Our Financial Reporting Update highlights key developments and issues that are relevant to finance and accounting personnel.
Securities and Exchange Commission
The Securities and Exchange Commission (SEC) has released guidance on the treatment of warrants from special purpose acquisition companies (SPACs). SPACs are companies that garner funds from the stock exchange in order to purchase other entities. These SPACs often sell warrants, or a right to buy company stock in the future at a designated price, to investors in order to raise the necessary capital. Generally, these companies have been treating these warrants as equity. However, the SEC now believes that these warrants may be better described as liabilities. Until the SEC can determine the proper accounting treatment for warrants, it may choose to refrain from declaring registration statements from SPACs effective. Additionally, SPACs may need to consider whether they need to change the accounting treatments of their warrants.
The SEC has voted to engage in two efforts to develop the security-based swap regulation contained in Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. First, the SEC will respond to an application by the United Kingdom’s Financial Conduct Authority (FCA) to allow substituted compliance for U.K.-regulated firms. The FCA has requested that U.K.-regulated firms that are also registered with the SEC be allowed to substitute certain SEC regulations with comparable U.K. requirements. Second, the SEC is re-opening the comment period for the French application for substituted compliance, submitted by the Autorité des Marchés Financiers (AMF) and Autorité de Contrôle Prudentiel et de Résolution (ACPR). Re-opening the comment period will enable stakeholders to give feedback on potential changes and ask questions about the application.
Financial Accounting Standards Board
The Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) that offers an alternative for goodwill triggering event assessments for private companies and not-for-profits. Previously, these entities were required to assess goodwill triggering events throughout the year. The alternative in this ASU only requires these entities to assess goodwill triggering events as of the end of the reporting period. The end of the reporting period could be for an interim or annual period, depending on when the entity released its financial statements.
Public Company Accounting Oversight Board
The Public Company Accounting Oversight Board (PCAOB) has renewed its cooperative agreement with the Haut Conseil du Commissariat aux Comptes (H3C), which oversees audit firms in France. This agreement aids in collaboration between the PCAOB and H3C in the oversight of audit firms that fall under both jurisdictions.
Additionally, the PCAOB has entered into a cooperative agreement with the Belgian Audit Oversight College (CTR-CSR), which oversees audits in Belgium. Similar to the arrangement with France, this agreement will help with collaboration between these organizations. However, the Belgian agreement also has provisions for the treatment of confidential information and transfers of personal data. The completion of the Belgian agreement means that the PCAOB now has an agreement with the audit oversight boards of all European countries that host PCAOB-registered firms.
The PCAOB has authorized the establishment of a Standards Advisory Group (SAG). This group will consist of eighteen members from the areas of investor representatives, audit and financial oversight professionals, and academics. SAG’s purpose is to improve communication between the PCAOB and various stakeholders and to provide another avenue for stakeholders to advise the PCAOB. The PCAOB is currently accepting nominations to join SAG; the linked page has information about self-nomination or nominating another individual.
Save the Date
On May 20, the FASB will have a virtual roundtable on the implementation of the current expected credit losses (CECL) standard. The event will run from 9:00 a.m. to 12:00 p.m. EDT. The livestream can be accessed through this link; prior registration is not required.
On July 26-29, the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA) will hold a conference for accounting and finance professionals. The conference will be a hybrid of online and in-person attendance at the Aria Resort & Casino in Las Vegas. The website aicpaengage.com has more information about registration and the conference agenda.