This Financial Reporting Update highlights key developments and issues that are relevant to finance and accounting personnel.
Financial Accounting Standards Board
The Financial Accounting Standards Board (FASB) proposed an Accounting Standards Update (ASU) that will address two separate rate issues. The first update changes the sunsetting of the 2020 ASU No. 2020-04 Reference Rate Reform. This ASU provided transitory relief for when the London Interbank Offered Rate (LIBOR) ceased. However, the UK Financial Conduct Authority (FCA) is delaying that decision to June 30, 2023. The proposed update will amend ASU No. 2020-04 sunset date from December 31, 2022, to December 31, 2024.
The second update is a definitional change related to ASU No. 2018-16. This ASU established the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as “a Benchmark Interest Rate for Hedge Accounting Purposes.” This also added the term SOFR Overnight Index Swap Rate (SOFR Swap Rate) to the Master Glossary of the FASB Accounting Standards Codification®. As it stands now the SOFR Swap Rate is only in reference to the OIS rate based on SOFR. The proposed ASU would amend the SOFR Swap Rate definition so that other versions of SOFR are considered a benchmark interest rate.
Securities and Exchange Commission
On April 8th the Securities and Exchange Commission (SEC) announced the fee rates for most securities transactions will be set at $22.90 starting May 14th, 2022. This is a large increase from 2021’s $5.10 fee which was lowered due to the recorded volume of covered sales during the pandemic. The increase is an attempt to get the fee back in line with pre/early pandemic years with 2019 and 2020 fees being $20.70 and $22.10, respectively.
American Institute of Certified Public Accountants
In a partnership with Oracle, the American Institute of Certified Public Accounts (AICPA) is launching a certification series to address the widening technology skills gap in accounting and finance. The “Agile Finance Transformation Certification Series” aims to give professionals the latest knowledge and skills needed to utilize the most recent financial technology. Coursework will range from leaning best practices, career development, and Oracle finance leaders providing their real-world experiences. This course is offered globally and participants will earn 21.5 CPE credits once fully completed.
Public Company Accounting Oversight Board
On April 19th, The Public Company Accounting Oversight Board (PCAOB) sanctioned two registered public accounting firms for “Improper Use of Unregistered Firms.” WWC, P.C. was utilizing an unregistered Hong Kong firm in ten issuer audits. WWC failed to supervise this firm in a way that protected against Sarbanes-Oxley and PCAOB rule violations. A civil money penalty of $50,000 was issued and orders to increase quality control measures within WWC. This is the first case in which the PCAOB has had to sanction a firm for failure to supervise an unregistered firm.
JLKZ was the second firm sanctioned for violating AS 3101 by issuing audit reports they had not actually completed. JLKZ had used an unregistered Chinese firm as “the engagement partner, audit staff, and engagement quality reviewer for the audits” while issuing the audit reports as if they had been completed the audits. The PCAOB issued the same $50,000 civil money penalty to JLKZ while also restricted their ability to accept new issuer or broker-dealer audit engagements for two years. Again, this is the first time the PCAOB has had to sanction a firm for this issue.