Our 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) issued Accounting Standards Update (ASU) 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify financial reporting associated with convertible instruments and contracts in an entity’s own equity. The ASU removes the major separation models currently required by Generally Accepted Accounting Principles (GAAP) and is effective for fiscal years beginning after December 15, 2021, or December 15, 2023, depending on whether or not the entity meets the definition of a public business entity.
The FASB launched its new Post-Implementation Review (PIR) web portal. The PIR web portal will help stakeholders provide their input after the standard is issued. This will improve the FASB’s ability to ensure the new standard is achieving its objective and to address any unforeseen problems with implementation.
The FASB issued a proposed ASU intended to reduce cost and complexity for private companies when determining fair value of the shares underlying a share-option award. The proposal came from the Private Company Council (PCC) with the hopes of reducing unnecessary cost and complexity. The proposed standard is open for stakeholder comments until October 1, 2020.
Save the Date
The FASB rescheduled a virtual roundtable discussion of the implementation of its standard on leases. The roundtable will take place on Friday, September 18, 2020, in two sessions.
Securities and Exchange Commission
The Securities and Exchange Commission (SEC) announced Lindsay McCord as the new Chief Accountant in the Division of Corporation Finance. Ms. McCord was previously the Acting Chief Accountant and has served the Division since 2009. Prior to joining the SEC, she was an audit manager with Grant Thornton LLP.
The SEC charged and settled with Hertz CEO and Chairman Mark Frissora for aiding and abetting the company in filing inaccurate financial statements and disclosures. Mr. Frissora allegedly pressured subordinates to make accounting revisions to financial statements to be more in line with forecasts.
American Institute of Certified Public Accountants
The American Institute of Certified Public Accountants (AICPA) submitted a letter to both the U.S. Department of Treasury and the Internal Revenue Service (IRS) requesting guidance on President Trump’s Executive Order deferring the payment of employee payroll taxes. Treasury Secretary Mnuchin indicated the payroll tax deferral was not mandatory.
The AICPA released nonauthoritative guidance, “Materiality Considerations for Attestation Engagements Involving Aspects of Subject Matters That Cannot be Quantitatively Measured,” to assist CPAs with attestation materiality, specifically where materiality cannot be numerically measured or evaluated. Examples of issues that cannot be numerically measured or evaluated include security controls and sustainability matters. To access the full paper, click here.