This Financial Reporting Update highlights key developments and issues that are relevant to finance and accounting personnel.
Financial Accounting Standards Board
On August 22nd, the Financial Accounting Standards Board (FASB) proposed an Accounting Standards Update (ASU) seeking to improve the disclosure and accounting policies for investments made in tax credit structures. This ASU comes in response to the standard set in 2014 regarding the application of proportional amortization for the generation of income tax credits. Before, investors could only elect to apply proportional amortization to low-income housing tax credit (LIHTC) structures. If this ASU is implemented then the option of proportional amortization would be extended to other structures and programs such as “New Markets Tax Credit (NMTC) program, the Historic Rehabilitation Tax Credit (HTC) program, and Renewable Energy Tax Credit (RETC) programs.” Comments on this ASU are due by October 6th and the full ASU can be read here.
Securities and Exchange Commission
On August 8th, the Securities and Exchange Commission (SEC) proposed new rules for all registered clearinghouses to improve regulation, oversight, and prevent conflicts of interest. The proposed rule implements many new governance requirements such as new “requirements on board composition, independent directors, nominating committees, and risk management committees.” The proposed rules would also enhance Dodd-Frank Policies for Clearing Houses that would require them to “identify, mitigate, or eliminate conflicts of interest and document those actions.” If adopted these changes would have increase transparency within the decision making of these organizations.
American Institute of Certified Public Accountants
On August 28th, The American Institute of Certified Public Accountants (AICPA) released an exposure draft of proposed revisions to the Statements on Standards for Tax Services (SSTSs). Updates to the SSTSs reflect a “reorganization of by the type of tax work performed and Promulgation of three new standards surrounding data protection, reliance on tools and the representation of tax clients before taxing authorities.” The goal of these changes is to bring the SSTSs into line with modern tax challenges and the new emerging needs for today’s members. The entirety of the proposed revisions can be read here.
Public Company Accounting Oversight Board
On August 26th, The Public Company Accounting Oversight Board (PCAOB) released a statement regarding the Board’s signed Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China. This marks the beginning for the PCAOB to investigate registered accounting firms headquartered in China and Hong Kong. The Statement of Protocol outlines three key points:
- The PCAOB has sole authority to choose which firms it investigates without prior approval from the Chinese Government.
- Under specific procedures all audit work papers with all required information will be available to PCAOB investigators.
- The PCAOB will have complete authority to take testimonies and interview all parties associated with an investigation.
For over a decade, the PCAOB has not been able to investigate firms within mainland China and Hong Kong until the PCAOB claimed that it was being actively blocked from said jurisdictions. The PCAOB Fact Sheet regarding this matter can be read here.