This Financial Reporting Update highlights key developments and issues that are relevant to finance and accounting personnel.
Financial Accounting Standards Board
On July 14th, the Financial Accounting Standards Board (FASB) proposed an Accounting Standards Update (ASU) that would impact transition guidance for ASU No. 2018-12, “Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI).” This update is targeted specifically for contracts that have been derecognized due to a “sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date.” The original ASU sought to clarify and strengthen the financial reporting done for LDTI contracts. The proposed changes would require a retrospective transition method be put in place by an insurance entity if early application is selected. The amendment would also allow insurance entities to hold an election to exclude certain contracts or legal entities from receiving the new LDTI guidance if they have been derecognized. The full ASU can be read here.
Securities and Exchange Commission
The Securities and Exchange Commission (SEC) proposed amendments to Rule 14a-8 which established that companies should include shareholder proposals in their proxy statements. Currently, there are 13 exclusions to this rule. The proposed amendment would seek to change three exclusions regarding Substantial Implementation, Duplication, and Resubmission.
- Substantial Implementation – Proposals may now be excluded if the “essential elements” of the proposal have already been implemented.
- Duplication – If a proposal “substantially duplicates” a previously submitted proposal, meaning the proposal highlighted the same subject matter and outcome, for the same shareholder meeting that proposal does not need to be included in proxy statements.
- Resubmission – If a proposal “substantially duplicates” another proposal submitted during a prior shareholder meeting its proxy statement inclusion is not necessary.
American Institute of Certified Public Accountants
The American Institute of Certified Public Accounts (AICPA) is requesting stakeholder input regarding the new model for CPA Licensing and the CPA Exam launching in 2024. This is being called the “CPA Evolution initiative” and changes the way the exam will be structured. All CPA candidates will be required to take three key sections: “Financial Accounting and Reporting, Auditing and Attestation, and Taxation and Regulation.” Once all are passed, the fourth exam will be the candidate’s choice of discipline comprising “Business Analysis and Reporting, Information Systems and Controls, and Tax Compliance and Planning.” Regardless of the choice made, all will lead to full CPA licensure. Stakeholders can offer feedback through Sep. 30th, 2022.
The AICPA in conjunction with North Carolina State University has published a new Enterprise Risk Management (ERM) report. This report comprises the insights of 560 U.S. CFOs and other senior finance leaders on their organizations’ level of competence in risk management. ERM practices are on a rise in the U.S. with certain business groups jumping by 33 percent in adoption rate. This report covers drivers of risk management, strategic value, risk identification, oversight structures, reporting and monitoring, etc. The full report can be found here.