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) settled charges with AmTrust Financial Services Inc. and its former CFO, Ronald E. Pipoly, Jr., for allegedly failing to disclose material facts about how the company estimated its insurance losses and reserves for $10.5 million. According to the complaint, AmTrust and Mr. Pipoly did not disclose specific assumptions and supporting documentation.
American Institute of Certified Public Accountants
The American Institute of Certified Public Accountants (AICPA) called for more guidance from the Department of the Treasury regarding Internal Revenue Code section 461(I) that was amended by the CARES Act. The matter concerns excess business losses to noncorporate taxpayers who may have underpaid taxes that were passed on this retroactive amendment.
The AICPA partnered with Chartered Professional Accountants of Canada (CPA Canada) to author two white papers on Artificial Intelligence (AI) and auditing. The papers emphasize that humans and AI working in tandem will deliver the best results.
The AICPA released a question-and-answer document to help CPAs and valuation professionals adjust business valuations based on the CARES Act. The document offers insight into the impacts of changes in the tax code as well as how to treat funding from the Paycheck Protection Program (PPP).
Financial Accounting Standards Board
The Financial Accounting Standards Board (FASB) released a question-and-answer document to address the application of GAAP Financial Reporting Taxonomy related to the COVID-19 pandemic. Specifically, the document addresses disclosures related to income taxes, payroll taxes, loans, grants, pensions, and the pandemic in general.
The FASB approved two new accounting standards. The first is a simplification of the accounting for convertible instruments under GAAP. The second is a requirement for not-for-profit organizations to present contributed nonfinancial assets as a separate line item in the statement of activities.
The FASB issued a proposed accounting standard that would delay both the implementation of lease standards for some nonprofit organizations and private companies as well as the revenue recognition standards for private franchisor businesses. The delays are meant to help businesses and other organizations that are already dealing with the impact of the COVID-19 pandemic.
Public Company Accounting Oversight Board
The Public Company Accounting Oversight Board (PCAOB) released its 2018 inspection report of the six largest audit firms in the United States. The report is in the PCAOB’s simplified new format that will be utilized by all future reports. The PCAOB also issued a high-level guide to the new format.