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) released an Accounting Standards Update (ASU) that addresses how issuers should account for modifications or exchanges of freestanding call options that are classified as equity before and after the change. One example of this type of option is a warrant. The ASU outlines the principles that issuers should follow to determine whether they should record such transactions as an expense or as a direct adjustment to equity.
The FASB issued a proposed ASU that would clarify and adjust hedge accounting guidance so that entities can better match their accounting to their risk management strategies. One of the most significant suggestions in this proposed rule is to allow entities to elect hedge accounting for multiple layers of a portfolio instead of limiting companies to a single-layer model. In addition to this change, the proposed ASU would clarify and expand the language of the current hedge accounting rules. The comment period for this proposed ASU closes on July 5, 2021.
Securities and Exchange Commission
The SEC has approved the registration of its first security-based swap data repository (SDR). This SDR is a centralized database of security-based swap transactions and will improve market transparency and reporting. By approving the SDR, the SEC has also set a compliance date of November 8, 2021, for Regulation SBSR. Regulation SBSR contains guidance for reporting security-based swap transactions to regulatory agencies and the public.
American Institute of Certified Public Accountants
The American Institute of Certified Public Accounts (AICPA) has instituted a new certificate for CPAs titled “Data Analytics Core Concepts Certification.” The course uses real-world scenarios to demonstrate various aspects of data analytics and the data environment. CPAs can also obtain 8 CPE credits through this certification.
The AICPA and Chartered Institute of Management Accountants (CIMA) recently updated their audit risk assessment guidance related to digital assets. This guide, titled Accounting for and Auditing of Digital Assets, can help auditors navigate the rapidly changing environment of cryptocurrencies and technology such as blockchain.
Public Company Accounting Oversight Board
The Public Company Accounting Oversight Board (PCAOB) has proposed a rule that would define the PCAOB’s obligations under the Holding Foreign Companies Accountable Act (HFCAA). This proposed rule sets forward the actions that PCAOB should take when foreign authorities do not allow the PCAOB to perform required oversight activities. The comment period closes on July 12, 2021.
Save the Date
On June 10, the PCAOB will hold a one-hour webinar discussing international issues, including the Holding Foreign Companies Accountable Act and cooperation agreements with foreign audit regulators. The webinar will begin at 3:00pm ET. Prior registration is required; registration details are on the website page.