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”) proposed an Accounting Standards Update (“ASU”) that would improve lease guidance. The amendments in the proposed ASU would allow lessors to classify and account for variable payment leases as operating leases, allow lessees to remeasure lease liabilities for changes in an index rate or changes in the rate affecting future payment at the date the change takes place, and change the requirements for terminating a lease within a contract that does not economically affect the remaining leases in that contract. Stakeholder comments on the proposed changes are due by December 4, 2020.

The FASB proposed an ASU to clarify an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified forwards and options (e.g., warrants) that remain equity-classified after modification. The proposed ASU would provide a framework for issuers to determine if a modification or exchange should be recognized as an adjustment to equity or as an expense. Stakeholder comments are due by December 28, 2020.

Securities and Exchange Commission

The Securities and Exchange Commission (“SEC”) named Jessica Kane the new Director of the Division of Corporation Finance’s Disclosure Review Program. In this role, Ms. Kane will lead initiatives to enhance the effectiveness and transparency of financial disclosures. Previously Ms. Kane served as the Director of the Office of Credit Ratings.

The SEC proposed a limited exemption from the broker registration requirements for “finders” who assist issuers with raising capital in the private market from accredited investors. The goal of the proposed exemptions is to help small businesses raise capital and provide regulatory clarity to investors, issuers, and finders.

American Institute of Certified Public Accountants

The American Institute of Certified Public Accountants (“AICPA”) and its Auditing Standards Board issued Statement on Standards for Attestation Engagements (“SSAE”) No. 21. SSAE No. 21 allows auditors to offer an opinion even if the party responsible for the underlying subject matter has not measured or evaluated the subject matter. The responsible party (typically the client) is required to acknowledge responsibility for the underlying subject matter. The new SSAE addresses new nonfinancial matters companies may not have the ability to evaluate.

The AICPA’s Digital Asset Working Group added 13 questions and answers to its non-authoritative guidance on how investment companies and broker dealers should account for digital assets. The new additions to Accounting for and Auditing of Digital Assets address issues around fair value and stablecoins. A stablecoin is a type of cryptocurrency with its value linked to a more traditional asset (e.g., fiat money or a commodity) to minimize volatility. 


While no new FASB decrees are effective for the third quarter of 2020, other regulatory requirements may be effective for the first time. EY compiled a list of all ASUs and their effective dates for third quarter 2020. Companies should evaluate which requirements apply to them for the first time.