This Financial Reporting Update highlights key developments and issues that are relevant to finance and accounting personnel.
Financial Accounting Standards Board
On September 28, the Private Company Council (PCC) held a meeting to discuss various issues that affect private companies. Topics discussed included difficulties in implementing the new lease standard, fair value measurement of equity securities, fair value measurement of equity-classified share-based awards, and credit losses. A recording of this meeting is on the Financial Accounting Standards Board (FASB) website.
Securities and Exchange Commission
The Securities and Exchange Commission (SEC) recently passed amendments to improve filing fee disclosure and payment methods. Companies typically pay filing fees when making registered securities offerings, making tender offers, or participating in mergers and acquisitions. These amendments will help modernize filing forms and payment processes. This update will make the filing process easier and more efficient for companies. The majority of the amendments will be effective on January 31, 2022. The SEC has stated that there will be an extended transition period for these amendments to give companies extra time to familiarize themselves with these changes.
The SEC published a report that discusses stock trading events that occurred earlier this year and the questions it raised about the equity and options market environment. In particular, the report discusses the January GameStop Corp (GME) stock transactions. The report, titled “Staff Report on Equity and Options Market Structure Conditions in Early 2021”, examines the GameStop events and considers where the SEC should focus its attention to avoid similar issues in the future.
American Institute of Certified Public Accountants
The American Institute of Certified Public Accountants (AICPA) recently published a new standard for auditors to use during their risk assessments. The new standard is titled “Statement on Auditing Standards (SAS) No. 145: Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement”. SAS No. 145 will supersede the section of Audit Clarity Standard (AU-C) 315 with the same title. The provisions in SAS No. 145 strengthen and clarify the requirements that auditors must follow when assessing the risk of materiality . SAS No. 145 is effective for audits of periods ending on or after December 15, 2023.
The AICPA released a new Frequently Asked Question (FAQ) document for auditors of Employee Retirement Income Security Act (ERISA) employee benefit plans. The FAQ clarifies SAS No. 136: Forming an Opinion and Reporting on Financial Statements of Employee Benefits Plans Subject to ERISA. Although the FAQ is nonauthoritative, it contains helpful guidance and illustrations for auditors of these types of benefit plans.
Public Company Accounting Oversight Board
The Public Company Accounting Oversight Board is seeking comments on its proposed standards related to audits that are carried out by multiple firms. The PCAOB notes that having multiple audit firms perform one engagement can lead to various difficulties. These issues can potentially decrease the quality of an audit. To help resolve these problems, the PCAOB has proposed standards related to the supervision of auditors during this type of audit engagement. Visit the PCAOB’s Supervision of Audits Involving Other Auditors project page for more information on this standard.
Save the Date
As discussed earlier, the AICPA has published a new standard on auditor risk assessments, titled SAS No. 145. The AICPA will hold a webcast to discuss this standard on November 16, 2021, from 1:00-2:00 P.M. EST. The webcast is free for AICPA members and $69 for all other participants. Viewers can obtain one continuing professional education (CPE) credit from this webcast.