CPAJ News Briefs: FASB, Audit

FASB News

Advisers Offer Tepid Approval on Board Developing Rules for Government Grants

FASB’s main advisory body said the board should advance its efforts to address the reporting on government grants for businesses, but this endorsement was lukewarm. An accounting standard would be useful, as U.S. GAAP does not specify how to recognize, measure, and present grants received from a government—but the topic is not that pressing, according to discussions by the Financial Accounting Standards Advisory Council (FASAC), a panel of 35 senior executives from various business demographics. “It’s not material to a lot of companies. So we just undertook a lot of work to gather what that was because it happens everywhere but little itty bitty amounts,” Lara Long, vice president, chief accounting officer at AGCO Corp., said. “But it is embarrassing as an American that as a chief accounting officer that I get a lot of questions—it’s mostly from our foreign colleagues—and they’re like ‘why is there not a U.S. GAAP standard?’ and I’m like ‘I don’t know.’ So the answer is yes from that perspective,” she said. “I think the issue more for preparers and maybe our auditors would be the scope.” The discussion comes as FASB added a project to its research agenda in 2021 on government grants, a follow-on to disclosure rules it issued on the topic after years of effort.

Interim Reporting Rules to Get Clearer for Non-SEC Registrants that File Annually

FASB is in the middle of advanced discussions on the form and content of interim financial statements, including clarification of the rules for entities that are not SEC registrants. Interim reports provide investors with an early look at a company’s financial performance, revealing whether material issues have cropped up in a given quarter that could substantially impact the business. The board said that applying Topic 270, Interim Reporting, to non-SEC registrants should make annual financial statements more available to their users. Furthermore, reports should disclose that interim financial statements are to be read in conjunction with the prior annual financial statements and notes when providing condensed financial statements. Non-registrants can include tax exempt charities, corporations, limited liability companies (LLC), or partnerships with assets of over $5 million, according to a published definition. Although form and content guidance exists in SEC regulations for entities that are SEC registrants, there is no guidance in the FASB Accounting Standards Codification for entities that do not apply SEC guidance.

Audit News

Remote Auditing Continues to be Hot Topic

Almost three years into the remote auditing of financial statements, accounting firms are still learning about the best way to provide audit that involves both in-person and remote work. Shortly after the U.S. professional workforce went remote in 2020 due to COVID-19, audit firms quickly shifted to remote auditing—with zoom and drones. Such remote work was a buzzy topic at the time, but it “definitely continues to be a hot topic” today, said Sara Lord, chair of the AICPA’s Auditing Standards Board, which sets the auditing standards used by auditors of private companies. Lord, chief auditor of RSM US LLP, made her remarks at the 17th Annual Audit Conference hosted by the Baruch College Zicklin School of Business in New York on Nov. 29. Remote auditing has been “not harder than I expected it to be, as I feel like we’ve gotten through the pandemic, [which] required remote working for masses of people,” Lord said. “And I think what we found is that there’s a lot that can benefit from doing remotely: we can work together collaboratively. I don’t know if there’s very many people in this room who are going to their office every single day and having meetings. We’ve learned how to do a hybrid environment for that.”