Audit & Assurance

Monday, 27 June 2022

FASB plans to study KPIs

Written by Thomson Reuters

In late May, the Financial Accounting Standards Board (FASB) added a project to its research agenda to study key performance indicators (KPIs) for business entities. The plan is to study the feasibility of standardizing definitions for KPIs, including earnings before interest, taxes, depreciation and amortization (EBITDA). But work won’t start until the FASB progresses further on its project on disaggregation of income statement expenses. Public response The FASB received mixed feedback from respondents to Invitation-to-Comment (ITC) No...

Published in Audit & Assurance
Monday, 27 June 2022

Income tax disclosures: Targeted improvements in the works

Written by Thomson Reuters

The income tax disclosures project is back on the active agenda of the Financial Accounting Standards Board (FASB). The decision was made after hearing feedback from stakeholders that the existing disclosure rules aren’t sufficiently useful for decision-making. The objective of the revived project is to focus on targeted improvements, steering clear of aspects of the topic that could be controversial. History lesson The income tax disclosure project started in 2014...

Published in Audit & Assurance
Monday, 27 June 2022

Why have financial restatements surged?

Written by Thomson Reuters

Audit Analytics, an independent accounting research firm, reports that restatements surged in 2021 — and more than three-quarters of these restatements were filed by special purpose acquisition companies (SPACs). Here is an overview of what SPACs are used for, why they can be risky ventures and what measures the Securities and Exchange Commission (SEC) has proposed to help rein them in. Restating financial results Financial restatements help gauge financial reporting quality. A financial restatement occurs when a company discovers an error or misstatement in previously issued financial statements, and the company corrects it by adjusting previous periods, using one of three methods: Reissuance restatements, Revision restatements, or Out-of-period adjustments...

Published in Audit & Assurance
Monday, 06 June 2022

FASB proposes delay in shift from LIBOR

Written by Thompson Reuters

On April 20, 2022, the Financial Accounting Standards Board (FASB) proposed to defer the sunset date of rate reform rules by two years to December 31, 2024, a year after the new cessation date of the London Interbank Offered Rate (LIBOR). The proposal would also amend the definition of the Secured Overnight Financing Rate (SOFR) Swap Rate as part of efforts to stay aligned with market developments to shift from LIBOR to other rates. Background In 2017, global regulators decided to discontinue the use of LIBOR after bankers were caught manipulating it to profit on the financial instruments supported by LIBOR. Published reports suggest that the rate-fixing scheme might have been taking place since as early as 2003...

Published in Audit & Assurance
Monday, 06 June 2022

Profits interest awards: Should the FASB expand its guidance?

Written by Thompson Reuters

Profits interest awards are a flexible type of equity compensation used by partnerships and limited liability companies (LLCs) to incentivize exceptional performance. The Private Company Council (PCC) recently recommended the Financial Accounting Standards Board (FASB) add a project to its technical agenda to clarify the rules for reporting profits interest awards. Rewarding top performers Under a profits interest plan, participants are usually granted an equity interest in a company’s future profits, but not any current capital. The use of these plans has spiked among private companies, in part, because they don’t result in taxable income to the recipients...

Published in Audit & Assurance
Monday, 09 May 2022

Use a reporting hotline to fight fraud

Written by Thompson Rueters

Tips are the most common method of detecting fraud, according to Occupational Fraud 2022: A Report to the Nations. This study, published by the Association for Certified Fraud Examiners (ACFE), found that 42% of frauds were uncovered through tips — more than three times the next most common method (internal audits). The best way to encourage tips from employees and other stakeholders is to implement a confidential fraud reporting mechanism. Every company needs some way for people to report suspicious behaviors...

Published in Audit & Assurance
Monday, 09 May 2022

FASB removes redundancies between credit loss standard and TDR rules

Written by Thompson Rueters

On March 31, the Financial Accounting Standards Board (FASB) published an amendment to credit loss accounting rules. The changes are designed to eliminate rules related to troubled debt restructurings (TDRs) for certain lenders and enhance the usefulness of vintage disclosures. Here are the details. Redundant rules Accounting Standards Update (ASU) No...

Published in Audit & Assurance
Monday, 09 May 2022

SEC approves controversial proposal on climate change

Written by Thompson Rueters

On March 21, the Securities and Exchange Commission (SEC) voted 3-1 to issue a proposal requiring public companies to provide investors with more detailed disclosures on climate risk and greenhouse gas (GHG) emissions. This includes, in some cases, so-called “Scope 3” indirect emissions. How would the disclosures be expanded? The proposal, which applies to domestic and foreign registrants, would require the new disclosures in annual reports and registration statements...

Published in Audit & Assurance
Thursday, 21 April 2022

New survey reveals what’s missing from some audit committees

Written by Thompson Reuters

A survey entitled “Audit Committee Practices Report: Common Threads Across Audit Committees” was recently published by Deloitte and the Center for Audit Quality, an affiliate of the American Institute of Certified Public Accountants. The survey analyzed 246 responses, including 86% of respondents who served on audit committees of public companies. One of the survey’s key findings was that many audit committees suffer from a lack of functional diversity. Here are the details...

Published in Audit & Assurance
Thursday, 21 April 2022

Income statement upgrades would add costs

Written by Thompson Reuters

On February 16, the Financial Accounting Standards Board (FASB) voted to reframe its project to revise the income statement, sticking with the objective of providing investors with more useful information. This project would require more detailed breakouts of expenses, which would cause companies to incur costs. Old project, new name The income statement project started in 2017 under the name “disaggregation of performance reporting.” The effort was paused in 2019 to allow the FASB to work on segment reporting, which had intertwining issues...

Published in Audit & Assurance
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