Audit & Assurance

Tuesday, 13 September 2022

Recent survey assesses disclosure trends for ESG matters and more

Written by Thomson Reuters

The Center for Audit Quality (CAQ), an affiliate of the AICPA that represents audit firms, published the results of a survey of audit partners on July 6. Here’s what’s trending in terms of accounting disclosures and stakeholder concerns. What the survey says The CAQ survey queried 700 audit partners across the CAQ’s governing board firms. Partners who were surveyed audit small public companies with valuations of less than $700 million to large companies valued at more than $50 billion...

Published in Audit & Assurance
Tuesday, 13 September 2022

“Little GAAP” has made big progress over the last decade

Written by Thomson Reuters

Private companies comprise the largest business demographic in the United States. For the last ten years, the Private Company Council (PCC) has been working with the Financial Accounting Standards Board (FASB) to develop simpler rules for private companies. History lesson The PCC was established in 2012. At that time, a blue-ribbon panel ruled that it was unfair to force private companies, especially smaller ones, to apply the same level of U...

Published in Audit & Assurance
Wednesday, 24 August 2022

Goodbye, goodwill: FASB decides to table goodwill project

Written by The Rehmann Team

On June 15, the Financial Accounting Standards Board (FASB) unanimously voted to drop its project on the subsequent accounting of goodwill and other identifiable intangible assets — for now. This was a surprising move that comes after several years of research and tentative decisions. In the meantime, the FASB plans to keep an eye on changes to the disclosure model that are being considered by the International Accounting Standards Board. What is goodwill?..

Published in Audit & Assurance
Wednesday, 24 August 2022

Eye on human capital accounting

Written by The Rehmann Team

The Securities and Exchange Commission (SEC) has been working on a proposal that’s intended to increase the amount of information public companies provide about their workforces — what many call “human capital management disclosures” as part of broader environmental, social and governance (ESG) reporting. Here’s why an SEC working group believes this is also a financial reporting matter, framing it as human capital accounting. 3 key changes In June, the Human Capital Accounting Disclosure Working Group — which includes former SEC officials, academics and market participants — asked the SEC to write a rule that would require public companies to provide pertinent information to help investors assess the extent to which companies invest in their employees. Specifically, they requested the following three rule changes: Companies should disclose, in the Management’s Discussion & Analysis (MD&A), what portion of workforce costs should be considered an investment in the company’s future growth, Workforce costs should be treated on an equal footing with research and development (R&D) costs, meaning that workforce costs should be expensed for accounting purposes but disclosed, allowing investors to capitalize workforce costs in valuation models, and Companies should provide greater disaggregation of the income statement...

Published in Audit & Assurance
Wednesday, 24 August 2022

Reporting software costs

Written by The Rehmann Team

On June 22, the Financial Accounting Standards Board (FASB) unanimously voted to add a project to its rulemaking agenda to modernize the accounting and disclosure rules for reporting software costs. Here’s an overview of the current accounting models for external and internal-use software and why the FASB wants to move to a single model for all software. Existing rules There are two main areas of U.S...

Published in 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
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