News

AICPA sets target to review revenue recognition issues

Financial industry groups agree on cyber-security principles

New auditor rotation rules create musical chairs game across Europe

Buying Time With Revenue Standard Delay

FASB might delay implementation of the new revenue recognition standard; corporate financial reporting executives should not. Despite uncertainty on fine points of the standard and business software yet to digest FASB’s seachange in reporting revenue, businesses can do plenty now. “The deferral is telling companies don’t delay in assessing the impact,” says Amy Hover of consulting firm MorganFranklin. “Don’t take your foot off the gas.” More suggestions inside.

IASB Finalizes New Standard on Financial Instruments

Companies following international accounting rules now have a comprehensive new standard to follow for how to report financial instruments in financial statements, with counterpart U.S. rules expected by year’s end. The International Accounting Standards Boards issued IFRS 9, Financial Instruments, to overhaul financial instruments accounting starting in 2018, while the Financial Accounting Standards Board is also developing an expected loss model.

Phillips Edison Names Chief Accounting Officer

Phillips Edison & Company, a real estate investment trust, has appointed Jennifer Robison as chief accounting officer. Details inside.

Regulatory Woes Lead Barclays to Launch Compliance Academy

British banking giant Barclays is partnering with a top business school in the U.K. to create the Compliance Career Academy, a program intended to better train its compliance personnel, educate employees on ethics, and improve its corporate culture amid record-setting fines and ongoing accusations."Strong and effective internal compliance is essential to ensuring banks operate in the right way," David Walker, Barclays chairman, said in a statement.

SEC Pursues Bar on KPMG Auditors Over Loan Losses

An administrative law judge of the Securities and Exchange Commission has recommended barring two KPMG auditors from appearing before the SEC based on their conduct during a 2008 year-end audit for a regional bank that ultimately failed in the wake of the financial crisis.

Data, Disclosures, Decisions: Revenue Standard Clock Ticking

New disclosures, new judgments, new frameworks to make judgments; all are coming soon as FASB's new revenue recognition standard hurtles into reality by 2017. Accounting departments looking to start implementation soon—which is anyone planning retrospective reporting of financials—have some big, crucial decisions to make about IT systems, vendors, and business strategy overall. Our rundown of what's to come in the next six months is inside.

PwC Audit Inspection Drives Restatements, Revised Opinions

PwC's 2013 regulatory audit inspection led to four restatements and five revised audit opinions on internal control, according to the firm's recently published inspection report. The Public Company Accounting Oversight Board found fault with 32 percent of the PwC audits it inspected in 2013, down from 39 percent in 2012. More findings inside.

Restatement Wreck: How Wheels Came Off of Hertz’ Accounting

Car rental giant Hertz had been purring along for the last few years, with nicely rising revenue and profits—until earlier this month, when it warned of a restatement that could hit three years worth of financial results. What happened? Four particularly tricky areas of accounting seem like the culprits, which might have been misunderstood by key financial executives. Our look at what went wrong is inside.

FASB Adopts New Rule to ClarifyStock-Based Compensation

FASB has completed new accounting requirements around stock compensation intended to resolve differences in how companies treat awards that have specific performance targets attached. The amendment says a performance target that affects vesting and that can be achieved after employment ends should be treated as a performance condition. It is the latest example of FASB adopting U.S. rules that differ from global accounting standards.

Review Finds Compliance Problems on IFRS Business Combination Rules

A review of 2012 financial statements from a few dozen European companies uncovered compliance problems with International Financial Reporting Standards' accounting rules governing business combinations. The review, released this week by the European Securities and Markets Authority (ESMA), showed that many of the issuers failed to provide adequate disclosure on goodwill or sufficient explanation as to fair value determination for assets and liabilities.

Financial Firms Failing to Create Culture of AML Compliance

Despite increasing government sanctions and larger fines, only 48 percent of financial institutions say they have a strong culture of compliance on anti-money laundering, according to a recent study. While many financial firms admit they fall short, most say they aren't rushing to improve: only 29 percent of respondents expect to make changes to their AML compliance efforts in the next year. More survey results inside.

XBRL Filings Full of Mistakes

As many as one in eight XBRL filings contains at least one problem with scaling, a simple mistake that could threaten the quality of investment recommendations and increase liability, according to a recent analysis. Even more common, says the report, are sign switches that confuse positive and negative numbers, a problem in 40 to 60 percent of filings over the period analyzed by the firm. More findings inside.

Related-Party Rule Targets Fraud; Audit Processes on Way

The PCAOB's new push for scrutiny of related-party transactions may be a useful new tool to fight fraud, but it will mean more attention to a somewhat neglected part of the financial audit; accounting departments should brace for impact. "There has been a fair amount of variation in practice in the areas covered in this standard," says Phil Wedemeyer, chairman of the audit committee at Atwood Oceanics. "This should give a more consistent approach."

FASB Completes Update toRepurchase Agreement Rules

The Financial Accounting Standards Board has finalized its new accounting rule on repurchase agreements to assure similar transactions receive similar accounting treatment going forward. The new rule is meant to eliminate the opportunity to treat repurchase-to-maturity transactions and repurchase financing arrangements as true sales of an asset, which would enable an entity to remove it from its balance sheet. More details inside.

FASB Wants Simpler Accounting

The Financial Accounting Standards Board has taken up a few short-term projects to cut some unnecessary complexity out of accounting rules and has finalized new rules for development-stage entities. Among the plans to streamline accounting are proposals to simplify the measurement of inventory and eliminate extraordinary items from the income statement. More inside.

PCAOB Airs Quality Concerns About EY, Grant Thornton

The Public Company Accounting Oversight Board has republished EY's 2010 audit inspection report and Grant Thornton's reports from 2008 and 2009 to publicize instances where the board's quality control criticisms were not addressed to the board's satisfaction within the one-year period that is allowed. In the republished reports, previously concealed criticisms of the firms' quality control practices were exposed. More inside.

Control Freak: Audit Firms Giving Controls More Scrutiny

This summer many public companies will be spending an exorbitant amount of time examining their control documentation as audit regulators—and hence audit firms—focus not just on the detection of controls, but also whether they are operating effectively. "The issue is to what extent do you have to repeat or somehow additionally verify that the control is operating effectively?" says Larry Rittenberg, audit committee chairman for Woodward Inc.

House Committee Debates WKSI Changes to Benefit Small-Cap Companies

As JOBS Act 2.0 inches forward, the House Committee on Financial Services this week debated a bill that would direct the Securities and Exchange Commission to revise its definition of Well-Known Seasoned Issuer status and reduce the qualifying financial threshold. That bill will advance to the full House, but an amendment that would encourage revocation of the status as an enforcement tool will not.

Auditors Get New Rules on Scrutinizing Related Parties

Auditors are under new orders starting next year to take a closer look at the riskiest transactions involving related parties. The Public Company Accounting Oversight Board adopted Auditing Standard No. 18, Related Parties, along with amendments to other auditing standards to focus auditors on related party transactions, significant unusual transactions, and the company's financial relationships and transactions with senior executives. Details inside.

Former SEC Chairman Says IFRS Adoption ‘Moment Has Passed’

American capital markets simply can't be served by the international accounting rulemaking process, making it clear that International Financial Reporting Standards won't be adopted in the United States "in our lifetime," Chris Cox, former chairman of the Securities and Exchange Commission, said during a recent speech. "Today, I come to bury IFRS," he said. More inside.

Banks Asked to Flag Unnecessary, Overly Burdensome Regulations

This week, federal bank regulators published the first of a series of public comment requests with the goal of identifying outdated, unnecessary, or unduly burdensome rules. Federal law requires this review every 10 years, accompanied by a report to Congress on issues that may require legislative action.

Converged Rev-Rec Standard: Consistency and Change for All

The Financial Accounting Standards Board and the International Accounting Standards Board capped off more than a decade of research and deliberation with the final publication of a new standard for how all companies must recognize revenue. The standard brings consistency to revenue accounting. "Regulators will have the ability to look across a broad swath of companies and really be able to compare, contrast, and call out companies," says Joel Osnoss, a partner at Deloitte.