Accounting Research Manager

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Weekly Summary of Accounting, SEC and Auditing Developments: July 17-21, 2023

The accounting updates below are provided courtesy of Accounting Research Manager, a subscription service that provides a timely and comprehensive online database of analytical accounting, auditing and SEC information as well as authoritative literature. KnowledgeLeader members are eligible to receive a 15% discount if they would like to subscribe to Accounting Research Manager. Experience the full database by requesting your free trial.

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ACCOUNTING AND SEC HEADLINES:

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A Closer Look – New Edition of A Closer Look Published 

We have published a new edition of A Closer Look, PCAOB Auditing Standards for Audits that Involve Other Auditors. This new edition discusses the PCAOB’s Release 2022-002, Planning and Supervision of Audits Involving Other Auditors and Dividing Responsibility for the Audit with Another Accounting Firm. The release adopts a new standard, Auditing Standard (AS) 1206, and amends existing PCAOB auditing standards related to the requirements and responsibilities of auditors that plan and perform audits involving other auditors.

China-Specific Disclosures – SEC Staff Provides Guidance to Companies Regarding China-Specific Disclosures 

The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published a Sample Letter to Companies Regarding China-Specific Disclosures. This sample letter expands on Corp Fin’s previous guidance issued regarding China-specific disclosures in SEC filings. Corp Fin indicates that it “continues to believe that companies should provide more prominent, specific, and tailored disclosures about China-specific matters so that investors have the material information they need to make informed investment and voting decisions.”

The sample letter highlights disclosure considerations for companies in several areas, including:

  • Commission-identified issuers (as identified by the SEC under the Holding Foreign Companies Accountable Act);
  • Risk of intervention or control by the PRC Government; and
  • The Uyghur Forced Labor Prevention Act.

Artificial Intelligence – SEC Chair Discusses Artificial Intelligence 

SEC Chair Gary Gensler recently discussed the growing use of Artificial Intelligence (AI) in many aspects of life, including finance. Gensler indicates that a lot “of the recent buzz has been about such generative AI models, particularly large language models. AI, though, is much broader. I believe it’s the most transformative technology of our time, on par with the internet and mass production of automobiles.”

Gensler provides that in finance, AI is already being used for call centers, account openings, compliance programs, trading algorithms, sentiment analysis, and more. Gensler discussed the many opportunities and challenges AI presents in finance and the broader world. Specific opportunities and challenges discussed by Gensler included:

  • Privacy and intellectual property;
  • Financial stability;
  • System-wide risk; and
  • Explaining AI results, bias, and/or robustness.

Consolidation – New Edition of Interpretation Published 

We have published a new edition of our interpretation, Interpretations of Topic 810, Consolidation, which provides key questions and focused answers on the application of Topic 810. Users of this content after this date should make themselves aware of subsequent changes.

In addition, this publication includes a practice aid in the Appendix, Consolidation Decision Evaluation Under the Variable Interest Model and is to be used as a tool for purposes of evaluating whether a reporting entity should consolidate a variable interest entity.

Checklist – New Edition of Summary of Recent Authoritative U.S. Accounting Standards Checklist Published 

We have updated our “CCH Accounting Research Manager Summary Checklist of Recent Authoritative U.S. Accounting Standards" to reflect the issuance of Accounting Standards Update (ASU) No. No. 2023 03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity(Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock.

These amendments amend the FASB Accounting Standards Codification™ for SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock.

Checklist – New Edition of Variable Interest Entity Checklist Published 

We have published a new edition of our Variable Interest Entity (VIE) Checklist, This checklist is designed to aid the reporting entity in evaluating and documenting the VIE consolidation decision under the variable interest model in FASB Accounting Standards Codification Topic 810, Consolidation. It includes any Accounting Standards Updates Issued through July 18, 2023.

Checklist – New Edition of Cash Basis Financial Statement Disclosures Checklist Published 

We have published a new edition of our Cash Basis Financial Statement Disclosures Checklist. This checklist is intended to be used as a guide for determining whether financial statements prepared in accordance with a cash basis of accounting (i.e., special purpose framework) including informative disclosures that are appropriate and necessary for the financial statements to achieve fair presentation. Cash basis accounting is a basis of accounting other than accounting principles generally accepted in the United States of America (U.S. GAAP).

Checklist – New Edition of Tax Basis Financial Statement Disclosures Checklist Published 

We have published a new edition of our Tax Basis Financial Statement Disclosures Checklist. This checklist is intended to be used as a guide for determining whether financial statements prepared in accordance with a tax basis of accounting (i.e., special purpose framework) including informative disclosures that are appropriate and necessary for the financial statements to achieve fair presentation. Tax basis accounting is a basis of accounting other than accounting principles generally accepted in the United States of America (U.S. GAAP).

Checklist – New Edition of Personal Financial Statement Disclosures Checklist Published 

We have published a new edition of our Personal Financial Statement Disclosures Checklist. This new edition is a component of our financial statement disclosure content and is intended to be used as a guide for determining whether the financial statements of individuals include the disclosures required by U.S. generally accepted accounting principles.

Inflation – New Edition of Interpretation Published 

We have published a new edition of our Interpretation, Inflation Rates for Judging Whether an Economy Is Highly Inflationary – June 30, 2023. This new edition has been issued and reflects the latest available inflation rate information. The following changes were made to the classification of countries under this Interpretation from the previous Interpretation dated December 31, 2022:

  • Haiti has been moved to the list of countries that have highly inflationary economies from the list of countries that may have highly inflationary economies.
  • Lao People’s Democratic Republic has been moved to the list of countries that may have highly inflationary economies from the list of countries that do not have highly inflationary economies.
  • Pakistan has been moved to the list of countries that may have highly inflationary economies from the list of countries that do not have highly inflationary economies.
  • Rwanda has been moved to the list of countries that may have highly inflationary economies from the list of countries that do not have highly inflationary economies.

Leases – New Edition of Accounting for Leases Interpretation Published 

We have published a new edition of Accounting for Leases, Interpretations of U.S. GAAP. Among other things, this new edition has been updated to reflect Accounting Standards Update 2023-01, Leases (Topic 842): Common Control Arrangements.

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AUDITING AND INTERNAL CONTROL HEADLINES: 

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A Closer Look – New Edition of A Closer Look Published 

As discussed above, we have published a new edition of A Closer Look, PCAOB Auditing Standards for Audits that Involve Other Auditors. This new edition discusses the PCAOB’s Release 2022-002, Planning and Supervision of Audits Involving Other Auditors and Dividing Responsibility for the Audit with Another Accounting Firm. The release adopts a new standard, Auditing Standard (AS) 1206, and amends existing PCAOB auditing standards related to the requirements and responsibilities of auditors that plan and perform audits involving other auditors.

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