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PCAOB Approves Standard for Auditor’s Use of Specialists

Last month, the Public Company Accounting Oversight Board (“PCAOB”) published a final standard aimed to strengthen the requirements for an auditor’s use of specialists. Release No. 2018-006, Amendments to Auditing Standards for Auditor’s Use of the Work of Specialists, improves how an auditor uses the work of specialists and reinforces the provisions necessary for reviewing the work of an organization’s specialist. The revised standard also aligns with the PCAOB’s risk assessment standards. Specifically, an auditor must now test the suitability of an organization’s data, as well as the significant assumptions and methods applied. PCAOB member Duane DesParte noted that the amendments. Read More.

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Codification Improvements to FASB Leases Standard Proposed

The Financial Accounting Standards Board has announced proposed amendments to its leases standard concerning possible lessor implementation issues related to Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The proposed changes would align the FASB’s guidance for fair value of the underlying asset by lessors not considered manufacturers or dealers under Topic 842, with existing guidance. Thus, the fair value of the underlying asset at the start of the lease is its cost, and it would incorporate any applicable volume or trade discounts. If significant time has lapsed since the acquisition of the underlying asset and when the lease starts, however,. Read More.

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SEC Officials Want Consistent Non-GAAP Metrics

As companies increase their use of non-GAAP measures, Securities and Exchange Commission (“SEC”) chairman Jay Clayton has urged public companies to provide metrics that are consistent with business operations. The request comes as SEC officials express concern over misleading non-GAAP metrics that cause companies to portray a more favorable financial performance than GAAP metrics do. In turn, the deceiving numbers can drive up stock prices. Discussing the issue at a December 10 conference in Washington, D.C., Clayton called for similar consistency in reporting non-GAAP metrics and key performance indicators as expected in GAAP metrics. SEC chief accountant Wesley Bricker agreed. Read More.

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SEC to Publish Concept Release on Exempt Offerings

According to its latest rulemaking agenda, the Securities and Exchange Commission (“SEC”) plans to issue a concept release on exempt offerings. The effort aims to generate feedback on ways the SEC could streamline the exempt offering process, which at the moment is pieced together by a complicated mix of disparate exemptions. SEC staff wants to review how to synchronize and simplify the disparate exemptive rules. William Hinman, the SEC’s Division of Corporation Finance director, said the concept release will be very broad and ask numerous questions concerning private placement exemptions. Part of the broad concept release will include exploring “accredited. Read More.

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Corp Fin Director Wants Public Companies to Improve Cybersecurity Disclosures

With public companies giving investors more information about cybersecurity risk factors, the director of the Securities and Exchange Commission’s (“SEC”) Division of Corporation Finance believes there is still room for improvement. At a speech last month, William Hinman noted that SEC staff is seeing inconsistencies regarding the quality of cybersecurity disclosures. To resolve the issue, Hinman wants companies to provide more details on how their boards of directors oversee risks and breaches. Hinman’s remarks come as Corp Fin staffers continue to review companies’ cybersecurity disclosures since the SEC issued Release No. 33-10459, Commission Statement on Guidance and Public Company Cybersecurity Disclosures . Issued in February, the guidance stresses why companies must implement controls for. Read More.

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SEC Aims to Fix Auditor Independence Rule by Next Fall

Addressing complaints that the current loan provision under its auditor independence rule is outdated, the Securities and Exchange Commission (“SEC”) expects to finalize planned changes to the rule by September 2019. The final rule will likely be based on Release No. 33-10491, Auditor Independence With Respect to Certain Loans or Debtor-Creditor Relationships. Issued in May, the proposal addresses practical challenges in deciding whether an auditor complies with independence Rule 2-01 of Regulation S-X when engaged in a lending relationship with its audit clients’ shareholders. To finance its business operations, an accounting firm may borrow from a bank or acquire funds by. Read More.

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