Accounting

Articles for CPAs during the pandemic: Possible delay in SAS effective dates – 4/7

Ultra modern audit interview. Image courtesy of Adobe Stock.

Some background articles for CPAs. Won’t be covering the CARES Act here or general pandemic news. Instead these posts focus on those of us running an attestation practice.

4/6/20 – Journal of Accountancy – ASB to consider one-year deferral of effective dates – There is a string of new audit rules that go into effect the end of this year. The ASB will be meeting on April 22 considering whether to postpone the effective dates by a year. Under consideration are SAS 134 through 139 which have already been issued plus SAS 140 which is expected this week. Those include:

Articles for CPAs during the pandemic: CECL postponement & going concern – 4/4

Your new office. Image courtesy of Adobe Stock.

A few more articles as you work through your audits, reviews, and compilations during the pandemic, plus a video on how to make your own cloth masks out of a t-shirt.

Key issues in this post:

  • Postponement of new CECL accounting
  • Deep dive into going concern assessment

3/26/20 – Nicola White at Bloomberg Tax – Congress Poised to Derail Biggest Bank Accounting Change in Decades Congress put a provision in the giantic CARES Act to postpone CECL until 12/31/20 or when the governemnt declares the pandemic over.  CECL otherwise went into effect on 1/1/20.  This is the first time Congress has dictated accounting rules.  Article mentions this is a reminder of the debate over mark-to-market during the Great Recession.

Articles for CPAs during the pandemic – 4/2

The new conference room. Image courtesy of Adobe Stock.

A few more articles as you work through your audits, reviews, and compilations during the pandemic. Stretch question at the end: what are going concern implications if a third of grad MBA students will defer classes a year if they are not on campus and just under half expect a large tuition discount if classes are online?

3/25/20 – Financial Management – Ethical leadership at a time of crisis – Encouragement to maintain high ethical standards in time of turmoil and uncertainty.  Summary of tips:  Be transparent, be empathetic, be available.

4/1/20 – AICPA – Addressing pandemic-related audit challenges – Reminder that while creative techniques can be used to perform audit steps, the professional standards have not changed. Article points to following document:

4/1/20 – AICPA’s Center for Plain English Accounting – Consequences of COVID-19 –  Potential Auditing Challenges Agility and creativity is needed to complete audits. Document is a reminder that the professional standards still need to be complied with because they have not changed.

Document reminds us there are a range of possible scope limitations in an audit. Discussion includes a range of issues:

Articles for CPAs during the pandemic.

Image courtesy of Dollar Photo Club before their merger into Adobe Stock.

Lots of articles are appearing that can help CPAs during the pandemic. There are new and depressingly creative ways this is going to affect financial reporting. I’ll start mentioning some of those articles that grab my attention and may be of interest to you.

3/31/20 – FEI Daily – How Lease Accounting Will Be Affected by Coronavirus – Turmoil in leasing office space will create lots of complications under ASC 842, the new lease accounting rules. Article calls attention to: rent concessions, discount rate, fair market values, impairment, partial termination, reassessment, full termination abandonment, and information delay.

3/29/20 – Forbes – For Higher Education, Nothing Matters More Than September – …

Financial reporting issues to consider during early stages of COVID-19 pandemic

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A range of financial reporting issues need careful attention during the COVID-19 pandemic. These issues are old news in the professional literature but need to be considered more intentionally.

The AICPA published a special report on March 18, 2020. The report, Consequences of COVID-19 Financial Reporting Considerations, was drafted by the Center for Plain English Accounting and is available at no charge.

On 3/14/29, I was Pondering impact of coronavirus prevention steps on financial statements. An auditor’s perspective. The AICPA report goes into far more detail.

Here, in bullet point italics, are the items mentioned for your focus, with a few of my comments for highlight:

  • Subsequent Events

Type II subsequent events are those which take place after the financial statement date which are so significant that they warrant mention in the financial statements to keep those statements from being misleading.

  • Subsequent Events – Market-Value Declines

A technical Q&A (TQA 9070.06) indicates there are some occasions that can arise which warrant adjusting financial statements based on subsequent declines in market value.

  • Subsequent Events – COVID-19

Pondering impact of coronavirus prevention steps on financial statements. An auditor’s perspective.

Image courtesy of Adobe Stock.

If you are an auditor getting ready to issue opinions on client financial statements, you might want to ponder the subsequent event implications of the U.S. shutting down large portions of the economy this week. Might want to take a closer look at going concern assumptions.

If you happened to have slept well last night, you might ponder the impact on the financial statements you released a couple weeks ago.

Subsequent events

Here are some initial thoughts for consideration as disclosable material subsequent events and perhaps contingent liabilities:

“Single Audits – 2019 Compliance Supplement” – PR Prompts!, part 3

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In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.

The AICPA gave me permission to reprint portions of the newsletter on my blog.

This is the third of six posts to help you stay up to date.

The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:

 

Single Audits – 2019 Compliance Supplement

The 2019 Compliance Supplement (Supplement) used for conducting single audits includes extensive changes from prior years. The most significant change relates to the Office of Management and Budget (OMB) requirement for federal agencies to limit the number of requirements identified as being subject to the compliance audit; it was decreased from a maximum of 12 to 6. …

“FASB Defers Effective Dates for Three Major Accounting Standards” – PR Prompts, part 2

Image courtesy of Dollar Photo Club.

In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.

The AICPA gave me permission to reprint portions of the newsletter on my blog.

This is the second of six posts to help you stay up to date.

The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:

 

FASB Defers Effective Dates for Three Major Accounting Standards

Effective dates will be delayed for private companies and certain other entities for the Financial Accounting Standards Board’s (FASB’s) standards on accounting for leases, credit losses (CECL) and hedging after a unanimous vote by FASB in October 2019. …

Presentation at CalCPA Accounting and Auditing conference: “California GAAP” – A case study in valuation of donated medicine

Image courtesy of CalCPA.

On October 24 at 3:55 I will be speaking at the California Society of CPAs Accounting and Auditing Conference where industry speakers and experts will provide comprehensive updates on current issues and emerging trends. The conference runs the 24th and 25th.

My topic is valuation of donated medicine in the not-for-profit community. I have the privilege of working with a 75 minute block of time.

If you are able to attend the session you will gain an understanding of the long-term enforcement effort at the federal and state level regarding valuation of donated meds. My concern is that the governor’s veto of AB 1181 is not the end of the enforcement actions considering what has happened over the last 9 years.

Title of the session is “California GAAP” – A case study in valuation of donated medicine.

Overview of the session from the conference schedule:

Proposed delay in effective date for two accounting changes affecting charities.

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FASB officially issued an exposure draft on August 15, 2019 which proposes a one year delay for implementing three new accounting standards. Two of these proposed delays will affect many charities.

(Cross-posted from my other blog, Nonprofit Update.)

Effective date for SEC filers would not be changed.

I won’t discuss any changes for public business entities (PBE). Readers of my blog who fall into that category would be non-profits that are considered to be conduit bond obligors and EBPs that file their financials with the SEC.

You can find the exposure draft here.

The proposed delays for not-for-profit entities and private companies:

Leases

FASB plans to postpone changes in lease and credit loss standards for non-public companies.

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FASB decided on 7/17/19 to postpone four major accounting rule changes for non-public companies. Journal of Accountancy reported the news on 7/17/19:  FASB to propose delaying effective dates for 4 major standards.

(Cross-posted from my other blog, Nonprofit Update.)

Two of the rules are particularly significant to the non-profit community while two will affect few charities.

The article uses a new method of identifying effective dates. It mentions January 1 of the year the standard will first be effective instead of the ol’ “fiscal years beginning after December 15” phrasing usually used..

Changes include:

Comments from recent continuing education classes worth repeating: not-for-profit entities.

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Here are some fun or interesting or useful tidbits from the October 2018 A&A and the June 2019 Not-for-profit conferences presented by California Society of CPAs that apply to not-for-profit organizations.

Previous posts had comments on

Non-attest services and Yellow Book independence. Everyone probably knows that charities with more than $2 million of revenue who are registered with the California Attorney General must have an audit. Excluded from the requirement would be religious organizations, who are exempt from registering with the AG.

That requirement was created by the Nonprofit Integrity Act of 2004, so it’s old news.

The best payoff from attending CPE conferences is to compare every piece of information you hear to what you think you know. So, here is one of the big rewards for me attending this class…

Comments from recent continuing education classes worth repeating: accounting and auditing

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To get ready for a writing project this summer, I’ve been going over my notes from some CPE conferences and classes.

Thought I’d share some of the fun or interesting or useful tidbits from the October 2018 A&A and the June 2019 Not-for-profit conferences presented by California Society of CPAs.

Auditing

The auditor’s report will be completely reworked with implementation first required for 12/31/20 reports. The statement has been issued. Check out SAS-134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements if  you want to get a head start on the overhaul to audit rules.

By the way, an omnibus standard, SAS 135, makes lots of little changes you need to know about.

An exposure draft is out which addresses audit evidence. Final document expected in late 2019.

Accounting

California bill AB 1181 would address valuation of GIK when donor restricts distribution to outside U.S.

What is the fair value of donated medicine restricted for use outside the U.S.? Image courtesy of Adobe Stock.

The California Assembly has passed and sent to the Senate a bill which would require specific accounting for charities who receive gifts-in-kind which are restricted by the donor for distribution outside the U.S.

For that very specific type of GIK, the bill would require the donation to be recorded at the fair value in the country where the items will be used.

This will particularly affect donated pharmaceuticals, which often have a severely different value in the U.S. compared to values internationally.

CPA sanctioned by California Attorney General over audit of charity

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The California AG negotiated a settlement with a charity for their alleged overvaluation of medical GIK. I say alleged because the charity, three present or former board members, the charity’s insurance company, and the external auditor all deny in the settlement they did anything wrong.

The alleged scheme, according to the AG, was the charity used two other charities, which it formed, to buy medicine in the Netherlands and then donate it back to the ‘parent’, which then recognized GIK at US prices.

The AG asserts that over the course of 25 or more transactions, the purchase of about $225,000 of medicine by the two controlled charities generated gift-in-kind revenue of about $34,900,000 in the sanctioned charity.

Of note for readers of this blog is that the CPA providing an external audit was sanctioned as part of the negotiated settlement. She audited the charity and signed its 990s. She also audited one of the controlled charities and signed their 990s.