Private Company Council

December 16, 2019

The Private Company Council (

PCC

) met on Monday, December 16, 2019. Below is a brief summary of issues addressed by the PCC at the meeting, categorized by project:

• PCC Issue No. 2018-01, “Practical Expedient to Measure Grant-Date Fair Value of Equity-Classified Share-Based Awards” : The PCC and the Board continued their discussion from the September 2019 PCC meeting about a potential practical expedient in which the current price for equity-classified share-option awards could be determined using a valuation that meets the requirements of Section 409A of the U.S. Internal Revenue Code. The PCC and the Board discussed whether and how the practical expedient (1) would differ from current practice and (2) could reduce the cost and complexity associated with determining the current price input. The PCC unanimously voted to move forward with the project and asked the staff to draft an Exposure Draft to be submitted for endorsement by the Board.
• Identifiable Intangible Assets and Subsequent Accounting for Goodwill: The PCC and the Board discussed feedback received from the Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill, as well as from the November 2019 public roundtable meetings. The PCC provided insight on questions of comparability and operability, and several PCC members indicated that if there is a change in the subsequent accounting for goodwill for public business entities, the private company goodwill alternative should not be amended.
• Distinguishing Liabilities from Equity (Including Convertible Debt): The PCC and the Board discussed feedback received on the proposed Update, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The PCC expressed overall support for the Board’s decisions. Several PCC members recommended the Board consider an effective date for private companies that is two years after the effective date for public business entities in its upcoming redeliberations.
• EITF Issue No. 19-C, “Warrant Modifications: Issuers’ Accounting for Modifications of Equity Classified Freestanding Call Options That Are Not within the Scope of Topic 718, Compensation—Stock Compensation, or Topic 815, Derivatives and Hedging”: The FASB staff provided an overview of the project and solicited feedback from PCC members on an issuer’s accounting for equity-classified warrant modifications. Certain PCC members discussed their experience in warrant modification transactions, acknowledged the diversity in practice, and provided their views on common analogies made due to the lack of authoritative guidance.
• Simplifying the Balance Sheet Classification of Debt: The PCC and the Board discussed feedback received on the revised proposed Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent). Certain PCC members noted areas of concern on unused long-term financing arrangements and the potential increase in the cost of debt issuance but, overall, PCC members continued to express general support for the project.

The next PCC meeting will be held on Thursday, April 16, 2020, and Friday, April 17, 2020, in Norwalk, Connecticut.

PCC Meeting Recaps are provided for those interested in following the activities of the PCC. Official positions of the PCC and the FASB are reached only after extensive due process & deliberations. More details on the PCC’s input on the FASB’s projects can be found within the meeting minutes, which will be published on the PCC website in the coming weeks.  

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Joint Meeting of the Private Company Council (PCC) and the FASB's Small Business Advisory Committee (SBAC)

PRIVATE COMPANY COUNCIL/SMALL BUSINESS ADVISORY COMMITTEE JOINT MEETING

MEETING RECAP

December 17, 2019

The Private Company Council (

PCC

) and the Small Business Advisory Committee (

SBAC

) jointly met on Tuesday, December 17, 2019. Below is a brief summary of the issues addressed by the PCC and the SBAC at the joint meeting:

• Reference Rate Reform: Facilitation of the Effects of the Interbank Offered Rate Transition on Financial Reporting: The FASB staff updated the PCC and the SBAC on the Board’s recent decisions. The PCC and the SBAC discussed the extent of general awareness of the issue and noted a varying degree of preparation among small public and private companies for the transition.
• Equity Method Accounting for Investments: The PCC and the SBAC discussed potential areas of simplification for the equity method of accounting for investments. Several members of both advisory groups noted that while measuring equity method investments at fair value through earnings could provide decision-useful information, there may be incremental costs associated with that change. Some members expressed concern that application of the measurement alternative in the absence of a readily determinable fair value could result in the loss of decision-useful information. Although some members of the advisory groups supported a potential simplification, the overall sentiment of the group was to maintain the existing equity method of accounting.
• Leases (Topic 842): The PCC and the SBAC discussed their current implementation progress and experience with the Leases standard. In addition, the members discussed the costs and benefits of applying the standard, with a focus on the initial costs incurred to implement the standard and expectations for ongoing costs. In addition, SBAC members emphasized the importance of having an overall implementation plan and shared their views and potential alternatives on implementation issues related to determining the incremental borrowing rate. SBAC members also shared their observations about identifying embedded leases and acknowledged that the same application questions existed under the prior lease accounting requirements.
• Revenue from Contracts with Customers  (Topic 606): The PCC and the SBAC discussed their current implementation progress and experience with the Revenue Recognition standard. Several members from both advisory groups agreed that companies generally underestimated the time and effort required to appropriately implement the standard, which contributed to a lag in implementation. Users from both advisory groups commented on the benefits of the enhanced disclosures provided by this standard.
• Identifiable Intangible Assets and Subsequent Accounting for Goodwill: The PCC and the SBAC discussed feedback received from the Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill, as well as from the November 2019 public roundtable meetings. Members of the advisory groups focused on issues related to comparability and operability, including how a potential goodwill amortization period should be determined and whether the private company goodwill alternative should be amended if the guidance for public business entities changes.  Many members of both advisory groups prefer a simplified amortization approach for goodwill accounting, noting that the information about goodwill and its impairment is only useful to certain financial statement users and relevant for a limited period of time.   
• Accounting by a Joint Venture for Nonmonetary Assets Contributed by Investors: Several members from both advisory groups provided feedback on potential alternatives related to the accounting for nonmonetary assets contributed to a joint venture in a standalone joint venture’s financial statement. Generally, members supported accounting for contributed nonmonetary assets at fair value, given the economics of the formation of a joint venture, the venturer’s accounting requirements, and the costs and benefits of providing that information.

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Small Business Advisory Committee

December 17, 2019

The

Small Business Advisory Committee

(SBAC) met on December 17, 2019. At the meeting, the SBAC members provided input on the following topics:

For more information the Small Business Advisory Committee, visit the

FASB website

.  

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Friday Footnotes: Are Accounting Students Prepared?; New CPE Rules; Blockchain Blah Blah Blah | 12.20.19

Regarding CPA Exam Performance and the Accounting Curriculum [The CPA Journal] A letter to the editor from a professor at Iona College reads: “In the end, I think too much emphasis is placed on pass rates and average scores, rather than the simple question of whether the students pass the exam in a reasonable period. The data that exists on pass rates and average scores is useful, but not determinative. Students who wait until they are fully prepared and confident before taking sections of the exam run the risk of extending the amount of time it takes to complete all sections.”

Adaptive learning self-study enabled in new CPE provider rules [Journal of Accountancy] Rules for continuing professional education providers for CPAs have been changed to accommodate adaptive learning self-study programs and address other issues. The National Association of State Boards of Accountancy (NASBA) and the AICPA announced that they have approved revisions to the Statement on Standards for Continuing Professional Education (CPE) Programs and the NASBA Fields of Study document.

How this startup by ex-KPMG exec is providing payments solution to credit-starved merchants [YourStory] Today, we are living in a society driven by technology, which in turn is transforming the business and customers. But for 47-year-old Jaijit Bhattacharya, tech-led societal transformation has been the proverbial Gordian Knot. Jaijit always believed that the financially abundant have access to systems, processes, and technology that a majority of the population does not have access to.

Ex-WorldCom CEO released from prison early [Compliance Week] Former WorldCom CEO Bernard Ebbers was granted early release from prison due to deteriorating health. Ebbers had served 13 years of a 25-year sentence for participating in one of the biggest accounting frauds in U.S. history.

The Need for New Skill Sets at CPA Firms is on the Rise [AccountingWeb] “Companies are being expected to report on things they never had before, things that are not on a traditional financial statement. How we touch these as a profession has become critically important,” said Melancon. “We have to unlearn what we know and relearn with the audit and standards. Tax compliance and planning, business reporting and analytics and information systems and controls will all be necessary as core learning for CPAs.”

Purdue Pharma Can Use EY as Auditor Despite Objection from U.S. [Bloomberg Law] U.S. Bankruptcy Court Judge Robert D. Drain cleared the way for Purdue Pharmato hire Ernst & Young as its financial statement auditor at a hearing Thursday, overruling an objection from the U.S. Trustee. The U.S. Trustee objected to the hire because EY also provides services to other businesses owned by the Sackler family, which owns Purdue, arguing that that relationship could skew the auditor’s incentives.

Blockchain snuck up on us [Accounting Today] Did it really tho?

The Beginning of the End of Tax Secrecy [Wall Street Journal] This week, Royal Dutch Shell voluntarily published its revenue, profit, taxes and other business details in each of 98 countries. The disclosure aligns with a drive by the energy company, which often attracts criticism from environmental activists, to present itself as forward-thinking, transparent and socially-minded. That didn’t stop the information feeding a predictable host of headlines in the U.K., where the company is partly based, that it didn’t pay taxes in the country (because of losses carried forward and tax refunds). In the U.S., Shell accrued $137 million of tax—a rate of 8%.

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2020 GAAP Financial Reporting Taxonomy and SEC Reporting Taxonomy Now Available

2020 GAAP Financial Reporting Taxonomy and SEC Reporting Taxonomy Now Available

Norwalk, CT, December 20, 2019

—The Financial Accounting Foundation (

FASB

) today announced the availability of the

2020 GAAP Financial Reporting Taxonomy

(Taxonomy) and the

2020 SEC Reporting Taxonomy

(SRT), along with the new

2020 XBRL US DQC Rules Taxonomy

(DQCRT). All taxonomies are pending final acceptance by the U.S. Securities and Exchange Commission (

SEC

).

The 2020 Taxonomy contains updates for the accounting standards and other recommended improvements. The 2020 SRT contains improvements to the dimensional elements whose underlying recognition and measurement are not specified by the GAAP but are elements commonly used by GAAP filers.

The DQCRT is a FASB taxonomy that includes in a derivative format XBRL US DQC Rules (DQCR) published by the XBRL US as validation checks for XBRL filings with the SEC. The purpose of the DQCRT is to improve exposure to and compliance with the DQCRs. This initial implementation is limited to three DQCRs. Over time, additional DQCRs are likely to be included.

The 2020 taxonomies are expected to be accepted as final by the SEC in early 2020.

The taxonomies are available on the

FASB’s Taxonomy

(XBRL) pages and through the following links:

2020 GAAP Financial Reporting Taxonomy

,

2020 SRT

, and

2020 XBRL US DQC Rules Taxonomy

.  

Questions about using the Taxonomies and creating and submitting XBRL tagged interactive data files in compliance with SEC rules should be directed to the SEC. SEC details and guidance are available at the

SEC’s portal on Structured Data

.  

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The FASB Did Not Pick You to Be Its Next Chairman

Unless your name is Richard Jones and you’re chief accountant and partner at Ernst & Young, then the FASB did pick you, congratulations.

Richard Jones

Jones will succeed nice neighborhood dad Russell Golden after Golden’s term ends on June 30.

Golden, a former Deloitte partner, has served as FASB chairman since July 1, 2013.

Jones looks the part of a FASB chairman, as he has a propensity for wearing blue button-down shirts with ties just like his predecessor.

But he also has the resume to back up that buttoned-down look:

Mr. Jones has worked at EY since 1987. He has held several titles at the firm, including assurance staff and senior manager to director of consultations. In 2014, he was appointed to his current role as chief accountant and partner.

The incoming chairman will serve a seven-year term with no option for renewal, according to FAF spokesman Matthew Broder. Mr. Golden initially served a three-year term, followed by a four-year renewal.

Jones is very familiar with the crew in Norwalk, CT, as he served on the Financial Accounting Standards Advisory Council (FASAC) from 2016 to 2018. He also was a member of the AICPA’s Accounting Standards Executive Committee from 2003 to 2008.

He is expected to join the FASB in early 2020 so Russ can show him the ropes.

To those who didn’t get chosen by the FASB, better luck next time. Try back again in seven years.

EY Chief Accountant To Become Next FASB Chairman [Wall Street Journal]

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Here’s Your Open Thread For the Fourth and Final CPA Exam Score Release of Q4 2019

Welp, that’s it. It’s over. Whatever your CPA exam plans were for 2019, I sure hope you got done what you wanted to do because there are no more chances left for the year. December 10 was the final testing day of 2019 and this on-time score release yesterday bears the distinction of being the last score release we’ll see this decade. Man, time flies when you’re having a terrible time.

On December 19, 2019, NASBA received and processed the following scores from the AICPA. pic.twitter.com/PjrYj4Ruow

— NASBA (@NASBA) December 19, 2019

There’s not a whole lot to say here, so here’s a helpful video from NASBA on what to do now that you’ve gotten your score.

Hope you guys waiting for scores got some good news this week. If not, go ahead and take a nice relaxing break before you get back on that horse come 2020. You got this.

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BDO Knows You Just Wasted One Minute of Your Life Watching Its Latest Holiday Video Card

I just did. Thanks for nothing, BDO.

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Richard R. Jones Appointed Chair of the FASB

Richard R. Jones Appointed Chair of the Financial Accounting Standards Board

Norwalk, CT—December 19, 2019—

The Board of Trustees of the Financial Accounting Foundation (

FAF

) today announced that it has appointed Richard R. Jones as the next chair of the Financial Accounting Standards Board (

FASB

).

Mr. Jones succeeds

Russell G. Golden

, and his appointment is effective July 1, 2020. Mr. Jones is expected to join the organization in early 2020 in order to enable a smooth, orderly leadership transition for the FASB.

Mr. Jones is chief accountant and partner at Ernst & Young LLP (EY), leading a large and diverse team of EY professional colleagues in the firm’s national office. Mr. Jones has spent his entire career at EY, joining in 1987 following his graduation with a BS in accounting from the State University of New York, Binghamton. Mr. Jones held the title of assurance staff and senior manager from 1987–2000 and was promoted to assurance partner in 2000. In 2008, he was named director, consultations, and he was appointed to his current post in 2014.

As EY’s chief accountant, Mr. Jones leads the effort to help the firm’s clients and engagement teams understand accounting requirements, develop the firm’s views on proposed accounting standards, and oversee EY’s accounting publication efforts across all sectors: public companies, private companies, not-for-profit organizations, employee benefit plans, and government entities. He is also the author of numerous EY technical publications.

Mr. Jones previously served on the Financial Accounting Standards Advisory Council (FASAC) from 2016 to 2018. He was also a member of the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (AICPA) from 2003–2008.

“Rich Jones brings together all of the important qualities we were looking for in FASB’s next leader,” said FAF Chairman

Charles H. Noski

. “He is an outstanding accountant, deeply knowledgeable about our diverse stakeholders, and an experienced leader who can drive consensus in the complex world of accounting standards and financial reporting. He lives our values and our mission in every respect and will serve with distinction.”

“I am both excited and humbled by this opportunity,” Jones said. “I have long regarded the FASB as a fascinating and vital player in the financial reporting system. The independent standard-setting process is a national asset and is foundational to our robust financial markets. I am eager to join my new colleagues to carry on the mission to establish and improve accounting standards, and to educate stakeholders on how to implement them successfully.”

About the Financial Accounting Foundation

Established in 1972, the Financial Accounting Foundation (FAF) is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut responsible for the oversight, administration, financing, and appointment of the

Financial Accounting Standards Board

(FASB) and the

Governmental Accounting Standards Board

(GASB). The FASB and GASB establish and improve financial accounting and reporting standards—known as Generally Accepted Accounting Principles, or GAAP—for public and private companies, not-for-profit organizations, and state and local governments in the United States. For more information, visit

www.accountingfoundation.org

.

About the Financial Accounting Standards Board (FASB)

Established in 1973, the FASB is the independent, private-sector organization, based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized by the Securities and Exchange Commission as the designated accounting standard setter for public companies. FASB standards are recognized as authoritative by many other organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB. For more information, visit

www.fasb.org

.

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Which Most Streamed Artist Of 2019 Are You?

For his Oscar-winning role in The Revenant, Leonardo DiCaprio ate a raw bison liver, learned how to use a musket, learned how to build a fire, and studied two Native American languages. While filming a scene for The Mummy in which his character was hanged, Brendan Fraser actually lost consciousness and had to be resuscitated. After finding out that she would have to be naked in front of Leonardo DiCaprio in Titanic, Kate Winslet decided to break the ice by flashing him upon their first meeting. George Clooney had to beg for his audition for E.R., which subsequently led him to fame and a movie career. O.J. Simpson was originally considered for Arnold Schwarzenegger's role in The Terminator, but was thought to be "too nice" to be menacing. Aaron Paul's now-iconic character of Jesse Pinkman was supposed to perish at the end of Breaking Bad season one, but the show's creator kept Paul around because of his chemistry with Bryan Cranston.

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Here Is a Chart of What You Are Doing to Piss Off Your Colleagues at Work

Take down that Bernie 2020 sign from your cubicle wall, stop streaming The Masters on your computer, put in some AirPods, and watch your language, asshole, because you’re irritating your co-workers, according to a new survey from Accountemps.

The good news is your fellow accountants aren’t as annoyed by your tats, nose ring, and fuchsia hair like they used to be.

Of the 91% of senior managers surveyed by Accountemps who said their firms have become more relaxed in the past 10 years, 59% cited looser societal standards while 52% blamed millennials and “Zoomers” as the main reasons why office etiquette rules have changed.

But there are still things you’re doing that get under the skin of your cube-mates. Accountemps lists them in this handy-dandy chart:

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One Guy at Moss Adams Didn’t Get the Christmas Sweater Memo

Not the Moss Adams guy in the Santa suit. He gets a pass. The guy on the bottom left showing off the red puffer vest he just bought on sale at Old Navy for $12. Dude, what happened? What made him think, “Look at everyone in their Christmas sweaters. I need to get in this photo.”?

C’mon man.

View this post on Instagram

‘Tis the season 🎅🏻

A post shared by Moss Adams Careers (@mossadamscareer) on Dec 17, 2019 at 12:26pm PST

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The PCAOB Is Really Making an End-of-Year Push to Get Stuff Done, You Guys

I dunno about you guys but for most of my working life, I’ve been conditioned to start checking out some time in mid-November. There’s the usual scramble around, oh, October to “tie up loose ends” and then everything from there is a drunken stumble to the new year. Obviously this timeline doesn’t work if you’re one of the unlucky few many with October 15 deadlines, month-end closes that don’t give a shit about your plans, or New Year’s Eve inventory counts. But for the rest of us, the last quarter of the year is definitely DGAF time.

One pattern I noticed early on in my CPA review days way back in the day was the fourth quarter rush to complete exam sections that should have been sat for months ago. You know how it is, you start the year all set for a fresh start, but then there’s some deadline or milestone or your wife pops out a kid or your crippling alcoholism throws you in the hospital for a few days… whatever, you get it, life happens and gets in the way. Next thing you know the leaves are falling and holy shit, it’s November already? Where did the year go? Well, down the toilet, but that’s neither here nor there, now’s the time to cram in all the stuff you put off for the entire year. This explains why it’s so hard to get your preferred CPA exam testing dates and/or locations in the fourth quarter, because everyone else did the same thing you did and fucked off the whole year.

It appears, if my inbox is any indication, that the PCAOB is taking a cue from procrastinating CPA exam candidates and trying to tie up innumerable loose ends during this otherwise lazy time of year.

And who can blame them? They’ve been called out for phoning it in this year but to be fair, they’ve also been dealing with a board shake-up and non-stop badgering from pundits over audit quality or lack thereof.

I say good for them. Please just don’t do anything big next week, we’re off and I plan to play PS4 in a perpetual blackout for that entire week, thx.

Further reading: PCAOB Appoints New Director of Enforcement and Investigations [CFO Mag]

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PwC and BDO Hong Kong Affiliates Got Their Hands Slapped by the PCAOB

As we begin to take a look back at the year that was 2019, one of the weird things public accounting firms were disciplined for this year by the PCAOB was for not disclosing that they’ve been the focus of a non-PCAOB disciplinary hearing.

According to PCAOB Rule 2203, if a firm is a defendant or respondent in an administrative or disciplinary proceeding that was initiated by another regulator, like the SEC or the Commodity Futures Trading Commission, it has to let the PCAOB know by filing Form 3, Special Report, within 30 days after the event. The firm also has to let the PCAOB know that the disciplinary proceeding has been wrapped up.

RSM US was busted in March and fined $15,000 because it was involved in two such disciplinary proceedings—one that concluded in October 2010 and another that concluded in June 2018—but didn’t file a Form 3 with the PCAOB until Nov. 30, 2018, eight years after the first proceeding ended and more than four months after the second one ended.

Deloitte’s affiliate in Colombia was fined $15,000 and RSM’s Hong Kong affiliate was fined $10,000 in April by the PCAOB for the same reason.

Today, two more firms were fined by the PCAOB for failing to timely disclose certain reportable disciplinary events they had with the Hong Kong Institute of Certified Public Accountants (HKICPA). PwC in Hong Kong and BDO in Hong Kong were each fined $10,000 for breaking PCAOB Rule 2203.

According to the disciplinary order, here’s why PwC Hong Kong was fined:

On or about December 17, 2015, the Firm became aware the HKICPA had initiated a disciplinary proceeding against the Firm and one of its partners in connection with the Firm providing professional services for a client that was not an issuer (the “2015 HKICPA Proceeding”).

On or about February 23, 2017, the Firm became aware the 2015 HKICPA Proceeding had concluded. The 2015 HKICPA Proceeding qualified as an Item 2.7 Proceeding.

On or about March 2016, the Firm became aware the HKICPA had initiated and simultaneously concluded a separate disciplinary proceeding against it (the “2016 HKICPA Proceeding”) in connection with the Firm providing professional services for a client that was not an issuer. The 2016 HKICPA Proceeding also qualified as an Item 2.7 Proceeding.

In violation of Rule 2203, the Firm failed to file a Form 3 with respect to the initiation and conclusion of these two proceedings.

According to the Form 3 disclosing the 2015 HKICPA proceeding, which wasn’t filed with the PCAOB until Nov. 25, 2019, the matter involved:

… the accounting treatment of a shortfall arising from disposal of a company’s subsidiary to its controlling shareholder in unaudited pro forma financial information appearing in a 2013 VSD circular of Xiwang Sugar Holdings Company Ltd. The HKICPA considered the HKFRS 10 [Hong Kong Financial Reporting Standard 10] required the entity to reflect the loss in the income statement and that the documentation in the work papers relating to this judgmental issue was inadequate.

PwC and partner Michael Chan Wai Hong were ordered to jointly make a contribution to the HKICPA’s costs in the amount of HK$108,000.

The 2016 HKICPA proceeding might have involved this:

The Hong Kong Institute of Certified Public Accountants has undertaken regulatory action against PricewaterhouseCoopers (PwC), for its failure or neglect to observe, maintain or otherwise apply professional standards issued by the Institute.

PwC audited the consolidated financial statements of a Hong Kong listed company and its subsidiaries for the year ended 31 March 2012. The relevant financial statements contained an understatement of tax expenses arising from the gain on disposal of certain properties held by a PRC subsidiary. PwC failed to detect the error and issued an unmodified opinion in the relevant financial statements.

The Institute concluded that PwC was in breach of paragraph 13 of Hong Kong Standard on Auditing (HKSA) 250 Consideration of Laws and Regulations in an Audit of Financial Statements and paragraph 6 of HKSA 500 Audit Evidence for failure to design and perform audit procedures to obtain sufficient appropriate audit evidence that could support their conclusion regarding the PRC tax expenses and the listed company’s compliance with the PRC tax laws and regulations.

PwC was ordered to pay an administrative penalty of HK$35,000 and costs of HK$39,655.90, which included costs incurred by the Financial Reporting Council of HK$29,655.90.

Now to BDO Hong Kong, which was a little tardy in telling the PCAOB about two HKICPA disciplinary hearings, according to the PCAOB order:

During July 2014 and January 2018, the Firm became aware that the HKICPA had initiated two separate disciplinary proceedings against it. Each of the proceedings related to the provision of professional services by the Firm to Hong Kong companies that were not issuers.

The Firm first learned of the initiation of each of the proceedings on or around the following respective dates:

• Proceeding 1: July 18, 2014
• Proceeding 2: January 17, 2018

In addition, the Firm learned of the conclusion of each of the proceedings on or around the following respective dates:

• Proceeding 1: September 26, 2014
• Proceeding 2: September 12, 2018

In violation of Rule 2203, the Firm failed to file a Form 3 with respect to the initiation and conclusion of these two proceedings until April 3, 2019.

On Sept. 26, 2014, BDO and director Choi Man On were punished for their failure or neglect to observe, maintain, or otherwise apply a professional standard issued by the HKICPA. They were ordered to pay a penalty of HK$30,000, as well as the costs of the disciplinary proceedings, which was HK$25,080.

On Sept. 12, 2018, the HKICPA fined BDO and accountant Lam Pik Wah a combined HK$100,000 and ordered them to pay costs of the disciplinary proceedings of HK$134,394.60 for their failure or neglect to observe, maintain, or otherwise apply a HKICPA professional standard.

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FASB Issues Standard to Improve Accounting for Income Taxes

FASB Issues Standard to Improve Accounting for Income Taxes

Norwalk, CT, December 18, 2019

—The Financial Accounting Standards Board (

FASB

) today issued an Accounting Standards Update (

ASU

) expected to reduce cost and complexity related to accounting for income taxes.

The ASU removes specific exceptions to the general principles in Topic 740—Income Taxes in Generally Accepted Accounting Principles (GAAP). It eliminates the need for an organization to analyze whether the following apply in a given period:

• Exception to the incremental approach for intraperiod tax allocation
• Exceptions to accounting for basis differences when there are ownership changes in foreign investments, and
• Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. 

The ASU also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for: 

• Franchise taxes that are partially based on income
• Transactions with a government that result in a step up in the tax basis of goodwill
• Separate financial statements of legal entities that are not subject to tax, and
• Enacted changes in tax laws in interim periods. 

The ASU is part of

the FASB’s simplification initiative

to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects.  

The ASU is available at

www.fasb.org

.  

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Grant Thornton Elects Three Dynamic Individuals to Partnership Board

Purple roses were bestowed to three dynamos who were elected to the partnership board at Chez Preber.

The newest board members are:

Robert Fox

Robert Fox: Bert is national managing partner of professional standards, based in Chicago. He leads the Purple Rose of Chicago’s national office teams over accounting principles, audit methodology, SEC and regulatory matters, and independence and ethics. Fox also consults with businesses on complex accounting matters, including business combinations, revenue recognition, share- and nonshare-based payments, and long-lived assets, according to his bio.

Fox joined GT in 2002, left for two years to become a Professional Accounting Fellow in the Office of the Chief Accountant at the SEC, then came back to GT in July 2009, according to his LinkedIn profile. Before joining Grant Thornton, Fox spent time at Arthur Andersen and McGladrey.

Chris Smith

Chris Smith: Smith is advisory services practice leader for growth and transformation, based in Bellevue, WA. This bearded dynamo focuses on “designing and deploying future-ready strategies for clients wanting high, yet sustainable growth and then operationalizing the strategy across the organization,” according to his bio. His expertise mainly centers on corporate strategy, sales, marketing and customer strategy, enterprise transformation, operational excellence, post-merger integration, and culture design.

Smith joined Grant Thornton in 2007 after GT gobbled up the boutique strategy firm he founded, Arryve.

Mark Sullivan

Mark Sullivan: MS is advisory services practice leader for the Midwest region, based in Chicago. He’s got mad skillz in corporate investigations, fraud prevention and detection, and litigation support.

According to his bio:

Mark has worked with companies and their counsel worldwide to investigate frauds, develop and implement anti-fraud programs, and identify vulnerabilities within their organizations. His advanced interviewing skills and his team of forensic accountants, eDiscovery and computer forensic professionals provide an unparalleled response to complex investigations, compliance and litigation matters.

He joined GT in 2009, according to his LinkedIn profile. He also spent parts of his career at Deloitte and Arthur Andersen.

Jim Wittmer

In addition, GT’s partners and principals re-elected Jim Wittmer to the partnership board, then re-elected him as the board’s chairman.

Wittmer is Grant Thornton’s national tax leader for market growth, based in Philadelphia. He’s been with the firm for more than 27 years.

Wittmer took over as partnership board chairman in June once Brad Preber stepped out of that role to become interim CEO of Grant Thornton. Preber was elected CEO of the Purple Rose of Chicago in November.

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Financial Accounting Foundation Appoints 11 New Members to the Financial Accounting Standards Advisory Council (FASAC)

Financial Accounting Foundation Appoints 11 New Members to the Financial Accounting Standards Advisory Council (FASAC)

Norwalk, CT—December 18, 2019—

The Financial Accounting Foundation (

FAF

) Board of Trustees, today announced the appointment of new members to the Financial Accounting Standards Advisory Council (

FASAC

). The FAF Trustees also reappointed 21 FASAC members for additional one-year terms.

The FASAC advises the

Financial Accounting Standards Board

(FASB) on strategic and technical issues, project priorities, and other matters that affect standard setting. The FASAC provides the FASB with diverse perspectives from individuals with varied business and professional backgrounds.

“I am pleased to welcome our new FASAC members, and know they will play an important role in helping the FASB improve financial reporting for all our stakeholders,” said Charles H. Noski, chairman of the FAF Board of Trustees. “I would also like to thank the departing members for their expertise, commitment, and input to the standard-setting process.”

The new FASAC members will serve a one-year term beginning January 1, 2020 and are eligible to be reappointed for three additional one-year terms. The new appointees are:

• Lara Abrash, Chairman and CEO, Deloitte & Touche LLP
• Paul Beswick, Partner, Assurance Services (National Office), EY
• Ted Christensen, Director and Terry Distinguished Chair of Business – J.M. Tull School of Accounting, University of Georgia
• Robert Fox, National Managing Partner of Professional Standards, Grant Thornton LLP
• Katherine Gill-Charest, Senior Vice President, Controller, Viacom Inc.
• Howard Guild, Chief Accounting Officer, Schlumberger Limited
• Ginger Jones, Board Member – Audit Committee, Tronox Ltd., Libbey’s Inc.
• Lucas Klein, Director of Research, Fidelity Worldwide Investment
• Lisa Koonce, Deloitte & Touche Endowed Chair in Accounting, University of Texas at Austin
• Andrew Skatoff, Senior Member, Investment Team, Belfer Management LLC
• Greg Wachsman, Vice President, Equity Research Analyst, VOYA Investment Management.

Eleven FASAC members will retire on December 31, 2019: Kimber Bascom, Stuart Birdt, Marie Gallagher, Sydney Garmong, Sameer Gokhale, Jeffrey Hales, Mark LaMonte, Cathy Shakespeare, David Sullivan, Ted Timmermans, and Randall Woods; as well as the FASAC Chairman, Andrew G. McMaster, Jr.

For the full listing of FASAC members, visit the

FASAC webpage

.

About the Financial Accounting Foundation

Established in 1972, the Financial Accounting Foundation (FAF) is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut responsible for the oversight, administration, financing, and appointment of the

Financial Accounting Standards Board

(FASB) and the

Governmental Accounting Standards Board

(GASB). The FASB and GASB establish and improve financial accounting and reporting standards—known as Generally Accepted Accounting Principles, or GAAP—for public and private companies, not-for-profit organizations, and state and local governments in the United States. For more information, visit

www.accountingfoundation.org

.

About the Financial Accounting Standards Board (FASB)

Established in 1973, the FASB is the independent, private-sector organization, based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized by the Securities and Exchange Commission as the designated accounting standard setter for public companies. FASB standards are recognized as authoritative by many other organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB. For more information, visit

www.fasb.org

.

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Deloitte Is Finally Finished with That Whole Aequitas Investors Lawsuit Thing

That’s because the $234.6 million settlement Deloitte, EisnerAmper, and five other companies reached with investors of the now-defunct Oregon investment company Aequitas last July was approved in Oregon federal court on Dec. 16.

According to Law360, the judge also approved nearly $58 million in attorneys fees and costs.

Deloitte, EisnerAmper, law firm Sidley Austin, securities firm TD Ameritrade, and ratings agency Duff & Phelps will pay a combined $220 million. Law firm Tonkon Torp and Integrity Bank & Trust of Colorado had already agreed to pay $12.9 million and $1.7 million, respectively, in a separate agreement.

But there’s still no word on how much Deloitte and EisnerAmper will have to pay individually.

Aequitas investors filed a $350 million class-action lawsuit in April 2016, less than a month after the SEC charged Aequitas Management LLC and four affiliates, as well as three executives—CEO Robert Jesenik, executive vice president Brian Oliver, and CFO and chief operating officer N. Scott Gillis—with hiding the deteriorating financial condition of Aequitas while raising more than $350 million from investors.

The investors claimed in their lawsuit that Aequitas and its affiliated companies operated a Ponzi scheme from 2010 until 2016.

Oliver pleaded guilty to fraud and money laundering charges on April 20. His sentencing is scheduled for Feb. 3, 2020.

Deloitte was named in the lawsuit because the firm was Aequitas’ auditor for the years 2013 and 2014. EisnerAmper was the company’s auditor for the years 2011 and 2012.

According to Law360, the eight named plaintiffs in the suit each received $10,000.

Related article:

Deloitte, EisnerAmper, 5 Others to Pay $235 Million to Settle Aequitas Investors’ Lawsuit

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Here’s What You Need to Know About the New Proposed CPA Licensure Model

As you may recall (or not, as I barely do), last summer NASBA and the AICPA reached out into the abyss hoping to get feedback on a new CPA licensure model. You see, the future is coming and fast, and in atypical fashion, The Powers That Be realized maybe it might be important to test CPA competency in areas other than Ability to Digest a 50 Pound FAR Book and Written Communication That We Stuck in BEC Because No One Really Cares. After all, if y’all are going to be the tech-savvy gatekeepers of the future economy, maybe it would be good to round out the ole testing regimen just a tad.

“The model we are proposing reflects the realities of practice today. When you look at the profession 20 or 30 years ago, it’s evident that the demands of CPAs have grown,” said Bill Reeb, CPA/CITP, CGMA, the chair of the AICPA. “… As our body of knowledge has expanded, we’ve stretched the exam and curriculum to cover more and more material, but that approach isn’t sustainable. We need a licensure model that is flexible enough to evolve with our profession.”

Apparently the process of soliciting opinions on this urgent need to revamp the exam went well (more than 2,000 responses!) and the process of finalizing a shiny new licensure model is chugging forward.

The Journal of Accountancy reported last week that under the proposed licensure model, candidates would pick one of three areas in which to show advanced skills in addition to being tested on competency in the familiar core areas of general accounting, auditing, and tax.

The three “bonus” areas to choose from are as follows:

• • Tax compliance and planning.
  • Business reporting and analysis.
  • Information systems and controls.

Sounds kind of interesting as a concept, will be interesting to see how they implement this. The direction they’re going with this is pretty much what we have now (e.g., everyone gets tested in audit concepts even if they don’t plan on being an auditor), just with an added “specialization.”

Writes the JofA:

The proposed model is designed to still result in one CPA license with strong required core knowledge in accounting, auditing, tax, and technology while facilitating candidates’ ability to develop a deeper understanding of one specialized area. Regardless of the candidate’s chosen discipline, the model leads to full CPA licensure, with rights and privileges consistent with any other CPA.

Additionally, the JofA says a few areas were of special concern to respondents who took last summer’s prompt for comment as an opportunity to weigh in on the new licensure model:

• Support for changing the licensure model. The most common comments stated that a bigger emphasis on technology skills and knowledge is needed and that evolving the model would bring important skills to the profession, position the profession for success in the future, and protect the public interest.
• Belief that all newly licensed CPAs should display strong core competencies. A strong core of accounting, auditing, tax, and technology was preferred.
• Implementation questions. Respondents asked how core CPA knowledge would be defined, how education requirements might change, and how licensure changes would be achieved in the current legislative environment.
• Belief that technology is not the only consideration. The impact of technology on the profession was the impetus for the CPA Evolution project, but other factors also are disrupting the profession.

So there you have it, you’re all caught up for now. The benevolent overlords of the profession hope to have this thing knocked out by next summer, and we’ll of course keep you updated as more information is available. You can find out more about the proposed licensure model at the CPA Evolution website in the meantime.

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‘Big R’ Restatements Are Quite the Thing For PwC Audit Clients

All the Tesla haters are having a field day with this on Twitter.

The Wall Street Journal reported today:

[PwC] has had a streak of accounting problems surface recently at U.S. companies it audits, including an uptick in high-profile restatements. Its clients account for three of the five biggest restatements so far this year, measured by cumulative impact on net income, according to a Wall Street Journal analysis of data from research firm Audit Analytics.

Companies audited by PwC have been more prone over the last couple of years than clients of the other Big Four firms to do the most serious type of restatement, the analysis found. These involve a company alerting clients to a problem and reissuing its financial statements.

Since the start of 2018, PwC clients have done 15 of these “Big R” restatements, more than the combined total of 11 for companies audited by Deloitte LLP, Ernst & Young LLP and KPMG LLP, according to the analysis.

Anyone surprised? You shouldn’t be.

PwC Clients More Likely to Revise Financial Statements [Wall Street Journal]

Related articles:

Big 4 Audit Quality Hiding in Plain Sight: Restatement Mentions in PCAOB Reports
PwC Probably Did Celebrate When It Helped Mattel Cover Up an Accounting Error
Accounting Fraud Watch: Under Armour’s Messy House?, Former Soccer Club Chairman Convicted, Ex-Comscore CEO Fined

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