Financial Reporting and Regulatory Update

The quarterly Financial Reporting and Regulatory Update is prepared by the Financial Education & Research Foundation (FERF) in collaboration with Crowe LLP, highlighting pronouncements from the U.S. SEC, FASB, PCAOB, and other regulators and standard-setters. Each update includes ASU Effective Date Checklists for Public and Non-Public Business Entities.

Fourth Quarter 2017

Revenue Recognition Implementation Lessons for Private Companies – and for Companies Applying Upcoming Standards

A Q&A With Glenn Richards and Bill Watts of Crowe Horwath LLP January 2018

Glenn Richards
Bill Watts

With public companies now operating under Accounting Standards Codification (ASC) 606, the new revenue recognition standard, their efforts to implement the standard hold lessons for private companies adopting the standard in 2018 and for companies preparing to implement other major standards including leases, credit losses, and hedging.

To better understand these lessons, FERF spoke with Glenn Richards, an audit services partner, and Bill Watts, a risk consulting services principal, of Crowe Horwath LLP about the standard and the steps public companies have taken to implement its requirements.

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Financial Reporting & Regulatory Update, Fourth Quarter 2017

During the fourth quarter of the 2017 calendar year, the Financial Accounting Standards Board (FASB) issued two standards for codifying the Securities and Exchange Commission’s (SEC’s) rescission of prior guidance on revenue recognition and eliminating outdated guidance on certain deferred taxes of steamship entities as well as one proposal that includes various improvements to the codification.

The focus for the SEC during the quarter continued to be on the topics of major accounting standard implementation, capital formation simplifications, and the advancement of technology. This emphasis remained through the final speeches of the year, delivered by the SEC’s chairman, chief accountant, and staff members at the annual American Institute of CPAs (AICPA) Conference on Current SEC and PCAOB Developments. With the passage of the federal income tax reform law, it too, became a focus for the SEC.

The highlight of the quarter for the Public Company Accounting Oversight Board (PCAOB) was the appointment of a new chairman and board and the approval of its auditor’s reporting model (ARM) auditing standard by the SEC. The SEC’s approval cleared the way for implementation of the first phase of changes to the auditor’s report for audits of fiscal years ending on or after Dec. 15, 2017. The initial changes to the auditor’s report apply to audits of Dec. 31, 2017, annual financial statements for calendar year-end public companies. 

This article covers these highlights from the quarter and more from the Center for Audit Quality (CAQ), the AICPA, and others.