Business acumen is keenness and quickness in understanding and dealing with a business situation in a manner that is likely to lead to a good outcome. For CPAs in public accounting this means performing higher quality audits. But who has the time to compile a list of relevant and timely accounting news relevant to CPAs? We do! Here are a few articles, blog posts, and publications designed to help increase business acumen in the profession.

‘Too Big to Fail’ Banks Need $1.2 Trillion (November 12, 2015) – CNN Money (@CNNMoney)

Big banks need to come up with $1.2 trillion to fortify themselves from the next financial meltdown, according to new rules issued by global financial regulators. The rules call for the 30 biggest banks in the world to boost their capital cushions, the loss-absorbing cash they have to set aside for financial storms. Wells Fargo may need to raise $30 billion and JPMorgan Chase could need $25 billion.

How It’s Relevant: The Financial Stability Board will require big banks to maintain capital of at least 16% of total assets by 2019; that requirement rises to 18% by 2022. To fill the gap between their current capital and the new required thresholds, banks will likely need to issue debt. Compounding the problem are decreases in other comprehensive income, which is part of equity, caused by unrealized losses on investments and foreign currency translation losses. Given the focus on capital by regulators, this increases the level of risk in this area with respect to the audit and auditors should respond accordingly.

FASB Getting Closer to Finalizing Major Standards (November 16, 2015) – Accounting Today (@AccountingToday)

Speaking at Financial Executives International’s Current Financial Reporting Issues conference, FASB chairman Russell Golden and technical director Susan Cosper discussed the FASB’s upcoming leasing and financial instruments standards. According to Golden, the leasing standard and impairment standard as part of the financial instruments project will be issued in final form during the first quarter of 2016.

Golden also discussed the recently issued revenue recognition standard, noting that it is mostly converged with IFRS 15 and that the FASB and IASB are “trying very hard during the implementation phase to remain converged.” However, he admitted that the joint Transition Resource Group (or TRG) has raised over 80 implementation issues and, as a result, the Boards agreed to delay the original effective date by one year.

How It’s Relevant: Finally! It seems like we’ve included the latest decisions with respect to these proposed new standards in our U.S. GAAP and IFRS Update courses for at least five years. And they were constantly changing! It will be nice to teach the final rules in 2016. Although the effective dates seem like they are far away, companies would be wise to start their training, transition, and implementation early. We expect these standards to have a significant impact on organizations in a variety of industries.

Companies Should Update Lease Accounting Systems, Experts Advise (November 12, 2015) – CFO.com (@cfo)

As mentioned above, the FASB expects the new leasing standard to be issued during the first quarter 2016. The new rule will be effective for public companies for fiscal years beginning after December 15, 2018 (so, January 1, 2019 for calendar year-end entities). Private companies will have an extra year before the standard becomes effective. As such, corporate lessees should start updating their lease accounting systems to cull the documentation needed to comply with the new rules. The Journal of Accountancy reported that these big changes to lessee accounting, namely putting nearly all leases on the balance sheet, “may require preparers to implement new systems and internal controls.”

How It’s Relevant: In a previous GAAP Flash post, the Wall Street Journal reported that corporate balance sheets could swell by $2 trillion. In order to comply with the new requirements, including disclosures, companies will have to extract and track a lot of information within existing lease documents, hence the need to update existing lease accounting systems. Also, accountants should be aware that the FASB and IASB ultimately decided on different models. So much for convergence!

Top SEC Accountant Urges Supplemental Use of Global Rules for U.S. Companies (November 17, 2015) – The Wall Street Journal (@wsj)

SEC Chief Accountant James Schnurr has recommended U.S. companies be allowed to use global accounting rules, or IFRS, to supplement their main financial statements prepared under U.S. GAAP. This is a middle-ground approach between full U.S. adoption of IFRS and the U.S. disallowing the use IFRS for financial reporting purposes at all. IFRS is now in use in more than 100 countries and the IASB has long argued that a worldwide set of accounting rules would benefit companies and investors. However, adopting IFRS has little or no support from U.S. companies who cite the cost of implementing a new set of standards.

How It’s Relevant: This appears to be an “about face” for Mr. Schnurr who, back in May 2015, stated he probably wouldn’t recommend the SEC mandate IFRS or that U.S. companies have a choice to prepare their financials under those standards. Here we are, six months later, and the window appears open…AGAIN. Forgive us if we don’t hold our breath. Back in 2007, we ran numerous IFRS courses in the U.S., telling participants that “IFRS is coming!” When the SEC “scrapped” the plan to require U.S. companies to use IFRS in November 2008, we felt like Chicken Little! That being said, “IFRS is coming!”

Special Report: Surging U.S. Stock Buybacks Dwarf Innovation Spending (November 16, 2015) – Reuters (@reuters)

Companies are using excess cash to buyback shares and acquire companies at record levels in order to lift revenue. The formula is not new. Current Presidential candidate Carly Fiorina did it at Hewlett-Packard Co. back in 1999, buying back $14 billion of HP shares during her tenure and putting lots of money in the hands of shareholders. However, the article argues that there is a cost to this strategy. Namely, this money could have been used to innovate which perhaps would have been better for shareholders over the longer term. In the most recent reporting year, share purchases reached a record $520 billion.

How It’s Relevant: This is a very thorough and well-written article discussing the pros and cons of share buybacks, as well as why companies are entering into these transactions. Auditors would be wise to read the article, not only to increase their business acumen, but also to consider the impact of these transactions on their risk assessments and long-term effects on their clients.