This week’s GAAP Flash includes articles about the new disclosure requirements for multinational PCAOB audits, the impact of the new revenue recognition standard (ASC 606) on banks, machine learning and its impact on the future of accounting, and the FASB tackling the accounting for cloud computing implementation costs.

New information about multinational audits may require changes in practice (July 10, 2017) – Accounting Today (@AccountingToday)

Starting with Form AP reports filed in June of 2017, the firm which signs an audit opinion for PCAOB audits will be required to disclose the name and location of other accounting firms (including shared service centers and foreign firms) participating in an audit if the work of such firms constitutes more than five percent of total audit hours. In addition, for the firms performing more than five percent of the audit, the percentage of the total hours must be disclosed in a range or as a percentage.

How It’s Relevant: As published by the PCAOB, 55% of all public companies in the U.S. have multinational operations! Recently, there has been significant scrutiny on the audit quality of non-U.S. audit firms and compliance with PCAOB auditing standards by foreign affiliates of U.S. audit firms. As a result, the requirements of the new Form AP will bring more attention to those firms as they will likely be subject to PCAOB inspections. Audit committees will want to make sure they are aware of the other auditors’ inspection reports and any related findings to make sure there are no quality issues coming from the affiliates or component auditors. Check out this post for issues coming out of recent PCAOB inspection reports of the annually inspected firms.

Banks are beginning to admit a new rule on revenue recognition will have an impact (July 8, 2017) – MarketWatch (@Marketwatch)

Financial services firms, including the biggest commercial and investment banks, are slowly but subtly admitting that the new revenue recognition standard (ASC 606) may have a significant impact on their financial statements. Since ASC 606 does not apply to revenue from financial instruments, including loans and securities, banks have been saying that the new revenue recognition guidance wouldn’t have a material impact on their income statement. However, several big commercial and investment banks hinted in their last quarterly filings that there may be more to come in other income areas and those changes may be significant.

How It’s Relevant: If you’re wondering why banks finally chose to disclose the expected impact of ASC 606, check out this post (Nugget #1)! It’s about time, as the new revenue recognition standard is effective for public business entities in less than 6 months! The standard is expected to impact nearly every company and there are so many considerations, including what approach to take in recording the change/impact of the standard, transition data, and related disclosures. Specifically relating to banks, the presentation of revenue on a gross vs. net basis is an area of focus, as well as new required disclosures. Is your company ready for ASC 606? If not, you can start with our free, 1-hour eLearning module or browse some of our micro-learning videos here. We also offer customized revenue recognition workshops, so contact us today!

Machine Learning, Artificial Intelligence - And the Future of Accounting (July 7, 2017) – Forbes (@Forbes)

White-collar workers who are part of the knowledge economy are beginning to experience what manual laborers have in the past when new technology made their jobs obsolete. Given the improvements we’ve recently seen in computing, many professionals fear for their future as machines threaten to overtake them. But rather than fear the changes that machines will have on accounting tasks, it’s an opportunity for accounting professionals to be excited!

How It’s Relevant: Technology is everywhere and it’s not going away anytime soon: Siri, robot powered cars, and the use of drones in an inventory observation have all been made to make our lives easier and isn’t that what we’re looking for? The convenience of technology, especially machine learning, in accounting will eliminate the need for humans to do the “automated” tasks of calculating, data entry/pull, classifying, and reconciling. This will allow humans to focus on more of the “human” part of their job – analyzing, interacting, and focusing on solving problems. So, go ahead and make friends with the robotic machine! If you’re still worried…. GAAP Dynamics is hiring! Check out our job postings where you will never be replaced by a machine!

FASB eyes cloud computing implementation costs (July 11, 2017) – Accounting Today (@AccountingToday)

The Private Company Council (PCC) recently confirmed that accounting for the costs of implementation in a cloud computing arrangement is a prevalent issue for private companies. As a result, they’ve asked the FASB to provide guidance on how to account for such costs. Two years ago, the FASB issued ASU 2015-05, which provides guidance about a customer’s accounting for fees paid in a cloud computing or hosting arrangement, but currently there is no explicit guidance on the implementation costs; therefore, it has been added to the Emerging Issues Task Force’s (EITF) upcoming agenda.

How It’s Relevant: The need for streamlined, explicit guidance as it relates to implementation costs for cloud computing will benefit both public and private companies. Additionally, auditors are focusing on cloud computing and how to leverage its technology within audit engagements to gain efficiencies and profitability. Check out this recent article for more information on the use of cloud computing technology.

Disclaimer
This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.