On Tuesday, April 21, 2020, GAAP Dynamics partnered with Parker + Lynch Consulting to bring together almost 900 of our closest friends for 1.5 free CPE by attending our live webinar SEC Reporting: SEC Update and Hot Topics. Although we weren’t able to facilitate from the same room, Mike and I had a blast, as always, and we hope the participants did too! In fact, this year’s webinar was so popular, we even did an encore performance on Tuesday, April 28, 2020 to a crowd of around 330. That’s a total attendance of around 1,230 CPAs…that’s a record for us! A big THANK YOU to all that attended. If you missed it, we’ve made the “Simulated Live” recording available for your viewing pleasure!
In our jam-packed, 90-minute session, we covered a lot of ground. There was a topic for everyone! In all the hubbub, we didn’t get a chance to answer all the questions posed by participants. So, we’re taking the opportunity to do that now, via this blog post. Let’s take a look at the questions that other SEC filers, like yourself, are asking when it comes to the latest updates impacting SEC registrants.
Accounting and reporting implications of COVID-19
Our session began with the topic that is on everyone’s mind – the accounting and reporting implication of the coronavirus. While many of the updates in this session were not directly issued from the SEC, there is no doubt that these updates will impact SEC filers and non-SEC filers alike as financial statement preparers struggle to stay ahead of an ever-changing landscape. To address some of the recent concerns of financial statement preparers, Russ Golden, Chair of the FASB, indicated that the FASB would be working to provide some reliefs, including:
- A proposal to provide certain private companies and not-for-profit organizations with an optional, one-year effective date delay of ASC 842 Leases. This means the new standard may not be applicable for those entities until 2022!
- Additionally, the FASB staff issued a Q&A document to help stakeholders account for lease concessions that many lessors providing to tenants during the pandemic. In summary, the FASB is providing selected relief from applying the lease modification accounting guidance in ASC 842.
- The FASB staff also noted that they have received questions related to accounting for loans from the Small Business Administration. They indicated they will work with stakeholders to provide accounting clarity in that area as well. In the meantime, this page from the AICPA provides some great insight!
In addition, GAAP Dynamics and many big four firms have been putting out guidance on other ways COVID-19 impacts accounting and reporting. Here’s some of our favorite links:
Big Four Firms:
- Technical Line: Accounting and reporting considerations for the effects of the coronavirus outbreak (EY)
- COVID-19: Accounting and financial reporting considerations (Deloitte)
- Coronavirus (COVID-19): Top 5 accounting issues and resources
- Triggering event? Let’s get off our assets and assess for impairment!
- COVID-19 & investment companies: New virus, same old accounting issues
- COVID-19: Key considerations for SEC filers
- Planning a restructuring? Here’s a refresher of ASC 420 and ASC 712!
- Impact of COVID-19 on accounting for income taxes under ASC 740
But wait, isn’t this an SEC course? Yes, it is! The SEC has also issued numerous updates that offer relief to SEC filers. For a summary of those changes, make sure to check out this blog by our own Julie Kopling!
When the SEC speaks, registrants should be listening, and the SEC has certainly been speaking! Some of the most recent topics at the top of the SEC’s mind include:
- The end of LIBOR: It’s being phased out in 2021 and the replacement rate in the U.S. will be the Secured Overnight Financing Rate (SOFR). Changing the over $350 Trillion in debt and derivatives that are based on LIBOR to SOFR is going to be a challenge that will bring up a plethora of accounting issues like debt modification and hedge accounting. Filers should be preparing NOW and disclosing their efforts to investors. You can read more about it this blog post.
- Non-GAAP financial measures: This is not a new topic for the SEC. The SEC is continuing to offer insights and areas of improvement for filers’ use of non-GAAP measures. Apart from the commonly recurring issues, like giving the non-GAAP measure more prominence than the GAAP measure, new issues have been popping up, like registrants using “tailored” accounting policies, which is not looked upon favorably by the SEC.
- Transitioning to the new accounting standards: By now, hopefully, we ALL know that the SEC is pushing filers to disclose the impacts of adopting new standards early and enhance those disclosures over time. But the SEC has also been addressing a new issue: how does an entity determine its effective date if its filing status has changed or is changing. What if an emerging growth company (EGC) loses that status? What if it happens to a smaller reporting company (SRC)? What if a registrant is going through an initial registration? The timing matters!
- Critical audit matters (CAMs): The first round of reporting on CAMs is in, and so is the verdict: It looks like most auditors are reporting 1-2 CAMs per opinion! You can read more about CAMs in this blog post.
The FAST Act
One of the key regulations recently released by the SEC is the Fixing America’s Surface Transportation Act (FAST Act). Seems like a logical place to include a bunch of changes to disclosure requirements, right? Some of the more impactful changes to disclosure requirements included:
- MD&A: The final rule allows companies to omit discussion of the earliest year (from the three years presented) if such discussion was already included in any of the company’s prior EDGAR filings that required such information, provided it is not material.
- Confidential information: Companies are now allowed to exclude or redact confidential information from material contracts filed as exhibits without requesting permission from the SEC under certain circumstances.
- Properties: The amendment guidance is meant to help filers determine when and if disclosure of physical properties is material to the company’s operations
- Risk factors: The SEC wants to encourage companies to compile more specific risk factors tailored to their facts and circumstances.
SEC Comment Letters and Enforcement Actions
Our course concluded with a discussion of recent SEC comment letter trends and enforcement actions. We reviewed the top five areas of recent comment letters, which include:
- Non-GAAP financial measures
- Revenue recognition
- Management’s discussion and analysis (MD&A)
- Segment reporting
- Fair value measurements
As it relates to enforcement actions, the SEC has outlined its enforcement priorities as follows:
- Non-GAAP financial metrics
- Role of gatekeepers
- Earnings management
- Expense recognition
- Revenue recognition
- Disclosure of material information
Q&A from the live sessions
We actually didn’t have a ton of questions that we didn’t answer on the webinar. However, with COVID-19 on everyone’s mind, we had several participants ask about the accounting and tax implications related to Payroll Protection Program (PPP) loans granted by the Small Business Administration (SBA).
As I mentioned above, the FASB has received questions related to accounting for loans from the SBA and that they are working with stakeholders to provide accounting clarity in this area.
However, in the meantime, I would point you to the guidance within ASC 470-50, which provides guidance on the accounting for modifications and extinguishment of debt. Generally, U.S. GAAP requires that loan, provided it has been extinguished, be removed from the borrower’s books. Depending on the circumstances, the borrower may also recognize a gain or loss upon settlement, which would be determined based on the difference between the loan’s reacquisition price and its net carrying amount. Obviously, in the case of loan forgiveness, there may not be a “reacquisition price”. For a nice summary of this guidance, check out this guide from RSM.
See it again (or for the first time)
If you missed the webinar, or if you just want to see it again to hear us speak about a particular item, don’t forget you can view the “Simulated Live” version here. You won’t be able to earn CPE for this event, but if you are interested in future free CPE events, make sure you subscribe to our blog, GAAPology, today!
About GAAP Dynamics
We’re a DIFFERENT type of accounting training firm. We don’t think of training as a “tick the box” exercise, but rather an opportunity to empower your people to help them make the right decisions at the right time. Whether it’s U.S. GAAP training, IFRS training, or audit training, we’ve helped thousands of professionals since 2001. Our clients include some of the largest accounting firms and companies in the world. As lifelong learners, we believe training is important. As CPAs, we believe great training is vital to doing your job well and maintaining the public trust. We want to help you understand complex accounting matters and we believe you deserve the best training in the world, regardless of whether you work for a large, multinational company or a small, regional accounting firm. We passionately create high-quality training that we would want to take. This means it is accurate, relevant, engaging, visually appealing, and fun. That’s our brand promise. Want to learn more about how GAAP Dynamics can help you? Let’s talk!
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.