Top 5 BS (Busy Season!) reminders for 2021
Top 5 BS (Busy Season!) reminders for 2021

Top 5 BS (Busy Season!) reminders for 2021

Before I begin with my first blog post of 2021, I’d like to wish everybody a happy new year! I am really looking forward to a fresh start, making many happy memories during the year, having fewer Zoom happy hours (because they will be in person) and hopefully getting to travel. Although I don’t envision traveling for many in-person training events in 2021, I know all of us at GAAP Dynamics will be busy teaching virtual webinars – because we all still need CPE!

As Mike announced last week, we are launching a periodic webinar series covering the accounting, auditing, and practice issues impacting regional accounting firms and independent member firms of global accounting networks. And the best part about it? All webinars are eligible for CPE and they are absolutely FREE! If you’d like to be on the mailing list to receive information on how to register for these webinars, you can sign up here

Our first webinar of the series, Key accounting and audit reminders for busy season, is scheduled for January 28, 2021 at 11am EST and will be hosted by several instructors from GAAP Dynamics. As all of us are former auditors, we know how critical this time of the year can be and we want to provide you with some helpful reminders before the craziness begins!

SIGN UP NOW

Here is a sneak-peek into the areas we plan to discuss:

Accounting and auditing issues arising from COVID-19

Last week, Christine wrote a great post about five key COVID-19 accounting considerations for year-end, which we’ll discuss in the webinar:

  • Non-financial asset impairments – Triggering events such as business closures, economic declines, and business disruptions resulting from the pandemic may require a non-financial asset to be tested for impairment – but the order of testing a company’s various assets is important!
  • Exit or disposal activities – Depending on the type of activity, ASC 420 governs restructuring activities, such as reorganization, closure of facilities and abandonment of assets, and ASC 712 governs certain termination benefits – but a company must determine if those benefits represent a one-time benefit or a contractual benefit, because the accounting differs. We will also discuss the accounting requirements for furloughs.
  • Fair value measurements – As a result of the pandemic, companies may encounter changes in activity and volatility in the markets that could impact their fair value measurements, which are used in both asset impairment testing and accounting for exit or disposal activities.
  • Debt modifications – When a debt arrangement is restructured, it’s important to determine whether the modification represents a troubled debt restructuring (TDR), which is governed by ASC 470-60 or a “regular” modification/extinguishment, which is governed by ASC 470-50.
  • Going concern – Management is required to evaluate whether there are conditions and/or events that raise substantial doubt about its ability to continue as a going concern. Your year-end audit procedures will be critical surrounding this analysis due to the ongoing impacts of COVID-19.

Fair value measurements and related disclosures

As mentioned above, companies may encounter changes in activity and volatility in the markets, which can impact fair value measurements. Careful consideration must be given to fair value guidance under ASC 820 on inactive markets because markets often remain active and orderly even during times of disruption. Additionally, companies may need to reassess the inputs and significant assumptions of their fair value measurements, especially for Level 2 and Level 3 measurements.

Auditing accounting estimates and the use of specialists

AS 2501 (Revised), Auditing Accounting Estimates, Including Fair Value Measurements, is effective for public company audits of financial statements for fiscal years ending on or after December 15, 2020 and replaces existing estimate standards (AS 2501 – AS 2503) by establishing one single standard related to auditing estimates. This new standard is designed to reflect a more uniform approach to substantive testing of accounting estimates. It focuses on estimates with greater risk of material misstatement, prompts auditors to devote greater attention to addressing potential management bias, and adds an appendix of addressing special topics, like the use of pricing information from third-party sources such as pricing services and brokers or dealers.

Additionally, the use of specialists is becoming even more prevalent as the number and complexity of accounting estimates continue to rise. The PCAOB has amended two of the current auditing standards (AS 1105 and AS 1201) and retitled and revised the other auditing standard related to the use of specialists (AS 1210). Regardless of the type of specialist utilized, auditors need to assess the knowledge, skill, ability, and objectivity of the specialist. Also, the work of the specialist must be reviewed to ensure the proper supervision is applied. The level of auditor work should be commensurate with the complexity of the accounting estimate. These new standards are effective for public company audits of financial statements for fiscal years ending on or after December 15, 2020.

Current expected credit loss (CECL) model outlined in ASC 326

ASC 326, which is the new standard for the current expected credit loss (CECL) model, has finally arrived! ASC 326 was effective for public business entities that are SEC filers in 2020. All other entities will have to wait until 2023, unless of course, they decide to early adopt. ASC 326 will bring about significant change into how companies measure credit losses, and we want to point out this is not just for banks! It applies to all financial instruments measured at amortized cost, which would include such things as accounts receivable and lease receivables (not only banks with loans or debt securities). Estimating these credit losses will involve significant judgment and will also require preparation, coordination, analyzing large data sets, and an overall understanding of an entirely new methodology (for both the company and the auditor). Don’t forget, there is an AICPA Practice Guide on CECL audit considerations.

Risk assessment and its impact on your audit procedures

Last but not least, we will also discuss risk assessment (which was always one of my favorites back in my auditor days!). Remember, risk assessment must be continuously evaluated throughout the year, and 2020 was a YEAR. It is critical for your team to be evaluating and communicating any potential changes to your risk assessment as a result of the pandemic (or any other significant changes your client may have incurred throughout the year) as your risk assessment drives the extent of your audit procedures. 

What a way to kick-off our free, periodic webinar series in 2021! This webinar is going to be filled with helpful reminders and in typical GAAP Dynamics fashion, we’ll also have some fun! Be sure to sign up for all the webinars in the periodic webinar series so you don’t miss out!

As always, if you have any questions or are interested in a customized webinar for your team (or client), please feel free to contact us. See you on the 28th!

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!

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.

A&A Update collection
 
New call-to-action

Comments (0)


Add a Comment




Allowed tags: <b><i><br>Add a new comment:


Ready To Make a Change?

Cookies on the GAAP Dynamics website

To give you the best possible experience, this website uses cookies. By continuing to browse this website you are agreeing to our use of cookies. For more details about cookies and how to manage them, please see our privacy policy.