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.
Broker-dealers: Prepare for the new revenue recognition standard (July 7, 2015) – Grant Thornton (@GrantThorntonUS)
The new revenue recognition standards (ASC Topic 606 and IFRS 15) are expected to have far reaching impacts on a number of industries, including broker-dealers. Don’t let the title of the article fool you. It is relevant to auditors of all industries, not just broker-dealers. This article provides an overview of the five-step model, highlighting the high-level impacts to broker-dealers. It also outlines 6 reasons why firms should start planning for the new standard now, irrespective of the one-year delay in the effective date recently passed by the FASB and IASB.
How It’s Relevant: Because of the one-year delay the effective date, some companies continue to procrastinate their implementation efforts. Implementation will take considerable time and the time to start is now! Likewise auditors need to ensure that are proficient in the new standards so that they can provide value-add services to their clients.
Shaking All Over (July 15, 2015) – CFO Magazine (@cfo)
Driven by billion-dollar-plus transactions, the market for mergers and acquisitions is booming. If 2014 was the best year for mergers and acquisitions since before the financial crisis, 2015 may turn out to be even better, market watchers say. This article does a good job of explaining the factors fueling the ongoing rush of deal making and listing the sectors experiencing the most M&A activity. It also provides a nice overview of ten megadeals announced during 2015.
How It’s Relevant: Accounting for business combinations can be tricky! Issues like contingent consideration, reverse acquisitions, and share based payment awards have fairly specific rules under both U.S. GAAP and IFRS. Accountants and auditors would be wise to brush up on the requirements (and nuances) of accounting for business combinations under ASC Topic 805 or IFRS 3.
The Hows and Whys Behind Spinoffs (July 14, 2015) – The CFO Journal (@CFOJournal)
Shareholders have reaped billions of dollars from spinoffs this year, proving that the sum of a company’s parts can be worth more than the whole. This year, companies have distributed more than $50 billion in shares to investors to transform U.S.-based units into stand-alone enterprises. This article does a good job of explaining why companies undertake these transactions, as well as the benefits and pitfalls.
How It’s Relevant: Generally,a parent shall deconsolidate a subsidiary or derecognize a group of assets as of the date the parent ceases to have a controlling financial interest in that subsidiary or group of assets. However, there are some fairly specific rules outlined in ASC Topic 810-10-40 that accountants and auditors dealing with these transactions should understand.
Fact Sheet: Concept Release on Audit Quality Indicators (June 30, 2015) – Public Company Accounting Oversight Board (@PCAOB_News)
The PCAOB issued a concept release to seek public comment on the content and possible uses of a group of potential audit quality indicators (AQIs), a portfolio of quantitative measures that may provide new insights about how to evaluate the quality of audits and how high quality audits are achieved. The PCAOB has identified 28 potential indicators to be used by audit committees, audit firms, investors, and regulators to “stimulate discussion about the drivers of audit quality.”
How It’s Relevant: We agree that certain AQIs, like the turnover and workload of audit staff, would provide relevant (and interesting) information to concerned parties to assess audit quality. However other AQIs, like allocation of audit hours to risk areas and phases of the audit, would require already overworked audit professionals to spend additional time to track their hours. CPAs in public accounting should review the proposed AQIs and provide their comments to the PCAOB by the September 28, 2015.
The Volcker Rule: As the Deadline Approaches, What Every Bank’s Internal Auditors Need to Know (July 2015) – KPMG LLP (@KPMG_US)
The Volcker Rule, part of the Dodd-Frank Act, takes effect July 21, 2015. Banks must comply with the many and complex requirements imposed by the Rule, such as the bank on proprietary training and restrictions on their ability to own and provide services to certain funds (e.g., hedge and private equity funds). This comprehensive publication is designed to help a bank’s internal audit department perform a thorough risk assessment and formulate an effective audit plan to review and evaluate the bank’s compliance with the Volcker Rule.
How It’s Relevant: Although this publication is certainly relevant for internal auditors, we believe it is also a worthwhile read for external auditors of banks and other financial institutions. The Volcker Rule is a “big deal” for banks. Auditors of these institutions would be wise to understand its requirements and implications to their clients.
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