A&A Article
  • The GAAP in Accounting for PTE Taxes

    In Pennsylvania, the most used entity formation structure (excluding the sole proprietor schedule C) is the pass-through entity (PTE). Though PTEs also include trusts, the focus in this column is on partnerships and S corporations (which include limited liability companies that elect either partnership or S corporation tax reporting structure). Historically, these entities have not been subject to income tax at the entity level, but rather they pass the reported tax attributes of income, deduction, gains, losses, and credits to the partners, shareholders, or members (owners). Accordingly, U.S. GAAP financial reporting seldom had ASC-740 income tax disclosure matters.
  • IAASB’s Plan for Audits of Less Complex Entities

    The International Auditing and Assurance Board (IAASB) issued the exposure draft Proposed International Standard on Auditing of Financial Statements of Less Complex Entities to address the challenges related to less complex entities (LCEs) and develop a separate standard for audits of LCE financial statements.
  • Filtering for Clarity: PCC’s Efforts to Clean Financial Reporting Requirements for Private Companies

    The Financial Accounting Foundation (FAF) established the Private Company Council (PCC) in 2012 to improve the process of setting accounting standards for private companies. The principal assertion underlying the foundation of the PCC was that users of private company financial statements are significantly different than users of public company financial statements, therefore the accounting language should be tailored accordingly. With 10 years under its belt, now is a good time to review what the PCC has been doing and where it should be going.
  • Identifying and Communicating Reportable Findings

    Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, requires auditors to communicate in writing reportable findings from audit procedures to management or those charged with governance on a timely basis. Prior to SAS 136, these items may have been communicated verbally or in a separate report discussing internal control related matters.
  • ASC 842 Lease Accounting: If You’re Not Ready, It Could Hit You Like a Ton of Bricks

    When the very first IKEA store came to the United States in 1985, there were signs and billboards two years beforehand declaring, “IKEA is coming!” I lived in Plymouth Meeting where it was built, saw the signs, and heard the news. Still, I had no idea what this store was about, let alone whether it would catch on. In my professional life, the new lease accounting standards exposure draft was issued in 2010, and we have long endured the “New lease accounting is coming!” promotions. Finally, it is here: Accounting Standards Codification (ASC) 842 is in effect for 2019 for public companies and 2020 for nonpublic companies.
  • Forensic Accounting and the Use of Artificial Intelligence

    The universe of data continues to grow – in volume, velocity, and variety. For forensic accountants, that means the scope of potentially relevant evidence is growing too. Moreover, forensic accountants must increasingly contend with evidence that is unstructured – meaning the information format doesn’t fit with conventional databases. Between the complexity of emerging data types and the sheer volume, manual methods of data management and analysis can’t keep up.
  • Accounting AI and Machine Learning: Applications and Challenges

    Artificial intelligence (AI) and machine learning have become industry buzzwords. This article discusses the state of AI and machine learning as they relate to accounting, and the challenges the profession may face moving forward as these technologies start to spread.
  • These New Audit Standards May Require Your Attention

    SAS Nos. 134 through 140 were issued by the Auditing Standards Board (ASB) to align U.S. and international standards and to communicate more information that is important to financial statement users. The standards were originally expected to be implemented for periods ending on or after Dec. 15, 2020, but the issuance of SAS No. 141 allowed for a one-year delay due to COVID-19. As a result, the effective date for this group of standards is Dec. 15, 2021. The ASB recommends that the standards be implemented concurrently, and early implementation is permitted.
  • Revenue Recognition and Telecommunications

    When the Financial Accounting Standards Board (FASB) released Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606), on May 28, 2014, several industries were provided additional resources for implementation. Among them was telecommunications (telecom), for which the Revenue Recognition Transition Resource Group and AICPA’s Telecommunications Entities Revenue Recognition Task Force have tackled some of the most challenging issues faced while implementing ASC 606.
  • How the Pandemic Impacts Determining Economic Damages

    Financial experts have a challenge, now and into the future, of separating out the effects of the once-in-a-lifetime COVID-19 economic disaster when expressing an opinion about lost profits, lost earnings, or other related damages in litigation matters, insurance claims, and other applications requiring financial forecasting.
  • GASB’s New Essentiality Criterion

    This column looks at the essentiality criterion and its development, from GASB Concept Statement No. 3, to the original exposure draft, and now the revised exposure draft.
  • Material Misstatements: Find Them Before They Find You

    For auditors, material misstatements are the enemy. If they sneak in without detection, we fail. Maybe they enter in by error, other times on purpose: it doesn’t matter. They often secret themselves in myriad places: receivables, equity, inventory, payables, investments, or a debt disclosure, just to name a few.
  • Revenue-Related Disclosures for Contractors

    Beginning in 2018, public engineering and construction companies must comply with extensive revenue-related disclosures required under ASC 606, Revenue from Contracts with Customers. Beginning in 2019 (years beginning after Dec. 15, 2018), nonpublic engineering and construction companies issuing GAAP-basis financial statements must also comply with expanded revenue-related disclosures. While the Financial Accounting Standards Board has provided all nonpublic companies with practical expedients that significantly reduce the quantity and detail of these new disclosures, the revenue-related disclosures for nonpublic companies will still present challenges.
  • The New & Improved CPA Exam: A Look Inside the CPA Evolution Updates

    The CPA Evolution initiative, a joint project between the National Association of State Boards of Accountancy (NASBA) and the AICPA, was created to transform the CPA licensure model. It was undertaken to embrace the changing skills and competencies required of CPAs, today and into the future.
  • The Effect of South Dakota v. Wayfair on GAAP Reporting

    In June 2018, the U.S. Supreme Court altered five decades of perspective regarding where an entity is “doing business.” Certainly, there are significant implications for tax compliance, but there are also immediate financial reporting issues for companies reporting under generally accepted accounting principles.
  • Attest Flexibility: New Examination and Revised Review Engagements

    Reviews are generally identified in context of historical financial statements, either in accordance with the statements on auditing standards or statements on standards for accounting and review services. However, for those reviews that fall within the scope of the statements on standards for attestation engagements, there is a pathway to perform an attestation service on other than historical financial statements. There are three types of attestation engagements: agreed-upon procedures, examinations, and reviews.
  • Independence Threats Hidden in Technology Services

    Do you provide information technology services for your attest clients? Or does the firm that performs your attest work also provide information technology services? Those services may now cause independence concerns.
  • Lease Modifications

    As defined by ASU 2016-02, a lease modification is a change to the terms of a contract that results in a change in the scope of, or consideration for, a lease. An example would be a change to the terms and conditions of a contract that adds or terminates the right to use one or more underlying assets or extends or shortens the contractual lease term. A modification must be evaluated to determine the requisite application of lease accounting.
  • CPAs and Automation in SOC 2 and IT Audits

    The traditional way of doing information technology (IT) and SOC 2 audits is going away, and it’s happening really fast. Automation is here, and it’s having an impact. But that doesn’t mean CPA firms cannot adapt and enhance their practices, deliverables, and value. Embracing automation, and the tools that facilitate it, are the key.
  • Where Are We with Client Noncompliance Issues?

    Noncompliance with laws and regulations (NOCLAR) pertains to suspected or identified noncompliance, including fraud, by CPAs. How this knowledge or suspicion impacts a current or successor CPA firm within the constraints of the AICPA Code of Professional Conduct confidentiality guidance of ET 1.700, as well as a range of nuanced state laws and regulation pertaining to client/employer confidentiality, has been at the core of the profession’s years-long wrestling with NOCLAR issues.
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