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FASB Proposes to Streamline Goodwill Impairment Tests

Published on May 24, 2016

The Financial Accounting Standards Board is proposing to simplify the test for goodwill impairment for public companies and nonprofits similar to recent accommodations it made for private companies. 

FASB issued an exposure draft of the accounting standards update, asking for comments on the proposal by July 11. FASB amended its standards in 2013 to allow private companies an alternative accounting treatment for subsequently measuring goodwill in response to input from its sister organization, the Private Company. 

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FASB Makes Additional Revenue Recognition Clarifications

Published on May 24, 2016

FASB issued a third round of clarifications to its revenue recognition standard recently, focusing on narrow-scope changes and practical expedients. 

In coordination with the International Accounting Standards Board (IASB), FASB is responding to preparers’ concerns about implementing the revenue recognition standard the boards issued jointly in May 2014. In some cases, the boards came to different conclusions about issuing clarifications. 

The IASB issued its changes last month in Clarifications to IFRS 15. FASB has taken a piecemeal approach to the changes, and issued Accounting Standards Update (ASU) No. 2016-12Revenue From Contracts With Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients

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Three Ways to Improve Your Vendor Management

Published on May 03, 2016

Most companies hire vendors in the course of doing business. The vendor could be a supplier of goods, a service company, a technology provider, or a building contractor. Senior management and corporate boards justifiably have questions and concerns about how to protect against vendors’ actions that might produce a loss. 

Examples that could happen to any organization include the following: (1) a software vendor’s employee sabotages the hiring company’s records because of personal animus; (2) a vendor hired for window washing has an accident at the hiring company’s building, suffering a crash that injures the vendor’s employees and passersby; or (3) a vendor hired by a doctor to handle medical records leaves files on the train by accident, exposing patients’ confidential personal information. 

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Preparing Businesses for the New Overtime Pay Rule

Published on May 03, 2016

In 2015, the Department of Labor proposed a rule that could have a significant impact on the way employers compensate their employees.

This rule proposes changes that would expand the number of workers who are eligible for overtime pay: time and one-half their regular rate of pay for hours worked over 40 in a workweek. Most businesses will be required to comply with the changes once a final rule is released. 

Here are five workflow recommendations that may be critical to your company’s success and compliance with the new overtime pay regulations: 

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Anti-fraud controls cut significantly into losses, new report finds

Published on May 03, 2016

The presence of anti-fraud controls such as management reviews and telephone hotlines can greatly reduce the damage done by fraud schemes. And the use of such controls is slowly on the rise. 

Those are two of the trends identified in the 2016 Report to the Nations on Occupational Fraud and Abuse, released Wednesday by the Association of Certified Fraud Examiners. The biennial report, which is based on thousands of fraud cases reported by fraud examiners worldwide, provides a detailed look into how fraud is being perpetrated, detected, and combated in various industries and regions. 

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IRS issues 2016 and revised 2015 vehicle depreciation limits

Published on May 03, 2016

The IRS issued guidance providing revised limits for the amount of depreciation taxpayers can take for the first year they use a passenger automobile (including a truck or van) for business in 2015 and the new depreciation limits for 2015. The guidance also includes the lease inclusion amounts that vehicle lessees must include in income for 2016 (Rev. Proc. 2016-23). 

The revisions apply to passenger vehicles that were placed in service during 2015 and to which 50% bonus depreciation applies. They were necessitated by retroactive extension of bonus depreciation for 2015 by the Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113. Accordingly, the first-year depreciation limitation for 2015 is increased by $8,000. For passenger automobiles (other than trucks or vans) placed in service during calendar 2015 to which 50% bonus depreciation applies, the depreciation limit under Sec. 280F(d)(7) is $11,160 for the first year. The corresponding figure for trucks and vans is $11,460. 

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New credit impairment standard, hedge accounting proposal on the way

Published on May 03, 2016

The FASB hopes to issue a new credit impairment standard in the second quarter of 2016 that would require entities to estimate and recognize an allowance for lifetime expected credit losses for loans, trade receivables, held-to-maturity debt securities and certain other financial assets measured at amortized cost. Estimating an allowance for lifetime expected losses would likely require changes in the processes, systems and controls entities use to estimate incurred losses today. The FASB recently held a public meeting with community bank preparers, auditors and banking regulators to discuss the banks’ concerns about the potential complexity in measuring expected losses on loans.

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New Leasing Standard Could Benefit Companies

Published on April 05, 2016

The Financial Accounting Standards Board’s new lease accounting standard could have some positive payoffs for companies if they take a careful approach to implementing it.

FASB released the long-awaited standard after a decade of work with the International Accounting Standards Board as one of their major convergence projects. 

The standard will add operating leases to the balance sheet for the first time for many companies, and they will need to begin tracking down all of their leases. Companies today are required to disclose their leasing commitments. With the new standard and the prominence on the balance sheet, they need to ensure that the information they have is complete and accurate. While we tend to find companies tend to have a relatively good arm around their real estate portfolio, the equipment leases are probably a category of assets where they may be a bit more disbursed across an organization. Even though it might not be the most significant part of what they’re putting on the balance sheet, it may be one of the more significant efforts in order to get there. 

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FASB Streamlines Move to Equity Method of Accounting

Published on April 05, 2016

The Financial Accounting Standards Board has issued an accounting standards update making it easier for companies to transition to the equity method of accounting. 

Stakeholders told FASB that the requirement to retroactively adopt the equity method of accounting is costly and time consuming when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence. They said the requirement does not provide a clear benefit to users of financial statements. 

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How Cooperatives Measure Earnings Affects Patronage Refunds

Published on April 05, 2016

Patronage refunds are one of the main differentiating factors between a cooperative business and a regular corporation or other business entity. One of the major parts of the statutory definition of a patronage refund is that it is determined by the net earnings of the cooperative. The statutory definition, does not, however, state whether those net earnings are determined by federal income tax or financial accounting rules. 

Based on experience, the method used to determine net earnings has been based on the region of the country that the cooperative is located and size of the cooperative. In recent years, cooperatives have begun to review their method for determining net earnings in the hopes of taking full advantage of tax breaks and still providing a fair and equitable return to their members. 

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