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Risk Management Costs Dove 5% in 2016

Published on May 30, 2017

With the insurance industry glutted with capital, corporations were among those benefiting from the oversupply by paying lower prices for property-casualty coverage in 2016, according to the Risk and Insurance Management Society’s annual benchmark study

The main drivers of a 5% overall decline in risk-related expenses were a 12% drop in the cost of covering property exposures; of 6% for workers’ compensation; and of 5% for liability, according to the study. The only area in which risk managers saw rising  costs was to cover fidelity, surety, and crime losses. 

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New Revenue Recognition Standard Closing in on Manufacturers and Distributors

Published on May 30, 2017

When it comes to revenue recognition, accounting principles generally accepted in the United States (GAAP) have been industry-specific and rules-based. For most manufacturing and distribution companies, the rules have been fairly simple. But as commerce becomes more global and countries use different standards of their own, revenue recognition has become increasingly disjointed. 

To remedy this, U.S. and international accounting standard-setters have agreed on a new principles-based standard for consistent revenue recognition. The new standard’s core principle is “to depict the transfer of promised goods or services to customers in an amount that reflects the consideration expected to be received.” 

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Overtime and Stress Are Common During Month-end Close Processes

Published on May 30, 2017

Overtime and Stress Are Common During Month-end Close Processes

Automation has helped improve the efficiency and accuracy of the month-end close, but finance departments still feel pressure to close the books faster.

Two recent surveys by software providers underscore several key issues facing finance professionals 12 times a year: 

87% said they worked overtime during the financial close process, according to a survey by Adra.

60% said stress levels rise during the month-end close, according to survey by FloQast, and one-fourth of respondents said the pressure related to closing has resulted in employees leaving their organization.

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Revenue Recognition Disclosure Requirements: A Challenge That Can't Wait

Published on April 20, 2017

FASB's revenue recognition standard includes complex disclosure requirements that will take effect sooner than companies think.

As companies scramble to implement the FASB's revenue recognition standard, many are primarily focusing on the revenue and measurement requirements, which have the highest profile. Meanwhile, many companies are largely ignoring the new disclosure requirements, treating them as a minor detail that can be quickly and easily addressed once the other requirements have been satisfied. That’s a mistake.

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IRS Enforcement Activities Dropped in 2016

Published on April 20, 2017

The IRS reported several large drops in its enforcement activities in fiscal year 2016, including a 16% drop in audits, a 40% drop in levies, and a 9% drop in liens compared to the prior year. These figures were revealed in the IRS's 2016 Data Book, which reports on the agency's activities for the fiscal year beginning Oct. 1, 2015, and ending Sept. 30, 2016.

According to the Data Book, the IRS audited just over 1 million individual tax returns in FY 2016, almost 16% fewer than last year's 1.2 million. The percentage of individual taxpayers audited fell to 0.7%, which the IRS said was the lowest rate in more than a decade. The Data Book also reports that the IRS’s enforcement budget was reduced by almost $107 million in FY 2016.

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Rules Proposed for Accounting Method Changes to Reflect FASB Revenue Recognition Standards

Published on April 20, 2017

The IRS is asking for comments on proposed procedures for requesting consent to make accounting method changes to reflect FASB's new revenue recognition standards (Notice 2017-17). The proposed revenue procedure contained in the notice would govern changes in a method of accounting for recognizing income when the change is made for the same tax year for which the taxpayer adopts the new financial accounting revenue recognition standards and the change is made as a result of, or directly related to, the adoption of the new revenue recognition standards. 

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Proposal on Inventory Disclosures

Published on April 20, 2017

The FASB proposed requiring all entities to make additional disclosures regarding changes in inventory that are outside the normal purchase, manufacture or sale of inventory and the composition of inventory. All entities also would have to make certain inventory disclosures currently required by the SEC. Entities that make segment disclosures would have to make disclosures about inventory by reportable segment if they provide that information to the chief operating decision maker. Entities that apply the retail inventory method would have to make additional qualitative and quantitative disclosures about the critical assumptions they use in their inventory calculations. The proposal is part of the FASB’s disclosure framework project, under which the Board also proposed changes to the disclosure requirements for income taxes, fair value measurements and defined benefit plans. The Board also plans to review disclosure requirements for interim reporting.

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Reminder About Setting Effective Tax Rates

Published on April 20, 2017

With companies once again setting their annual effective tax rates, we'd like to remind you of some basic principles. The tax provision for the year is the same whether a company prepares only annual financial statements or interim and annual statements. The tax expense for ordinary income in an interim period is measured using an estimated annual effective tax rate. At the end of each interim period, a company must make its best estimate of the annual effective rate for the full year and apply that rate to year-to-date ordinary income. The calculation can be affected by:

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Employers' Presentation of Defined Benefit Retirement Costs Will Change

Published on April 20, 2017

The FASB issued new guidance that will require employers that sponsor defined benefit plans for pensions and/or other postretirement benefits to present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Employers will present the other components of the net periodic benefit cost separately from the line item(s) that include the service cost and outside of any subtotal of operating income, if one is presented. These components will not be eligible for capitalization in assets. The guidance is effective for PBEs for fiscal years beginning after December 15, 2017, and interim periods therein. Early adoption is permitted as of the beginning of an annual period (i.e., only in the first interim period). The guidance provides a practical expedient for disaggregating the service cost component and other components for comparative periods.

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FASB Simplifies Accounting for Goodwill

Published on April 20, 2017

The FASB issued new guidance that simplifies the accounting for goodwill impairment for all entities by eliminating the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today's goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on today’s Step 1). The new standard does not change the guidance on completing Step 1 of the goodwill impairment test. An entity will still be able to perform today’s optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. In addition, private companies will still have the option to elect the Private Company Council alternative on goodwill. The standard has tiered effective dates, starting in 2020 for calendar-year PBEs that meet the definition of an SEC filer. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017.

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