Given the size and complexity and scale of the government’s response to the pandemic and the fact that the legislation was passed quickly, more guidance is needed and being published almost daily. VisitBarnes Dennig’s COVID-19 Resource Centerfor a comprehensive aicpa center for plain english accounting list of resources. Please contact our COVID-19 Advisory Team or any of ourleadership team at Barnes Dennigto discuss. I am the author of The Little Book of Local Government Fraud Prevention, Preparation of Financial Statements & Compilation Engagements.
Lessors in sales-type and direct financing lease arrangements should likewise follow the impairment testing guidance prescribed for financial assets in Topics 310 or 326, as applicable, when determining credit losses on lease receivables. The events or conditions that give rise to substantial doubt as to an entity’s ability to continue as a going concern need not have occurred before the balance sheet date; they may have occurred in the subsequent period. Such an assessment and conclusion may require the preparation of a management forecast that is based on assumptions judged to be reasonable and therefore sufficiently reliable for this purpose even if not examined by the auditor. In the event substantial doubt was present before the financial statements are issued, even if adequately alleviated by management’s plans, certain disclosures about going concern uncertainty are required by U.S. Those who hold the latter view have considered certain 2020 events or transactions as direct effects of that 2019 condition. Therefore, consistent with their interpretations of the provisions of Topics 855 and 250, they have recognized certain effects of these 2020 events or transactions in their 2019 financial statements. At the same time, they have treated other events or transactions as more directly attributable to 2020 developments, such as stay-at-home orders and government assistance programs, and therefore unrecognizable in 2019.
These contingencies would be considered resolved only when the proceeds have either been received or the expected amount has been confirmed by the insurer or a duly authorized representative. Entities often maintain insurance to mitigate losses from business interruption (i.e., disruption), such as lost revenue during periods of suspended operations.
Financial Reporting And Auditing Implications Of The Covid
Under this model, unlike the FASB accounting for government grants, the funds can be recognized into other income or can be recorded as a reduction to expenses. If repayment is expected, the loan should be accounted for consistent with other debt arrangements and reported as a loan payable. If facts and circumstances change and partial or total forgiveness is obtained, the gain on extinguishment is recognized once the company is legally released as the primary obligor of the debt. If your firm desires to keep up with evolving standards and needs written answers to technical questions, the CPEA is an excellent choice. Last week I was working with another partner to resolve a nonprofit accounting issue. (I would say who was right but I might embarrass myself.) And with it, we documented our consultation per our firm’s quality control document. Now, if the issue comes up in peer review, we have a solid answer for our position.
Address CPEA technical director review comments on all inquiries each month and follow up with members, as necessary. GAAP troubled debt restructuring accounting requirements for loans restructured as a result of the pandemic between March 1 and Dec. 31 of this year.
Our membership in the CPEA and use of their resources has led to a direct improvement in our engagements, services and client communications. I would recommend membership in the CPEA to all Firms if they are not already participating.” When attest clients ask for implementation help, CPA firms are faced with the task of maintaining their independence. This can be daunting given the complexity and scope of implementing the revenue recognition standard.
Reporting entities may have to revise disclosures about the methods, inputs, and assumptions used. Therefore, extreme caution must be exercised by auditors whose clients are proposing accruing or disclosing any material expected business interruption insurance recoveries in their financial statements. Auditors must verify such coverage and its qualifying conditions and limits by reference to express policy language, by obtaining confirmation from the carrier or a professional insurance agent, or in the event of potentially disputed coverage, by obtaining a legal opinion from the client’s counsel. The curtailment of operations, diminishing liquidity, and other economic hardships currently being experienced by customers and borrowers must be considered when valuing receivables for collectability and establishing allowances.
Cpas Opportunities At Aicpa
A “white paper” that has been circulated as being the work product of an AICPA committee has been confirmed by AICPA as NOT being a recommendation of that committee. The white paper may have been developed by certain members of the committee, but the committee developed questions only and issued no formal position paper. Buy products from manufacturers or brokerage firms and distribute them to wholesale and retail clients. Perform administrative duties, such as preparing sales budgets and reports, keeping sales records, and filing expense account reports. Identify prospective customers by using business directories, following leads from existing clients, participating in organizations and clubs, and attending trade shows and conferences. Consult with clients after sales or contract signings to resolve problems and to provide ongoing support. Assist other teams within the Association as needed on subject matter knowledge and information.
On May 13, 2020, the AICPA, through the Center for Plain English Accounting , released a report (“Accounting in the Fog of War – Treatment of PPP Loans”) to provide clarification on the accounting considerations. In short, the CPEA provides information about evolving technical issues and answers to specific accounting and auditing questions. Practitioners can provide some assistance but not all services are permissible. Practitioners may provide guidance, advice and recommendations that help management or another service provider design or develop policies, procedures, controls or systems. In addition to impairment considerations, such changes could cause the estimated useful lives of such assets to be shortened for depreciation or amortization purposes. If a lessee has adopted ASC Topic 842, “Leases,” the impairment requirements of Topic 360 will also apply to right-of-use assets recognized on leasing arrangements recorded under Topic 842. Because of the worldwide adverse effects of the COVID-19 pandemic on economic activity, many supply chains have been interrupted, and the replacement cost of inventory items, depending on the industry, has risen or fallen materially.
It includes practice notes, and CPEA observations, which should be useful to practitioners as they work through numerous questions and practice issues. Howard B. Levy, CPA, is an independent technical consultant with over 50 years’ auditing experience. He is a former member of the AICPA’s Auditing Standards Board, its Accounting Standards Executive Committee, and its Center for Audit Quality’s Smaller Firms Task Force. Dohrer suggests that it may be possible to delay the physical inventory count and observation to a later date (i.e., after the access restrictions have been lifted and the health risk reduced) and “roll back” the count by auditing interim sales and purchases. It will likely be impossible to predict how long this may take, and the longer this period, the more an auditor will have to rely on controls that may be difficult to test and may have become unreliable during the intervening roll-back period. Using a perpetual inventory system and periodic test counts may more readily permit rollback or roll-forward procedures, but with much of the same potential pitfalls.
Introducing The Ppp Loan Forgiveness Services Matrix
Monitor and attend standards setting meetings including those of the GASB and other standards-setters as necessary. Help prepare slides and participate in webcasts, addressing the implementation of new standards and other relevant A&A topics. We take care of your job applications every time you choose Apply4Me. To ensure the most secure and best overall experience on our website we recommend the latest versions of Chrome, Edge, Firefox, or Safari. Media representatives are invited to visit the AICPA Press Center at aicpa.org/press. Thomas J. Groskopf, a nationally known authority on those topics, succeeds the late Dr. Tom Ratcliffe, founder of Plain-English Accounting, LLC, a highly regarded advisory service acquired by the AICPA last fall and expanded into the CPEA. Firms must be members of the AICPA’s Private Companies Practice Session to join the center.
As businesses obtain approval and receive funds under the PPP program, there is seemingly no limit to the challenges and questions that follow. After making sure documentation is in place to support the financial need certification, implementing a system to track qualified expenses, and checking on the most recent update on the ever-evolving forgiveness rules, eventually, the question is asked how to account for the funds under U.S.
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- At the same time, they have treated other events or transactions as more directly attributable to 2020 developments, such as stay-at-home orders and government assistance programs, and therefore unrecognizable in 2019.
- Auditors must verify such coverage and its qualifying conditions and limits by reference to express policy language, by obtaining confirmation from the carrier or a professional insurance agent, or in the event of potentially disputed coverage, by obtaining a legal opinion from the client’s counsel.
- It includes practice notes, and CPEA observations, which should be useful to practitioners as they work through numerous questions and practice issues.
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More than ever, practitioners are trying to understand the current standard setting environment, interpret complex accounting and auditing rules, assess the potential impact of proposed standards, and trying to figure out how to implement standards. And, very often, they do not have access to a national office and have nowhere to turn for help or guidance. Through CPEA membership, practitioners gain national office resources without a national office. The CARES Act enables small businesses and not-for-profit entities that have experienced or are expected to experience significantly lower revenue to be eligible for certain government loans and grants. Under certain conditions, the SBA loans are eligible for forgiveness of amounts spent on stipulated benefits. Once in place, the terms of these loans and grants, if material, will have to be disclosed and compliance verified in future audits.
Secondarily, the CPEA lead manager serves as assistant staff liaison of the Private Companies Practice Section Technical Issues Committee and supervises committee efforts in Zone 3 , as well as other assignments as assigned by the lead TIC liaison. The Center for Plain English Accounting (“CPEA”) is the Association’s national A&A resource center. The CPEA’s lead manager assists member firms in understanding and implementing accounting, auditing, review, compilation, and quality control standards by sharing technical advice and guidance. The CPEA’s lead manager accomplishes that in a straight-forward and clear style of writing and speaking. The CPEA’s team of experts assist members with accounting, auditing, attest, review, and compilation needs by sharing technical advice and guidance.
Examples of triggering conditions or events applicable to goodwill and other indefinite-lived assets include adverse changes in financial performance, legal or political factors, entity- or industry-specific events, or market considerations. Following such an event, management should consider whether the direct and indirect effects of COVID-19 require it to test and adjust the carrying value of the asset for impairment between required annual testing dates. Also, if there are any indicators that an entity has changed its classification of an intangible asset from indefinite-lived to finite-lived due to COVID-19, an accounting adjustment may be required. Travel and work-at-home CARES Act restrictions, layoffs, furloughs, illnesses, and other significant disruptions to operations being experienced as a result of the pandemic may have adverse effects on existing internal controls over financial reporting . The risk of new deficiencies in ICFR may be increased, for example, due to reduced segregation of duties or effective monitoring controls, which may give rise to increased fraud risk of potential management override. These developments may cause ICFR to become deficient and fail, or need modification or replacement. In any event, auditors need to update their understanding of ICFR for the conditions prevailing during the audit and subsequent periods.
Auditors will need to be particularly alert to circumstances that present fraud risks and therefore require special attention. Her passion is providing high-quality CPE that is meaningful, creates efficiencies and improves quality, and positively impacts ROI. She also supports essential professional development, audit level training, and train the trainer efforts. Serve as a subject matter expert on topics and issues impacting PCPS members and CPEA members and promote PCPS, TIC, and the CPEA with internal and external stakeholders. National office experience, or other similar experience in either creating and presenting content on accounting matters as well as significant experience researching accounting/assurance issues. Serve as a subject matter expert on topics and issues impacting PCPS members and CPEA members and promote PCPS, TIC, and the CPEA with and external stakeholders. The Center is a voluntary membership organization for firms that perform or are interested in performing ERISA employee benefit plan audits.
Some are essential to make our site work; others help us improve the user experience. By using the site, you consent to the placement of these cookies. When US GAAP does not provide one exclusive accounting treatment for a transaction, as is the case here, the significant accounting policies footnote should describe the accounting policy that an organization applies. It is highly recommended for you to review the applicable US GAAP provisions for these accounting models in more depth as not all nuances are covered in this high-level summary. The International Federation of Accountants and the Association of Chartered Certified Accountants are marking Climate Week in New York City by urging accountants to get more involved in climate information reporting. Practitioners need to be careful and avoid performing management responsibilities. The Firm Services/PCPS team of the AICPA is posting other new resources regularly to their PPP Resources Center.
Its principal potential financial reporting and auditing consequences follow. Any unaudited, quantitative, unrecognized subsequent events information disclosed in audited financial statements, such as optional pro forma presentations, must be clearly designated as unaudited. IMTA is for CPAs who offer assurance services and information management support for their clients, helping them to build skills and provide business insight through IT.
And The Why and How of Auditing, and I frequently speak at continuing education events. Additionally, if you are not a member, you can pay a per-inquiry fee of $300. Spend your time wisely, and be confident that you’re gaining knowledge straight from the source. But it’s one that will reap big rewards if you choose to pursue it.
While the report provides much-needed guidance on the accounting for the funds under the PPP program, the resulting treatment will not be consistent from entity to entity, and in some cases, will require management to select an appropriate accounting policy. Given the fact-specific considerations, we recommend reaching out to your Barnes Dennig Accounting Team Member Accounting Periods and Methods for assistance. Accounting for the funds as Government Assistance under the International Accounting Standards 20 model. Under this model the funds are recognized when “there is reasonable assurance that the entity will comply with the conditions” of the program and will be recognized on a systematic basis over the period in which the related expenses are incurred.
Author: Justin D Smith