by Magnus Orrell and Joseph Renouf, Deloitte
& Touche LLP
Welcome to Quarterly Accounting Roundup: Third Quarter — 2020. In the third
quarter of 2020, the FASB issued an Accounting Standards Update (ASU) that simplifies
the accounting for certain financial instruments with characteristics of liabilities and
equity, including convertible instruments and contracts on an entity’s own equity. The
Board also released several proposals, including the following:
A proposed concepts statement that would add Chapter 4, “Elements of Financial Statements,” to Concepts Statement 8, which contains the Board’s
conceptual framework for financial reporting.
A proposed ASU that would give insurance companies an additional year to
implement ASU 2018-12.
A proposed ASU that would allow private companies to use a practical
expedient to determine the current market price of the underlying share of
equity-classified shareoption awards issued to grantees.
On the regulatory front, the SEC released a final rule that modernizes certain disclosure
requirements in Regulation S-K, including those on the description of a business, legal
proceedings, and risk factors. The final rule is intended to improve the readability of
disclosures, reduce repetition, and eliminate immaterial information, thereby
simplifying compliance for registrants and making disclosures more meaningful for
investors. The SEC also finalized updates to the disclosure requirements for bank and
savings and loan registrants (i.e., Industry Guide 3). The final rule eliminates
requirements that are duplicative with other SEC regulations or U.S. GAAP or IFRS
Standards® and updates the requirements to include certain credit ratios.
In addition, in response to the ongoing coronavirus disease 2019 (“COVID-19”) pandemic,
the SEC’s COVID-19 Market Monitoring Group issued its initial observations on credit
ratings, procyclicality, and related financial stability issues.
In international news, the International Accounting Standards Board (IASB®)
completed the second phase of its project on interest rate benchmark reform by releasing
a package of amendments addressing issues that might affect financial reporting in
connection with the transition of existing interest rate benchmarks to alternative
rates. The IASB also released amendments that defer the effective date of its January
2020 amendments to IAS 1 and address concerns and challenges with implementing its new
insurance contracts standard, IFRS 17.