Third Quarter — 2020

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.

Conclusions of the FASB, GASB, IASB, and IFRS Interpretations Committee are subject to change at future meetings and generally do not affect current accounting requirements until an official position (e.g., Accounting Standards Update or IFRS Accounting Standards) is issued. Official positions are determined only after extensive deliberation and due process, including a formal vote.

Further information about the standard setters can be found on their respective Web sites as follows: www.fasb.org (FASB); https://www.fasb.org/page/PageContent?pageId=/about-us/advisory-groups/eitf/openissuesandproposedagenda.html (EITF); https://www.aicpa-cima.com/home (AICPA & CIMA); www.sec.gov (SEC); https://pcaobus.org (PCAOB); https://fasab.gov (FASAB); www.gasb.org (GASB); and www.ifrs.org (IASB and ISSB).

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