Second Quarter — 2021

by Magnus Orrell and Joseph Renouf, Deloitte & Touche LLP

Welcome to Quarterly Accounting Roundup: Second Quarter — 2021. In the second quarter of 2021, the FASB issued an Accounting Standards Update (ASU) on accounting for certain modifications or exchanges of freestanding equity-classified written call options. The Board also released proposed ASUs on (1) an entity’s use of a portfolio layer method for a fair value hedge and (2) the discount rate used by lessees that are not public business entities (PBEs) in the accounting for a lease. In addition, the FASB published an invitation to comment that seeks comment on what the Board’s future agenda priorities should be.

In other domestic news, special-purpose acquisition companies (SPACs) and environmental, social, and governance (ESG) matters continue to be topics of focus for the SEC. On March 31, 2021, the SEC acting chief accountant and Division of Corporation Finance released two public statements that address (1) certain issues private companies should consider before undertaking a business combination with a SPAC and (2) financial reporting and auditing considerations for companies merging with SPACs. Further, on April 8, 2021, the acting director of the Division of Corporation Finance issued a statement on SPACs, initial public offerings, and liability risk under the securities laws. Moreover, on April 12, 2021, the acting chief accountant issued a statement on accounting and reporting considerations for warrants often issued by SPACs. With respect to ESG, the Commission published a risk alert detailing observations by the Division of Examinations of investment advisers’ ESG investing approaches and disclosures.

On the international front, the International Accounting Standards Board (IASB®) published amendments to IAS 12 that clarify that the initial recognition exemption related to deferred taxes does not apply to transactions such as leases and decommissioning obligations. The IASB also released for public comment exposure drafts (EDs) that would (1) provide guidance on the exchange rate to use when a currency is not interchangeable, (2) replace its existing guidance on preparing management commentary, and (3) establish a new sustainability standards board under the governance of the IFRS Foundation.

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).

Quarterly Accounting Roundup is prepared by members of Deloitte’s National Office. The purpose of this publication is to briefly describe key regulatory and professional developments that have recently occurred in the field of accounting and to provide links to locations where additional information can be found on each topic. Readers seeking additional information about a topic should review the information referred to in the hyperlinks and not rely solely on the descriptions included in this communication.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.

The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.

As used in this document, “Deloitte“ means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.