Federal Reserve Pushes for FASB Rules on Digital Assets
The Board of Governors of the Federal Reserve System added its voice to that of many investors who have asked FASB to develop accounting rules for digital assets, such as Bitcoin, that are rapidly growing in use. If appropriate, the board should amend the scope of existing accounting standards to include digital assets or develop a new standard specifically for those assets, the agency suggested in a September 22, letter signed by Jeffrey Geer, associate chief accountant in the Office of the Comptroller of the Currency, and Lara Lylozian, deputy associate director and chief accountant of Board of Governors of the Federal Reserve System. “We observe growth, increasing interest, and innovation in related services conducted by regulated entities,” the letter stated. “Eliminating ambiguity in existing accounting standards and ensuring the economic substance of transactions is reported in the financial statements strengthens the agencies’ ability to assess exposure and related risks at institutions. The issues are complex and may require an extended period for the board to sufficiently address. Thus, adding a project to the standard-setting agenda in the near term is desirable.”
New Chair Barckow Says Intangible Asset Rules Need to be Revised
In his first major public speech as IASB Chair, Andreas Barckow said on September 27 that he agreed with those who have pressed the board to revise the accounting for intangible assets because the current standard is decades old and does not result in transparent information. IAS 38, Intangible Assets, is more than 20 years old, has never been largely revisited, and is frequently used for self-generated intangibles, Barckow told the World Standard-Setters Conference, a virtual gathering of 140 national standard-setters from more than 70 countries. Intangible assets are non-physical assets that include big data, customer relationships, brand, efficient business processes, or dynamic capability of a workforce —typically worth 90% of a business’s value, according to published data. “Today many—if not most—companies around the globe operate in the service sector. They attract a lot of attention in the capital markets and, in fact, some of the richest market valuations. However, we don’t capture well the basis of their value creation or consumption,” Barckow said. “This is the key reason why, personally, I would like us to explore what we can do to increase transparency in this area.”
PCAOB Requests More Comments Sought on Proposal for Supervision of Other Auditors
The PCAOB unanimously voted to issue another supplemental request for comment on a 2016 proposed rule intended to strengthen the requirements for the lead audit firms that supervise other accounting firms working on the audit. Other auditors are defined as accounting firms and individual accountants that are outside the accounting firm issuing the auditor’s report on the financial statements of a public company regulated by the SEC. “It is important for investor protection that the lead auditor sufficiently plans, supervises, and evaluates the work of other auditors,” PCAOB Acting Chairperson Duane DesParte said in a statement. “With the supplemental request for comment we issue today, we look forward to receiving further stakeholder input as we move to strengthen existing requirements.” The request is in PCAOB Release 2021-005, “Second Supplemental Request for Comment: Proposed Amendments Relating to the Supervision of Audits Involving Other Auditors and Proposed Auditing Standard—Dividing Responsibility for the Audit with Another Accounting Firm.” Comments are due by November 30.