The final CPE Day presentation covered updates related to accounting and assurance topics. Jeff Ford and Megan Troxell provided an overview of a recent changes to U.S. GAAP that were recently applicable or will be applicable soon, auditing standards updates, Department of Labor updates and a review of the most recent leasing standard.
Jeff and Megan kicked off their presentation focusing on updates to U.S. GAAP. One of the major changes was to ASU 2019-12–Topic 740–Income Taxes, which was effective for periods beginning after December 15, 2021. This ASU is part of FASB’s simplification initiative and removes four exceptions to general principles in Topic 740. Jeff and Megan reviewed a few new requirements that arose as part of this ASU, including recognition of franchise tax that is partially based on income as an income-based tax. Another change requires evaluation of when a step up in the tax basis of goodwill should be considered as part of the business combination in which the book goodwill was originally recognized. In these cases, the evaluation of a step up in the tax basis of goodwill should be considered a separate transaction. Finally, they discussed the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in an interim period that includes the enactment date.
Next, Megan and Jeff covered the new leasing standard, which is effective for all organizations with leases (excluding leases of intangible assets, biological assets, inventory, assets under contributions and leases to explore for or use non-regenerative resources such as minerals, oil and natural gas). They noted that the intent of the leasing standard is to accurately reflect the financial position and eliminate off-balance-sheet financing. For leases with terms over 12 months for Lessees, there will be a right-of use asset and a lease liability for assets recorded. The presenters also reviewed a few financial statement impacts of the standard: the change in balance sheet treatment, which may affect financial ratios (bank covenant ratios), and the determination between finance and operating lease, which could impact EBITDA.
Jeff and Megan walked through two examples of how the updated lease standard should be implemented. They reviewed the two transition alternatives (the comparative option and the effective date option), which companies will have to consider when implementing the new lease standard. Finally, they noted that the new lease standard will require additional disclosure items for both lessees and lessors.
Next, the focus of the presentation moved to the DOL’s updated methodology for determining who is considered a participant for employee benefit plan reporting purposes. Historically, plan sponsors included in this count all eligible participants in a plan, regardless of whether they contributed. Megan and Jeff explained that the new count methodology includes only participants with account balances. This change is supposed to reduce the number of large plans and, therefore, decrease the number of plans subject to an audit. The presenters noted that the 80/120 rule still applies, and plans can continue to voluntarily elect to have an audit performed. The new participant count methodology is effective for plan years beginning on or after January 1, 2023.
Jeff and Megan provided an overview of quite a few relevant topics to make sure attendees were aware of these changes and knew which ones applied to their organizations.
Click here to access copies of the slides, links to resources and a video of the presentation
About GYF’s CPE Day: The firm presents this program each year to bring together clients, friends of the firm, and other professionals who are interested in gaining knowledge. The day is always filled with interesting presentations and great networking opportunities, and is generally attended by 300+ guests. If you have any questions about the material covered, or other issues we did not have time to address, please reach out to your GYF Executive or contact the office at 412-338-9300. We look forward to seeing everyone next year!
