Audit & Accounting Alert January 2019 (Issue 1)


Gerry Herter

As this issue of the Alert is released, two major financial reporting milestones have been reached, one for public companies and another for private companies. As of January 1, 2019, the new lease accounting standard goes into effect for public companies with calendar year ends, while the new revenue accounting standard is now effective for private companies. Our first article highlights recent reports on the implementation status of these generational changes.

A milestone for nonfinancial reporting was also announced recently by the Sustainability Accounting Standards Board. Industry-specific sustainability standards have been finalized for 77 different industries. Helpful tools for use in implementing these standards have been developed by the SASB, as discussed in our second article.

Finally, our Worldwide Update covers news from organizations across the globe.

The New Year Brings Momentous New Standards for Both Public and Private Companies

Public companies tackle leases while private companies update revenue recognition


A year ago, the January 2018 issue of the Alert summarized the significant financial reporting changes contained in the new lease and revenue accounting standards. At that time, the revenue accounting standard was just going into effect for public companies while the new lease accounting standard was still a year off. Private companies were given more time before implementing either new standard.

As of January 1, 2019, both standards are now in play for public companies with calendar year ends, while private companies are also responsible for applying the revenue accounting changes, but still have another year to put the lease accounting changes into effect. Various reports and surveys provide insights as to the progress and approaches employed leading up to and after implementation.

For example, a November 2018 report titled Impact of Revenue Recognition Standards on Public Companiesfrom business and regulatory compliance analytics company, Intelligize, revealed that most companies chose the easier of two approaches in one aspect of their initial reporting. For the transition, companies could apply either full or modified retrospective reporting. The full approach required restating the prior two years of revenue to reflect the new standard, which would have taken a lot more work. However, the report indicated that the modified approach used by the vast majority could be riskier, since investors, without the benefit of comparable accounting for all the years, may misinterpret the reduction in current year revenue caused by the change in the standard.

More "New Standards"...

First-Ever Industry-Specific Sustainability Standards Issued

Independent board completes six-year process


On November 7, 2018, the independent Sustainability Accounting Standards Board published voluntary standards covering 77 specific industries from across 11 broad sectors. The new guidelines will enable companies of all sizes to account for and report on factors of sustainability in a standardized fashion, while also facilitating comparisons between entities.

The standards set out a framework for assessing the here-to-fore difficult to quantify impacts of environmental, social and governmental conditions (ESG) in a measurable, comparable and decision-useful manner. Regardless of political persuasion, consideration of these issues will be crucial for assuring the prosperity and even survival of a business. For example, whether or not man-made climate change had an influence on the recent tragic wildfires in California, a small business located in devastated Paradise, California, may have been destroyed, and owners may have even suffered loss of live. For large companies like Pacific Gas & Electric, enormous liability may be incurred as a result of company power lines implicated in the cause of the conflagration. Owners and investors will be better served if they are informed in advance of risks, such as those leading to these fire losses.

Materials from the SASB provide a wealth of useful information for companies in any industry. A good place to start is the SASB Industry Standards Field Guide, available on the SASB website. After explaining the objectives, governance, and process for developing the standards, this volume provides a profile for each industry, along with specific exposure issues for the industry, as well as value drivers and relative financial impact. Levels of industry exposure compared to market averages are reflected for the ESG factors, which are expanded to five categories: environment, social capital, human capital, business model and innovation, and leadership and governance.

For further detail into an industry, the in depth standards for that industry can be downloaded. The content includes accounting metrics for each industry-specific sustainability disclosure topic, technical protocol for compiling data, and activity metrics for normalization.

More "Sustainability"...

Worldwide Update

Periodic roundup of recent and upcoming actions and activities by Audit and Accounting Organizations throughout the world....


IASB– International Accounting Standards Board (

  1. Exposure Draft -Onerous Contracts—Cost of Fulfilling a Contract, issued December 13, 2018 as a proposed amendment to IAS 37 - Provisions, Contingent Liabilities and Contingent Assets,would “specify that the costs of fulfilling a contract include both incremental costs, such as the costs of materials, and an allocation of other costs directly related to the contract, such as the depreciation charge for equipment the company uses to fulfil contracts.” The comment period ends on April 15, 2019.
  2. Disclosure Initiative—Definition of Material (Amendments to IAS 1 and IAS 8),issued October 30, 2018, to “clarify the definition of material and how it should be applied.” The new definition states “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. Effective January 1, 2020, with early application permitted.

IFAC– International Federation of Accountants (

  1. International Accounting Education Standards Board (IAESB) - Exposure Draft, International Education Standards 2, 3, 4, and 8: Information and Communications Technologies and Professional Skepticism– issued December 4, 2018, “speaks to strengthening professional skepticism to improve the quality of financial reporting and auditing and developing competence to meet ICT’s [information and communications technology] disruptive potential. The comment period ends on March 4, 2019.
  2. The International Auditing and Assurance Standards Board (IAASB) - Proposed International Standard on Related Services 4400 (Revised), Agreed-Upon Procedures Engagements, Exposure Draft issued November 15, 2018, “proposes to enhance key concepts in the standard, including: Ÿthe role of professional judgment in an AUP engagement Disclosures relating to the practitioner’s independence or lack thereof; Ÿguidance on appropriate or inappropriate terminology to describe procedures and findings in AUP reports; Ÿthe use of a practitioner’s expert in an AUP engagement; Ÿrestrictions on the distribution and use of the AUP report.” The comment period ends on March 15, 2019.
  3. Data Analytics: An Information Resource for IFAC Members, published November 9, 2018, provides an overview of the different types of data analytics and their applications to financial reporting and audit, as well as usage in business, to uncover valuable insights.

More "Worldwide Update, including IFRS, ACCA, IIRC, FRC, FASB, GASB, AICPA..."

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Audit & Accounting Alert is a publication of Integra International intended to highlight emerging issues in the profession.
The goal is to give Integra members an awareness of developments impacting the practice of Audit & Accounting
enabling them to stay on the forefront of industry trends.

Editor Gerald E. Herter ~ HMWC CPAs & Business Advisors, 17501 E. 17th Street, Suite 100, Tustin CA
email: [email protected]

Integra International is registered in London at 1st Floor Sackville House, 143-149 Fenchurch Street, London, EC3M 6BN, United Kingdom