(duplicate of post from Attestation Update blog )
Looks like FASB is listening very seriously to the comment letters on leases. They seem to be backing off on some of the strongest components of the lease revisions. (see big news in UPDATE below!)
Non-profit accounting
Depreciation in a local church
Great post on recording depreciation in a local church by Corey Pfaffe, CPA at his MinistryCPA blog. He suggests using modified cost as the method of accounting so you don’t have to worry about depreciation. Also points out that historical cost should be used instead of current value. Good read. Check it out.
One sentence explanation of the difference between an audit and a review
I have discussed the differences between audits, reviews, and compilations here and here. Even developed a visual illustration here. Ask any CPA and you can get a long explanation of the distinctions.
For something shorter, consult this article by Angus Loten in the Wall Street Journal, which said:
Q: How can audits pay for themselves?
Pushback on Revenue recognition draft – topic 605
Article from CFO magazine, One Size Gives Fits to All addresses the exposure draft on revenue recognition. As expected, pushback against the exposure draft is building. See my post for a bit of background on the draft. (more…)
Revenue Recognition exposure draft – Topic 605
FASB has an exposure draft out on revenue recognition. This post is a ‘heads up’, not an overall summary. This will be a fairly substantive rule, so if you haven’t heard about it, might be good to take a look. The document has a great summary on the first five pages of the introduction. (more…)
What services do you want from your CPA when they look at your financial statements?
There are three different levels of service that CPAs can provide when we look at your financial statements. We can provide a compilation, a review, or an audit. What are the differences? I have an article here that goes into some detail. It is an extract from one of my books.
The following post explains the differences visually.
Visual description of the difference between audits, reviews, and compilations
Here is a visual picture that illustrates the different comfort levels someone can draw from financial statements that have been audited, reviewed, or compiled by a CPA.
Here is a picture of assurance levels from reports issues by CPAs.
What comfort level is there from an audit, review or compilation report?
This is an explanation of the visual picture I drew in the previous post. I will try to explain the differences between audits, reviews, and compilations with a minimal amount of the technical words we CPAs usually bring to an issue. (more…)
Revised accounting for leases – proposed changes to Topic 840
The accounting rule makers (that would be the FASB) have proposed massive changes to lease accounting. Essentially, all leases with a term over 12 months will be recorded as an asset with an offsetting liability for the lease payments.
This is a casual summary (well, as casual as I can get when discussing accounting). A separate post at my other blog, www.attestationupdate.com goes into more technical details.
A very rough analogy is that all leases in the future will be treated in somewhat the same way as a capital lease is handled today. (more…)
Expanded disclosures for loans and allowance for credit loss – ASU 10-20
Disclosures for financed receivables (i.e. loans) and the allowance for losses will be dramatically expanded by Accounting Standards Update 2010-20, Receivables (Topic 310) – Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. (more…)
Increased fair value disclosures – ASU 10-06
Fair value disclosures will increase for December 2010 financial statements. Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (Topic 820) will require a few new items. The two main items I see for small and medium-sized NPOs are first, disclosing transfers in & out of Level 1 & 2, and second, disaggregation of fair value disclosures. (more…)
ECFA changes requirement for audit or review
ECFA has raised the income thresholds for requiring their members to get an audit. If your revenue is over $3 million, then you must submit financial statements audited by a CPA. If your revenue is less than $3 million, you may submit financials that are reviewed by a CPA.
There is another option that is even more economical. If your revenue is less than $1 million, you may submit financial statements that are compiled by a CPA.
(Update: ECFA revised the cutoff for a review in the fall of 2013. See discussion here.)
More information at the ECFA website here.
A review is much less costly than an audit. Not only in the lower fee you will pay your CPA, but also in terms of the reduced time you spend providing information to your CPA. A compilation is even less costly than a review.
There are major differences between audits, reviews, and compilations. I have background here that goes into more detail.
If you are not a member of ECFA and had been thinking about joining, these new thresholds might make it easier to join. Check them out! Joining ECFA makes a strong statement to your donor base that you are taking the high road on financial accountability.
Before you shift from an audit to a review, it would be wise to check with your funders, lenders, and a few major donors. You might want to make sure they are comfortable with seeing a review instead of an audit. It would not be a good situation to save half your audit fee and lose a grant that is ten times the savings! There is good news on that issue though — A few of my clients have checked with their constituency and found their funders and donors very accepting of that shift.
What’s this ‘codification’ stuff my auditor is talking about?
You may have heard auditors talking about the codification of accounting rules. Well, it isn’t about everything getting fishy. (Bad joke – sorry!) You probably have seen lots of odd comments in the notes to your financial statements. Instead of mentioning FAS Statement #157 when discussing fair value accounting of your investments, your notes now refer to something like ASC 820. What happened? (more…)
What’s going on with the audit rules?
In case there was not enough going on for your change-phobic auditor to deal with, all the audit rules are being rewritten. Every one of them. (more…)