Financial Executives International has released two guides to help CFOs, controllers and other senior finance execs address the internal control considerations for the new lease accounting and credit loss standards.
The pair of "ICFR: Insights, Issues and Practices" guides discuss some of the considerations and best practices that financial statement preparers should follow in their application of internal controls when dealing with the Financial Accounting Standards Board’s new standards for leases and current expected credit losses, also known as CECL. FEI’s Committee on Corporate Reporting is publishing the two documents to help companies of different sizes implement and maintain effective internal controls over financial reporting for both of the new FASB standards.
“Internal controls must be top of mind for management at all times, but especially as new standards are operationalized, and new systems and processes are implemented,” said FEI CCR chairman Mick Homan, who is also vice president of finance and accounting for corporate accounting at Procter & Gamble. “These ICFR guides represent the collaborative efforts of leading preparers, with input from their auditors. We believe this will help refresh the dialog between management and its auditors, leading to process improvements and better internal controls,”
Both Insight Guides are available for download on the FEI website at
Earlier this week, FEI hosted its annual Current Financial Reporting Issues Conference in New York, where a number of speakers addressed the new revenue recognition, leasing and CECL accounting standards.
SEC deputy chief accountant Sagar Teotia was asked at a press conference by Accounting Today about how companies were handling implementation of so many new accounting standards. “Companies have a number of large, complex, important standards to implement that are going to help investors, so calendar-year companies would have completed revenue,” he said. “They’re getting very close to completing leasing, and then we as well as Corp Fin [the SEC’s Division of Corporation Finance] are asking for comments on revenue. We’ll continue to monitor that to ensure that the application is as robust as possible for investors. We’ve tried to be very proactive and we’ve had many, many consultations in both areas. We’ve given numerous speeches about the consultations we’ve received. The goal in doing all that is to get a high-quality implementation and one that will provide the best information for investors.”
With regard to CECL, Teotia said during a panel discussion at the conference, “A lot of progress has been made on the implementation of CECL. I think a year ago people were digesting the standard. This year now, we got a lot of implementation questions so things are moving. They’ve taken learnings from some of the other standards. ... We’ve had a whole host of dialogue with a number of institutions. Some financial institutions have come in and shown us their calculations and gone into detail with us, so we can get a full understanding of what’s going on. It’s no different from revenue and leases. Last year we were quite a ways out from implementation. We felt it was so important for CECL that we dedicated almost an entire speech at the time to CECL about the types of consultations we were getting, and we put that on the website. In a month or so, I anticipate we’ll be talking more about some of the consultations we’ve gotten so people can see that.”
The SEC has also been monitoring a Transition Resource Group that FASB has set up to help companies implement the new standard, similar to the joint TRG that FASB ran with the International Accounting Standards Board for implementing the revenue recognition standard. “We’ve been active in the TRG as an observer,” said Teotia. “There was a meeting a couple of weeks ago. There are a lot of interesting issues that people are working through, the types of issues that in the cycle we feel we should be working through seems to be about the right timing as well. The AICPA has working groups and a task force on this, so we’re tracking that as well in order to see what various folks are getting.”
The SEC is also in the process of updating a staff accounting bulletin known as SAB 102 that has some relevance for the CECL standard, and it’s working with the accountants at the Office of the Comptroller of the Currency and the Federal Reserve on getting ready for the new standard. “SAB 102 applies SEC guidance on estimation in terms of the allowance, so we’re taking the concepts that are in there, applying them to the credit loss model and are working on updating that,” said Teotia. “The last thing we’re doing is coordinating closely with banking regulators. There’s obviously a whole host of people who have differing interests in the standard, so we stay very close to the chief accountants at the OCC and the Fed.”
