AICPA Releases Revised and Additional Frequently Asked Questions Regarding Third Party Verification Letters
Increasingly, CPAs are receiving requests from clients, lenders, mortgage brokers, health and life insurance providers, adoption agencies, regulators, and various other government and nongovernment agencies to confirm client information. In turn, the AICPA has received several inquiries from CPAs on what they often refer to as “comfort letters.” However, AU-C section 920, Letters for Underwriters and Certain Other Requesting Parties (AICPA, Professional Standards), defines a comfort letter as a letter issued by an auditor in accordance with AU-C section 920 to requesting parties in connection with an entity’s financial statements included in a securities offering.
The requests that CPAs are actually receiving from third parties pertain to verification letters. The requested information may relate to a pending loan, employee medical insurance, child adoption applications, or use-tax certification. Mortgages originated by private mortgage companies, which were resold to Fannie Mae and Freddie Mac and past due, are subject to required quality reviews. Quality review standards may require the mortgage originator to contact CPAs whose third-party verification is contained within the loan file to confirm the statements made in such letters.
In most cases, CPAs are asked to provide a confirmation letter containing specific language, a verification statement, or a certification form.
Due to the increase in requests, CPAs find that this process is becoming more and more confusing, and information regarding third-party verification is increasingly important to assure that practitioners are providing optimal services. In response to frequently asked questions regarding third-party verification letters, the AICPA has created responses to those questions most commonly asked.
New AICPA Accounting and Valuation Guide Testing Goodwill for Impairment
The AICPA has issued new guide in our Accounting and Valuation series, Testing Goodwill for Impairment. Like the other guides in the same series, Valuation of Privately-Held-Company Equity Securities Issued as Compensation and Assets Acquired to Be Used in Research and Development Activities (to be released in early 2014), this guide provides advanced valuation guidance. Specifically, the new guide focuses on practice issues related to the qualitative assessment and the first step of the two-step test.
This resource is a valuable tool for auditors, accountants and valuation specialists seeking an advanced understanding of the accounting, valuation, and disclosures related to goodwill impairment testing (including the qualitative assessment). It is also a vital resource for preparers of financial statements of public and private companies that follow FASB guidance on goodwill.
This new guide is available for paperback preorder and will be available in the coming weeks in eBook format and as part of an electronic subscription through the AICPA’s Online Professional Library.
Related Webcast Available “Release of New AICPA Accounting and Valuation Guide Testing Goodwill for Impairment”
Since the issuance of ASC 350-20 (formerly SFAS 142) in 2001, the two-step goodwill impairment test has had a significant impact on financial reporting. In 2011 FASB amended ASC 350 to permit an entity to first assess qualitative factors (Step 0) to determine whether to proceed to Step 1 of the two-step test. The final version of the new AICPA Accounting and Valuation Guide Testing Goodwill for Impairment, which takes one from A to Z of the goodwill impairment test, is now available.
Join our experts for this webcast, during which representatives from the Task Force, which developed this new guide, will discuss the key topics covered in the guide, including:
Register quickly for this informative webcast.
- Identifying reporting units and assigning assets and liabilities to a reporting unit
- Market participant assumptions
- Issues surrounding comparison to the market capitalization
- Framework for performing the optional qualitative assessment
- Measuring the fair value of a reporting unit in accordance with the guidance in ASC 820
- And more!