Recently Issued Technical Questions and Answers

Below, the AICPA will post recent questions and answers issued since July 2017. The questions and answers in this section are not sources of established authoritative principles. This material is based on selected practice matters identified by the staff of the AICPA's Technical Hotline and various other bodies within the AICPA and has not been approved, disapproved, or otherwise acted upon by any senior committee of the AICPA. Consult AICPA Technical Questions and Answers for all technical staff questions and answers issued by the AICPA.

If you have specific questions about information contained here, contact the AICPA's Technical Hotline.

Auditing Questions and Answers

Section 6935.03, Multiemployer Plan Payroll Compliance Services—Engagement Letter (Issue Date: March 2018)

Inquiry — When the practitioner is engaged by the plan trustee to perform payroll compliance procedures for multiple participating employers as an AUP engagement under AT-C section 215, can the practitioner request and obtain one written engagement letter from the plan trustee to cover all participating employers that will be tested?

Download full question and answer

Section 6935.04, Multiemployer Plan Payroll Compliance Services—Representation Letters From Engaging Party (Issue Date: March 2018)

Inquiry — When a plan trustee engages the practitioner to perform payroll compliance services for multiple participating employers as an AUP engagement under AT-C section 215, the plan trustee is the engaging party. Paragraph .29 of AT-C section 215 requires that when the engaging party is not the responsible party, the practitioner should request written representations from the engaging party in addition to the written representations requested from the responsible party. In addition, paragraph .30 of AT-C section 215 states that the representation letters should be as of the date of the practitioner’s report.

When the plan trustee engages the practitioner to perform multiple AUP engagements, can the practitioner request and obtain one written representation letter from the plan trustee that covers all agreed-upon procedures engagements instead of requesting and obtaining multiple representation letters? If so, when should that representation letter be dated?

Download full question and answer

Section 6935.05, Multiemployer Plan Payroll Compliance Services—Representations Not Obtained From Responsible Parties (Issue Date: March 2018)

Inquiry — When a practitioner performs payroll compliance services for multiple participating employers as an agreed-upon procedures engagement under AT-C section 215, the responsible party is the contributing employer selected for review by the plan trustee. As the responsible party, the contributing employer maintains the payroll records for its employees and determines the contribution amounts that are required under the CBA. Paragraph .15 of AT-C section 215 states that the practitioner should request from the responsible party a written assertion about the measurement or evaluation of the subject matter against the criteria and also should request written representations as required by paragraph .28 of AT-C section 215.

If a participating employer (responsible party) is unwilling or unable to provide the requested representations in writing or orally, what are the appropriate actions that the practitioner should take?

Download full question and answer

Section 6935.06, Multiemployer Plan Payroll Compliance Services—Use of AUP or Other Reports as Audit Evidence (Issue Date: March 2018)

Inquiry — In a multiemployer plan audit, it is common for the plan auditor to receive payroll testing information from third parties. That information may come from a CPA practitioner who has performed payroll compliance services for multiple participating employers under AT-C section 215. Alternatively, similar payroll service testing information may be performed and received from an internal audit group of the employer. What are the plan auditor’s responsibilities and considerations prior to using such information as audit evidence?   

Download full question and answer

Section 9160.31, Following Accounting Standards as Promulgated by FASB by a State or Local Governmental Entity (Issue Date: July 2017)

Inquiry — How should an auditor determine whether an entity (or component thereof, such as a component unit) is a state or local government for purposes of determining whether the entity is following the appropriate accounting standards?

Download full question and answer

Section 9160.32, Reporting on Accounting Standards as Promulgated by FASB by a State or Local Government (Issue Date: July 2017)

Inquiry — An entity (or a component thereof, such as a component unit) that meets the definition of a state or local government prepares its financial statements in accordance with accounting standards as promulgated by FASB. How should an auditor report on such financial statements?

Download full question and answer

Section 9160.33, Engagement Acceptance When a State or Local Government Elects to Follow a Special Purpose Framework (Issue Date: July 2017)

Inquiry — An entity (or a component thereof) that meets the definition of a state or local government elects to prepare its financial statements in accordance with a special purpose framework (SPF). What are the auditor’s responsibilities concerning the acceptability of the SPF used by management?

Download full question and answer

Section 9160.34, Accounting Standards as Promulgated by FASB as a Special Purpose Framework (Issue Date: July 2017)

Inquiry — An entity (or a component thereof) that meets the definition of a state or local government elects to prepare its financial statements in accordance with accounting standards as promulgated by FASB. Because the appropriate accounting standards are those promulgated by GASB, can the accounting standards as promulgated by FASB be considered a special purpose framework?

Download full question and answer

Section 9160.35, Reporting on Indian Tribe Financial Statements Prepared in Accordance With Accounting Standards as Promulgated by FASB (Issue Date: July 2017)

Inquiry — An Indian tribe (or a component thereof, such as a business component functioning like a commercial entity) that meets the GAAP definition of a state or local government prepares its financial statements in accordance with accounting standards as promulgated by FASB. In such situations, may an auditor report on whether the entity’s financial statements are presented, in all material respects, in accordance with both the appropriate GAAP framework (that is, accounting standards as promulgated by GASB) and accounting standards as promulgated by FASB?

Download full question and answer

 

Accounting Questions and Answers

Section 2220.28, Definition of Readily Determinable Fair Value and Its Interaction With the NAV Practical Expedient (Issue Date: November 2017)

Inquiry— What is readily determinable fair value and how does it interact with the NAV practical expedient?
Download the full question and answer. 

Section 7100.01, Use of the Term “Security” in the Definition of a Public Business Entity (Issue Date: October 2017)

Inquiry—The FASB ASC glossary definition of a PBE uses the term “security.” ASU No. 2013-12 does not reference a specific definition of “security.” How should entities evaluate whether their financing instruments are securities?
Download the full question and answer.


Section 7100.02, Types of Securities Included in the Definition of a Public Business Entity 
(Issue Date: October 2017)

Inquiry—The FASB ASC glossary definition of a PBE uses the term “security.” Are all forms of securities included or only certain forms (for example, equity securities) included?
Download the full question and answer.


Section 7100.03 Use of the Term “Over-the-Counter Market” in the Definition of a Public Business Entity 
(Issue Date: October 2017)

Inquiry—Criterion (d) of the FASB ASC glossary definition of a PBE states that a business entity (an entity other than a not-for-profit entity within the scope of FASB ASC 958, Not-for-Profit Entities, or an employee benefit plan accounted for under FASB ASC 960, Plan Accounting—Defined Benefit Pension Plans; FASB ASC 962, Plan Accounting—Defined Contribution Pension Plans; or FASB ASC 965, Plan Accounting—Health and Welfare Benefit Plans) that “has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market” is a PBE. How should an entity evaluate whether its securities (or securities for which it is a conduit bond obligor) meet this criterion?
Download the full question and answer.


Section 7100.04, Use of the Term “Conduit Bond Obligor” in the Definition of a Public Business Entity 
(Issue Date: October 2017)

Inquiry—What is the meaning of the term “conduit bond obligor” within the FASB ASC glossary definition of a PBE? Are all entities that are conduit bond obligors considered PBEs?
Download the full question and answer.


Section 7100.05, FINRA TRACE and MSRB EMMA Data and a Public Business Entity 
(Issue Date: October 2017)

Inquiry—Are the Financial Industry Regularity Authority (FINRA) Trade Reporting and Compliance Engine (TRACE) or Municipal Securities Rulemaking Board (MSRB) Electronic Municipal Market Access (EMMA) considered OTC markets? Should financial statements available in EMMA be considered under criterion (e) of the FASB ASC glossary definition of a PBE? 
Download the full question and answer.


Section 7100.06, Use of the Phrase “Contractual Restriction on Transfer” and a Public Business Entity 
(Issue Date: October 2017)

Inquiry—Criteria (c) and (e) within the FASB ASC glossary definition of a PBE use the phrase “contractual restriction on transfer;” what types of restrictions would be included?
Download the full question and answer.


Section 7100.07, Use of the Terms “Prepare,” “Publicly Available,” “Financial Statements,” and “Periodic Basis” in the Definition of a Public Business Entity 
(Issue Date: October 2017)

Inquiry—Criterion (e) within the FASB ASC glossary definition of a PBE uses the terms “prepare,” “publicly available,” “financial statements,” and “periodic basis.” How are each of those defined?
Download the full question and answer.


Section 7100.08, Application of the Definition of a Public Business Entity When Entities are Organized in Tiered Organizational Structures (Parent, Consolidated Subsidiaries, Nonconsolidated Entities, Guarantors, Equity Method Investees) 
(Issue Date: October 2017)

Inquiry—Should the FASB ASC glossary definition of a PBE be applied on an entity-by-entity basis, or should entities look through, or evaluate the organizational structure in totality, when applying the definition of a PBE?
Download the full question and answer.


Section 7100.09, Financial Statements or Financial Information Filed With the SEC and Considerations for Effective Dates and the Definition of a Public Business Entity 
(Issue Date: October 2017)

Inquiry—Are there any effective date accommodations available to PBE entities that otherwise would not meet the definition of a PBE, except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC?
Download the full question and answer.


Section 7100.10, Accounting Standard Update Effective Dates and the Definition of a Public Business Entity 
(Issue Date: October 2017)

Inquiry—Do non-PBEs always receive deferred effective dates?
Download the full question and answer.


Section 7100.11, Evaluating the Definition of Public Business Entity for Financial Institutions Subject to Section 36 of the Federal Deposit Insurance Act and Part 363 of the FDIC Rules and Regulations  
(Issue Date: October 2017)

Inquiry—Is a financial institution subject to the Federal Deposit Insurance Corporation Improvement Act (FDICIA) always a PBE?
Download the full question and answer.


Section 7100.12, Mutual Depository Institutions and the Definition of a Public Business Entity
(Issue Date: October 2017)

Inquiry—Does the FASB ASC glossary definition of a PBE affect entities such as credit unions or mutual thrifts?
Download the full question and answer.


Section 7100.13, Brokered Certificates of Deposit and the Definition of a Public Business Entity 
(Issue Date: October 2017)

Inquiry—How would a brokered certificate of deposit (CD) be evaluated under the FASB ASC glossary definition of a PBE?
Download the full question and answer.


Section 7100.14, Private Resales (Rule 144 and Rule 144A) and the Definition of a Public Business Entity 
(Issue Date: October 2017)

Inquiry—How are private resales under SEC Rules 144 or 144A (Rule 144 and Rule 144A securities) analyzed under the FASB ASC glossary definition of a PBE?
Download the full question and answer.


Section 7100.15, Insurance Companies and the Definition of Public Business Entity 
(Issue Date: October 2017)

Inquiry—Is an insurance entity considered a PBE under the FASB ASC glossary definition?
Download the full question and answer.


Section 7100.16, Brokers, Dealers, and Futures Commission Merchants and the Definition of a Public Business Entity 
(Issue Date: October 2017)

Inquiry—Is a broker, dealer, or future commission merchant considered a PBE?
Download the full question and answer.

Section 7200.09, Tax Accounting Considerations Under Partnership Audit Regime (Issue Date: March 2018)

Inquiry— The Bipartisan Budget Act of 2015 includes rules for audits of partnerships (IRS partnership audit regime) that allow the IRS to assess and collect underpayments of tax from the partnership rather than pursuing payment from the partners unless the partnership elects to pass the adjustments through to its partners.

The rules apply to all partnerships, except for qualifying partnerships that may elect out for a tax year. A partnership that does not (or cannot) elect out for a tax year may file a “push-out election.”  Once a valid push-out election has been made, the partners for the tax year that was audited are required to report their share of the IRS adjustment.

How should a partnership account for amounts it pays to the IRS for previous underpayments of tax, interest, and penalties?  Said another way, does the underpayment represent an income tax of the partnership or the partners?

Download the full question and answer