What is FinREC up to?

I had the privilege of attending my first in-person Financial Reporting Executive Committee (FinREC) meeting last week in New York. FinREC is an AICPA committee that determines the AICPA’s technical policies regarding financial reporting standards with the ultimate purpose of serving the public interest by improving financial reporting. While the committee is not a standard setter and papers and guides are not considered official authoritative literature under GAAP, the committee’s guides and papers provide our profession with important guidance and insights on how others are interpreting GAAP with the hope of bringing consistency to various issues and topics beyond what the standard setters can provide.

At the March meeting the committee discussed three major topics including an addition to the Employee Benefit Plan guide on Multi-Employer Plans, additional revenue recognition papers for inclusion in the revenue recognition implementation guide, and some of the first papers on the Current Expected Credit Loss (CECL) model which we will all have to implement by 2020.

Multi-employer benefit plans can be pension, health and welfare or apprentice plans, which are collectively bargained and receive contributions from several different employers. A key feature of such plans is that the contributions are not made only for the benefit of the employer’s employees, but for the benefit of all participants in the plan no matter which employer the participant came from. While financial statements of such plans have many commonalities with single employer plans, there are several unique aspects to multi-employer plans which the proposed guidance addresses.

Work on revenue recognition is winding down with 130 papers already posted for comments. FinREC reviewed five papers at the meeting. Three papers covering health care and construction industry issues had already been exposed, and FinREC was reviewing and responding to the comments received. Two papers covering gaming and telecommunication industry are being prepared for exposure in the coming months.

FinREC reviewed the first two proposed topics in response to the implementation of the new CECL rules. One paper discussed whether the way an entity implemented the required reversion method in determining credit losses was considered an estimation technique or an accounting policy election. The other paper explored the potential for additional financial instruments beyond the U.S Treasury security example in the FASB standard to have zero expected credit losses under the CECL model.

The members of FinREC took their work very seriously, asked numerous questions, and discussed implications of the work throughout the day. We would love for you to do the same when these items are posted for public comment in the coming months.

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