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Government Auditing Standards –GAO Proposes Updates to Government Auditing Standards 

GASB Implementation Guidance –GASB Proposes Additional Proposal for Implementation Guidance 

Governmental Auditing Standards –GAO Issues Professional Standards Update No. 87 

GASB Standards –GASB Proposes Guidance to Assist Stakeholders with Application of Its Pronouncements

GAO Professional Standards –GAO Issues Professional Standards Update No. 86 

GASB Standards –GASB Proposes Guidance to Assist Stakeholders with Application of Its Pronouncements 

Professional Standards – GAO Issues Professional Standards Update No. 85

Other Exposure Documents - Invitation to Comment 2022-002 —Accounting for Government Grants by Business Entities —Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into Generally Accepted Accounting Principles

GASB Pronouncements –GASB Issues 2022 Omnibus on Practice Issues

Error Corrections –GASB Issues Statement No. 100 on Accounting Standards and Error Corrections

Risks – GASB Issues Exposure Draft on Disclosures about Certain Governmental Risks

Omnibus 2022 –OMB Issues 2022 Compliance Supplement

GAO –GAO Issues Professional Standards Update No. 84

Governmental Audit –GAQC Alert No 439 Published

Auditing –GAQC Publishes Practice Aids for Auditing For-Profit Entities with Provider Relief Fund

Governmental Audit –GAQC 437 Published 

Government Professional Standards – GAO Issues Professional Standards Update No. 83

FASB Accounting Standards Updates - Accounting Standards Update No. 2021-10 —Government Assistance (Topic 832) —Disclosures by Business Entities about Government Assistance

Articles 

Government Auditing Standards –GAO Proposes Updates to Government Auditing Standards 

Summary - The U.S. Government Accountability Office (GAO) has issued an exposure draft with proposed updates to Generally Accepted Government Auditing Standards (GAGAS), also known as the Yellow Book. These proposed updates reflect developments in accounting and auditing professions since the last update. The GAO has requested public comments on the proposed changes by April 28, 2023.

The GAO intends the proposed update “to strengthen and modernize audit organizations’ systems for managing engagement quality using a proactive and risked-based approach,” according to Gene L. Dodaro, Comptroller General of the United States and the head of GAO. “The proposed approach is intended to help ensure that audit organizations produce reliable, objective, and high-quality work for use in holding management and officials entrusted with public resources accountable for carrying out their duties.”

The GAO also expects the proposed updates to improve the scalability of the standard for audit organizations of various sizes and those with quality management systems that vary in complexity and formality. Some of the proposed amendments include:

  • A change in approach from quality control to quality management;
  • Use of a risk-based process for achieving the objectives of quality management;
  • Provisions for optional engagement quality reviews of GAGAS engagements; and
  • Application guidance on key audit matters for the public sector.
  • To ensure that the proposed standards meet the needs of auditors who use GAGAS, the Comptroller General has convened an advisory council consisting of representatives from federal, state, and local governments and the private sector and academia. The 2023 exposure draft includes the advisory council’s input.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

GASB Implementation Guidance –GASB Proposes Additional Proposal for Implementation Guidance 

Summary - The GASB has issued for public comment and Exposure Draft, Additional Proposal for Implementation Guidance Update—2023. This proposal seeks feedback on guidance that clarifies, explains, or elaborates on Statement No. 96, Subscription-Based Information Technology Arrangements. The question and answer proposed in this document supplements the implementation guidance in the proposed Implementation Guide, Implementation Guidance Update: 2023. Accordingly, the following provisions of that proposed Implementation Guide apply to the question and answer in this document: the applicability provisions in paragraph 2, the effective date and transition provisions in paragraph 6, and the materiality provisions.

Comments on the proposal are due March 10, 2023.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Governmental Auditing Standards –GAO Issues Professional Standards Update No. 87 

Summary - The Government Accountability Office (GAO) has published Professional Standards Update (PSU) No. 87 covering standards published from October through December 2022.

PSUs alert the audit community to changes in and highlight the issuance and effective dates of recent standards and guidance related to engagements conducted in accordance with Government Auditing Standards. They provide brief summaries of recently issued standards of major auditing and accounting standard-setting bodies, including, among others, the GAO, the FASB, GASB, and AICPA. Auditors may use the GAO’s Governmental Auditing Standards: 2018 Revision Technical Update April 2021 (Yellow Book) in connection with professional standards issued by the GAO and other authoritative bodies.

While PSUs inform Yellow Book users of important changes to professional requirements and highlight key points of recent standards, they do not establish new professional standards, reflect GAO official views on these requirements, nor provide complete summaries of the standards.

The content in PSU 87 is divided into two sections:

  • Section I identifies select standards and guidance with their respective effective dates.
  • Section II identifies select standards and guidance issued from October through December 2022.

Users should refer to the original, authoritative standards for details on those standards and for purposes of implementing them.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

GASB Standards –GASB Proposes Guidance to Assist Stakeholders with Application of Its Pronouncements

Summary - The Governmental Accounting Standards Board issued proposed implementation guidance in the form of questions and answers intended to clarify, explain, or elaborate on certain GASB pronouncements. The Exposure Draft, Implementation Guidance Update—2023, contains proposed new questions and answers that address application of GASB standards on leases, subscription-based information technology arrangements, and accounting changes. The proposal also includes amendments to previously issued implementation guidance on leases.

The GASB periodically issues new and updated guidance to assist state and local governments in applying generally accepted accounting principles (GAAP) to specific facts and circumstances that they encounter. The GASB develops the guidance based on:

Application issues raised during due process on GASB pronouncements,
Application issues identified during the first stage of the GASB’s post-implementation reviews of the leases standards,
Questions it receives throughout the year, and
Topics identified by members of the Governmental Accounting Standards Advisory Council and other stakeholders.
The guidance in Implementation Guides is cleared by the Board and constitutes Category B GAAP.

Stakeholders are asked to review the proposal and provide input to the GASB by January 20, 2023.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

GAO Professional Standards –GAO Issues Professional Standards Update No. 86 

Summary -The Government Accountability Office (GAO) has published Professional Standards Update (PSU) No. 86 covering standards published from July through September 2022.

PSUs alert the audit community to changes in and highlight the effective dates and issuance of recent standards and guidance related to engagements conducted in accordance with Government Auditing Standards. They provide brief summaries of recently issued standards of major auditing and accounting standard-setting bodies, including, among others, the GAO, the FASB, GASB, and AICPA. Auditors may use the GAO’s Governmental Auditing Standards: 2018 Revision Technical Update April 2021 (Yellow Book) in connection with professional standards issued by the GAO and other authoritative bodies.

While PSUs inform Yellow Book users of important changes to professional requirements and highlight key points of recent standards, they do not establish new professional standards, reflect GAO official views on these requirements, nor provide a complete summary of the standards.

The content in PSU 86 is divided into two sections:

•             Section I, which identifies select standards and guidance with their respective effective dates. Section I includes standards effective for:

•             Audits of financial statements for periods ending after June 30, 2022;

•             Attestation reports dated after June 30, 2022; and

•             Accounting for reporting periods beginning on or after April 15, 2021.

•             Section II, which identifies select standards and guidance issued from July through September 2022.

Users should refer to the original, authoritative standards for details on those standards and for purposes of implementing them.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

GASB Standards –GASB Proposes Guidance to Assist Stakeholders with Application of Its Pronouncements 

Summary - The Governmental Accounting Standards Board issued proposed implementation guidance in the form of questions and answers intended to clarify, explain, or elaborate on certain GASB pronouncements. The Exposure Draft, Implementation Guidance Update—2023, contains proposed new questions and answers that address application of GASB standards on leases, subscription-based information technology arrangements, and accounting changes. The proposal also includes amendments to previously issued implementation guidance on leases.

The GASB periodically issues new and updated guidance to assist state and local governments in applying generally accepted accounting principles (GAAP) to specific facts and circumstances that they encounter. The GASB develops the guidance based on:

•             Application issues raised during due process on GASB pronouncements,

•             Application issues identified during the first stage of the GASB’s post-implementation reviews of the leases standards,

•             Questions it receives throughout the year, and

•             Topics identified by members of the Governmental Accounting Standards Advisory Council and other stakeholders.

•             The guidance in Implementation Guides is cleared by the Board and constitutes Category B GAAP.

Stakeholders are asked to review the proposal and provide input to the GASB by January 20, 2023.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Professional Standards – GAO Issues Professional Standards Update No. 85

Summary - The Government Accountability Office (GAO) has published Professional Standards Update (PSU) No. 85 covering standards published from April through June 2022. PSUs highlight the effective dates and issuance of recent standards and guidance related to engagements conducted in accordance with Government Auditing Standards. They provide brief summaries of recently issued standards of major auditing and accounting standard setting bodies, including, among others, the GAO, the FASB, GASB, and AICPA. Auditors may use the GAO’s Governmental Auditing Standards: 2018 Revision Technical Update April 2021 (Yellow Book) in connection with professional standards issued by the GAO and other authoritative bodies.

PSUs inform Yellow Book users of important changes to professional requirements and highlight key points of recent standards. They do not establish new professional standards, reflect GAO official views on these requirements, nor provide a complete summary of the standards. Users should refer to the original, authoritative standards for details on those standards and for purposes of implementing them.  

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Other Exposure Documents - Invitation to Comment 2022-002 —Accounting for Government Grants by Business Entities —Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into Generally Accepted Accounting Principles

Summary - The FASB has published an Invitation to Comment (ITC), Accounting for Government Grants by Business Entities: Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into Generally Accepted Accounting Principles. The ITC gives stakeholders the opportunity to provide feedback on whether IAS 20 represents a workable solution for improving GAAP in the U.S. financial reporting environment for business entities as it relates to the accounting for government grants.

Stakeholders are encouraged to review and provide comment on the ITC by September 12, 2022.

In response to previous feedback, the FASB Chair Richard R. Jones added a project, “Accounting for Government Grants, Invitation to Comment,” to the research agenda last December. Published as part of that research project, the government grants ITC solicits additional feedback from stakeholders on relevant requirements in IAS 20 that should apply to US GAAP and includes specific questions for investors about the importance and utility of government grants information to their analysis of a company’s financial performance.

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

GASB Pronouncements –GASB Issues 2022 Omnibus on Practice Issues

Summary - The Governmental Accounting Standards Board (GASB) has issued GASB Statement No. 99, Omnibus 2022, which provides guidance addressing various accounting and financial reporting issues identified during the implementation and application of certain GASB pronouncements or during the due process on other pronouncements.

GASB No. 99 covers practice issues that include:

  • Accounting and financial reporting for exchange or exchange-like financial guarantees;-Certain derivative instruments that are neither hedging derivative instruments nor investment derivative instruments;
  • Clarification of certain provisions of: (a) Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, (b) Statement No. 87, Leases, (c) Statement No. 94, Public-Private and Public-Public Partnership and Availability Payment Arrangements (PPPs), and (d) Statement No. 96, Subscription-Based Information Technology Arrangements (SBITAs);
  • Replacing the original deadline for using the London Interbank Offered Rate (LIBOR) as a benchmark interest rate for hedges of interest rate risk of taxable debt, with a deadline of when LIBOR ceases to be determined by the ICE Benchmark Administration using the methodology in place as of December 31, 2021;
  • Accounting for the distribution of benefits as part of the Supplemental Nutrition Assistance Program (SNAP);
  • Disclosures related to nonmonetary transactions;
  • Pledges of future revenues when resources are not received by the pledging government; and
  • Updating certain terminology for consistency with existing authoritative standards.

Effective Dates: The requirements of Statement No. 99 that relate to the extension of the use of LIBOR, accounting for SNAP distributions, disclosures for nonmonetary transactions, pledges of future revenues by pledging governments, clarifications of certain provisions in Statement No. 34, and terminology updates are effective upon issuance. The requirements related to leases, PPPs, and SBITAs are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter. The requirements related to financial guarantees and the other requirements related to derivative instruments are effective for fiscal years beginning after June 15, 2023, and all reporting periods thereafter. Earlier application is encouraged and is permitted by individual topic to the extent that all requirements associated with an individual topic are implemented simultaneously. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Error Corrections –GASB Issues Statement No. 100 on Accounting Standards and Error Corrections

Summary - The Governmental Accounting Standards Board (GASB) issued GASB Statement No. 100, Accounting Changes and Error Corrections, which is intended to improve the accounting and financial reporting requirements for accounting changes and error corrections. The GASB believes that Statement No. 100 provides more straightforward guidance designed to lead to information that is easier to understand and more reliable, relevant, consistent, and comparable across governments for making decisions and assessing accountability. The GASB’s previous standards on accounting changes and error corrections, in GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, were based on guidance established in the 1970s. The GASB’s pre-agenda research identified diversity in applying the existing standards in practice, including issues with selecting the appropriate category of accounting change or error correction. Statement 100 defines the following categories:

  • Changes in accounting principles;
  • Changes in accounting estimates;
  • Changes to or within the financial reporting entity; and
  • Corrections of errors in previously issued financial statements.

Statement 100 prescribes accounting and financial reporting for (1) each category of accounting change and (2) error corrections. It requires that:

  • Changes in accounting principle and error corrections be reported retroactively by restating prior periods;
  • Changes in accounting estimate be reported prospectively by recognizing the change in the current period; and
  • Changes to and within the financial reporting entity be reported by adjusting beginning balances of the current period.

The Statement also addresses how accounting changes and error corrections should be displayed in financial statements, disclosed in notes, and presented in required supplementary information and supplementary information.Statement 100 carries forward some of the requirements of Statement 62 but with clearer explanations. Regarding classification, a notable change relates to changes to or within the financial reporting entity, which previously did not encompass changes within the reporting entity, such as a change from discrete presentation of a component unit to blended presentation or vice versa. Regarding note disclosures, Statement 100 requires that governments disclose the effects of each accounting change and error correction on beginning balances in a tabular format.“Governments and other stakeholders should find many of the requirements of Statement 100 familiar,” said GASB Chair Joel Black. “But they should find the understandability of the guidance greatly improved, and financial statement users should benefit from the new tabular disclosure.”Effective DateThe requirements of Statement 100 are effective for accounting changes and error corrections made in fiscal years beginning after June 15, 2023, and all reporting periods thereafter. The GASB encourages earlier application. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Risks – GASB Issues Exposure Draft on Disclosures about Certain Governmental Risks

Summary - The Governmental Accounting Standards Board (GASB) has issued the Exposure Draft, Certain Risk Disclosures, which proposes requirements that governments disclose information about certain risks they face that could affect the level of services they are able to provide or their ability to meet obligations as they come due. The comment deadline is September 30, 2022.

Although governments are required to disclose information about their exposure to some risks, essential information about certain other risks that are prevalent among state and local governments is not routinely disclosed because it is not explicitly required. The proposed Statement would provide financial statement users with an early warning that governments are susceptible to the financial effects of those risks.

The Exposure Draft would require governments to disclose essential information about risks related to a government’s current vulnerabilities due to:

  • Certain concentrations; and
  • Certain constraints common in the governmental environment.

The proposed Statement defines a concentration as a lack of sufficient diversity related to an aspect of a significant revenue source or expense, for example, a small number of companies that represent a majority of employment in a government’s jurisdiction, or a government that relies on one revenue source for most of its revenue. It defines a constraint as a limitation imposed on a government by an external party or by formal action of the government’s highest level of decision-making authority, such as a voter-approved property tax cap or a state-imposed debt limit. Concentrations and constraints may limit a government’s ability to acquire resources or control spending.

Disclosure Criteria

This proposal would require a government to disclose information about a concentration or constraint if all of the following criteria are met:

  • It is known to the government prior to issuing the financial statements;
  • An associated event either has occurred or is more likely than not to occur or begin to occur within 12 months of the financial
  • statement date or shortly thereafter; and
  • It is at least reasonably possible that within three years of the financial statement date the event will cause a substantial effect on the government’s ability to (a) continue to provide services at the level provided in the current reporting period, or (b) meet its obligations as they come due.

Note Disclosures

If a government determines that those criteria have been met, it would disclose information in notes to financial statements in sufficient detail to allow users of financial statements to understand the general nature of the circumstances disclosed and their potential effect on the government’s ability to provide services or meet its obligations.

The GASB has requested that comments be submitted either in writing or through an electronic input form. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Omnibus 2022 –OMB Issues 2022 Compliance Supplement

Summary - The White House Office of Management and Budget (OMB) has issued the 2022 Compliance Supplement.

This 2022 Supplement is effective for audits of fiscal years beginning after June 30, 2021, and supersedes the 2021 Compliance Supplement (dated August 2021) and its Addenda (dated December 2021 and January 2022).

The 2022 Compliance Supplement, like previous annual Compliance Supplements, identifies existing, important compliance requirements that the federal government expects to be considered as part of an audit required by the 1996 Amendments to the Single Audit Act. It adds, deletes, and modifies prior Supplement sections.

In addition, the 2022 Compliance Supplement follows the OMB mandate adopted in the 2019 Compliance Supplement that requires each federal agency to limit the number of compliance requirements subject to the audit to six, with the exception of the Research and Development cluster.

The Research and Development cluster is permitted to identify seven compliance requirements as subject to the audit. For this purpose, the requirements relating to A. Activities Allowed and Unallowed and B. Allowable Costs and Cost Principles are treated as one requirement. The Part 2 matrix and the related program sections in parts 4 and 5 reflect this OMB mandate. Additionally, this six-requirement mandate does not apply to programs not included in this Supplement.

Appendix V provides a list of changes from the 2021 Compliance Supplement. However, changes in the Matrix of Compliance Requirements are reflected in Part 2 of the 2022 Compliance Supplement. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

GAO –GAO Issues Professional Standards Update No. 84

Summary - The Government Accountability Office (GAO) has published Professional Standards Update (PSU) No. 84 covering standards published from January through March 2022. Specifically, this PSU has two sections:

  • Section I identifies select standards and guidance with their respective effective dates. Section I contains standards effective for:
  • audits of financial statements for periods ending after December 31, 2021;
  • attestation reports dated after December 31, 2021; and
  • accounting for reporting periods beginning after October 15, 2020.
  • Section II identifies select standards and guidance that were issued from January 2022 through March 2022.

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Governmental Audit –GAQC Alert No 439 Published

Summary - The AICPA’s Governmental Audit Quality Center (GAQC) has published Alert No. 439. This GAQC Alert discusses a Federal Register technical updated published that announces a compliance examination attestation engagement option for certain recipients of funding from the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF), as well as a reminder from the GAQC to register for an April 21, 2022, GAQC Web event on the CSLFRF program. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Auditing –GAQC Publishes Practice Aids for Auditing For-Profit Entities with Provider Relief Fund

Summary - The Government Audit Quality Center (GAQC) today published several practice aids for auditing for-profit entities with Provider Relief Fund (PRF) and other HHS Program funding, and for organizations undergoing first-time single audits. The GAQC has published these practice aids in response to the large increase in entities requiring a single audit based on having received federal funding in response to the COVID-19 pandemic.

PRF funding is subject to single audit requirements which require the auditor to determine and report on whether the Schedule of Expenditures of Federal Awards (SEFA), presented as supplementary information (SI), is fairly stated in all material respects, in relation to the financial statements as a whole.

The GAQC developed the practice aid, Auditing For-Profit Entities with PRF and Other HHS Program Funding, to “assist auditors and for-profit entities subject to the HHS for-profit audit requirements when the PRF program is among the HHS awards subject to audit. The practice aid “includes, among other items, frequently asked questions (FAQs) and illustrative schedules, notes, and auditors’ reports. This practice aid provides nonauthoritative guidance on accounting and auditing matters as developed by AICPA staff.”

Many organizations that have never had a single audit received federal funding in response to the pandemic and through various federal legislation are now required to undergo one. These GAQC practice aids are chciecklist tools to assist auditors and organizations in considerations relating to single audits, including knowing whether a single audit is necessary. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Governmental Audit –GAQC 437 Published

Summary - The AICPA’s Governmental Audit Quality Center (GAQC) has published Alert No. 437. This GAQC Alert discusses the following:

  • A GAQC practice aid related to the Provider Relief Fund (PRF) program, HHS Audit Requirements for For-Profit Entities with Awards for the Provider Relief Fund Program and Other HHS Programs;
  • A GAQC practice aid related to the PRF program, Audit Scope Considerations for Provider Relief Fund General and Targeted Distributions in Parent-Subsidiary Relationships;
  • A GAQC checklist tool, Tips for Auditors Taking on Single Audits; and
  • A GAQC checklist tool, Tips for Organizations Subject to Single Audit Requirements. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Government Professional Standards – GAO Issues Professional Standards Update No. 83

Summary - The Government Accountability Office (GAO) has published Professional Standards Update (PSU) No. 83 covering standards published from through December 2021. This PSU has two sections:

  • Section I identifies select standards and guidance with their respective effective dates. Section I contains standards effective for: (1) audits of financial statements for periods ending after September 30, 2021; (2) attestation reports dated after September 30, 2021; and (3) accounting for reporting periods beginning after July 15, 2020.
  • Section II identifies select standards and guidance that were issued from October 2021 through December 2021.

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Updates - Accounting Standards Update No. 2021-10 —Government Assistance (Topic 832) —Disclosures by Business Entities about Government Assistance

Summary - The FASB issued Accounting Standards Update (ASU) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which is expected to increase transparency in financial reporting by requiring business entities to disclose, in notes to their financial statements, information about certain types of government assistance they receive. Examples of such government assistance include cash grants and grants of other assets.

The amendments in the ASU require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance such as a grant model within FASB Accounting Standards Codification® Topic 958, Not-for-Profit Entities, or International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance:

Information about the nature of the transactions and the related accounting policy used to account for the transactions;
The line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item; and
Significant terms and conditions of the transactions, including commitments and contingencies.

The amendments are effective for all entities within their scope, which excludes not-for-profit entities and employee benefit plans, for financial statements issued for annual periods beginning after December 15, 2021. Early application is permitted.

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.