In the News

New PCAOB Guide Helps Smaller Firms Navigate the Complexities of Auditing Estimates The PCAOB has just released a new resource— Audit Focus: Auditing Accounting Estimates —aimed at supporting smaller audit firms as they tackle one of the most judgment-heavy areas of financial reporting. Accounting estimates, such as credit loss allowances or asset impairments, are not only pervasive but also inherently uncertain and vulnerable to bias. This guide reinforces key expectations under AS 2501, shares recurring deficiencies flagged during inspections, and spotlights good practices that smaller firms have successfully adopted. Why does this matter? The quality of work around estimates significantly affects audit reliability and investor confidence. PCAOB inspectors continue to find issues such as failure to identify significant assumptions or inadequate testing beyond basic recalculations. This publication is a timely reminder for auditors—especially those serving smaller entities—to apply ...

FASB Clarifies Rules for Identifying the Accounting Acquirer in Business Combinations On May 12, 2025, FASB issued a new Accounting Standards Update (ASU) that refines the guidance for determining the accounting acquirer in a business combination under Topic 805. The update focuses on transactions involving variable interest entities (VIEs) and applies when ownership is transferred through equity interests. This clarification ensures consistency in how companies identify the accounting acquirer, especially in complex deal structures involving VIEs that qualify as businesses. Why does this matter? Identifying the accounting acquirer is a critical step—it directly impacts asset and liability valuations and shapes the financial results post-merger. This updated standard promotes comparability and improves the usefulness of financial reporting, particularly for investors. It’s also a milestone as the first final standard issued based on recommendations from the reconstituted Emerging ...

FASB Clarifies Accounting for Share-Based Payments to Customers FASB has issued a new Accounting Standards Update (ASU) to provide much-needed clarity on how to account for share-based consideration payable to a customer. Specifically, the ASU addresses situations where companies use equity instruments (like stock awards) to incentivize customer purchases—helping to better align the guidance between ASC 606 (Revenue Recognition) and ASC 718 (Stock Compensation). This update matters because it resolves longstanding uncertainty on how and when to recognize revenue when share-based payments are contingent on a customer reaching a volume or spending threshold. By clarifying that these awards should be accounted for under stock compensation standards until they vest (i.e., when the customer meets the purchase condition), FASB is helping companies achieve greater consistency and transparency in financial reporting. For accounting and finance professionals, this means reviewing current ...