Editor’s note: The NeuGroup Process brings members together to solve problems and answer each other’s questions in a variety of forums, including online communities for specific groups—one of many benefits of membership. Talking Shop shares valuable insights from these members-only exchanges, anonymously. We welcome your responses—and any questions you want answered: [email protected]. Member question: “Does your company have a finance/accounting shared service center? “If yes, do you have a SOX entity-level control (ELC) related to monitoring the shared services center activities, e.g., error rates,…
January 26, 2021
Libor Transition Puzzle: FASB Provides Clarity, Relief to Corporates
Guidance from FASB clarifies accounting for all hedges impacted by the discounting transition.The Financial Accounting Standards Board (FASB) started 2021 by clarifying accounting guidance aimed at facilitating the transition of corporate floating-rate transactions away from the Libor reference rate. The standard setter is also expected to resume progress this year on issues it had set aside to address the Libor transition. Background. On Jan. 7, FASB issued ASU 2021-01, an accounting standards update that clarifies issues stemming from Topic 848, titled…
Member question: “For those who use Quantum as their TMS, do you also leverage Quantum for hedge accounting, and if you do, does Quantum (in your opinion) manage interest rate swap accounting well? “We have been using Reval for a while, but just wanted to know if people have been able to leverage Quantum V6+ for hedge accounting, including interest rate swaps.” Peer answer 1: “When we put our interest rate forward starting swaps in place a few years back, Quantum…
September 29, 2020
SOX-Like Framework Needed for ESG/Sustainability Disclosures
Moving ESG/sustainability information from the web to the 10-K warrants attention.By Joseph NeuMembers of our group for treasurers at mega-cap companies recently heard a partner from the law firm White & Case share the findings of the firm’s latest annual survey of ESG disclosures in SEC filings by the top 50 companies by revenue in the Fortune 100. The presentation built on a topic raised by the head of ESG at a member company in a NeuGroup session last month. …
September 15, 2020
Talking Shop: Disclosing Option Premium Expenses in Revenues
Context: In 2017, the FASB issued ASU 2017-12, which simplified and expanded the eligible hedging strategies for financial and nonfinancial risks. The update goes into effect for all corporates this year, and some NeuGroup Members recently collaborated to share their approach to updated guidance on disclosing option premium expenses in their revenues. Question: “Does anyone disclose option premium expense in their revenues due to ASU 2017-12?” “As a consequence of the revised accounting for hedge costs under ASU 2017-12, our company is reviewing our typical…
September 10, 2020
ESG Transparency Goals Create Hard Resource Allocation Decisions
The struggle to prioritize reporting requirements for a growing list of ESG standards and frameworks. Some NeuGroup member companies are struggling to prioritize how to allocate the resources necessary to satisfy a growing list of reporting and disclosure standards as corporates strive to be more transparent about their environmental, social and governance (ESG) records. That was among the key takeaways at a recent Virtual Interactive Session where an ESG officer raised the subject of determining what information is truly useful…
September 10, 2020
Pandemic Clouds CECL’s Impact on Corporate Loans and Lending
New accounting may prompt more conservative lending terms post-Covid. FASB’s new accounting for loan-loss reserves, current expected credit losses (CECL), directly impacts banks and other lenders and ultimately the loans they provide. Tim McPeak, principal industry consultant in the risk research and quantitative solutions division of SAS, the data analytics provider, said that the current pandemic and economic downturn have blurred the impact of CECL, effective for larger banks and most public companies since the start of 2020.Nevertheless, CECL will be…
July 30, 2020
On Track: Banks Adopting CECL Not Derailed by COVID-19
Regulators have allowed banks to delay implementing CECL, but most are well on the way to adopting the standard. Banks have been given extra time to implement the FASB’s CECL standard, but most are continuing their push to adopt the measure. The CARES act passed by the US Senate back in March offered banks the option to pause implementation until either the end of the year or the end of the COVID-19 national emergency, whichever came first. According to meeting material…
Taking a qualitative approach and doing no discounted cash flow calculations produced a calm CECL debut for at least one investment manager.At a recent NeuGroup meeting, the only investment manager whose company adopted the new accounting standard for estimating credit losses in the first quarter described a relatively painless process, giving comfort to some of his peers. The meeting, sponsored by BlackRock, included a presentation by Aladdin on FASB’s current expected credit losses (CECL) methodology. Aladdin offers risk management software…
Treasury investment managers trying to get a better handle on FASB’s new methodology for estimating credit losses got some help this month at two NeuGroup virtual meetings. No surprise, the issue of how exactly to estimate those losses generated plenty of interest. One of the meetings featured a presentation from EY that included the slide below. It lays out three criteria used to adjust historical loss information to develop a loss estimate. EY’s presenter said that coming up with a “reasonable and…