LIST OF SUBSTANTIVE CHANGES AND ADDITIONS. PPC s Guide to Cash, Tax, and Other Bases of Accounting. Nineteenth Edition (August 2015)

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1 Route To: j Partners j Managers j Staff j File P.O. Box Carrollton, TX Tel (972) (800) Fax (888) tax.thomsonreuters.com LIST OF SUBSTANTIVE CHANGES AND ADDITIONS PPC s Guide to Cash, Tax, and Other Bases of Accounting Nineteenth Edition (August 2015) Highlights of this Edition The following are some of the important new features of the 2015 edition of PPC s Guide to Cash, Tax, and Other Bases of Accounting: SSARS In October 2014, the Accounting and Review Services Committee issued SSARS No. 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification. SSARS No. 21 is the most significant change to the Statements on Standards for Accounting and Review Services (SSARS) since their inception in It supersedes all outstanding SSARS through SSARS No. 20, except SSARS No. 14, Compilation of Pro Forma Financial Information, and introduces a new level of service preparation of financial statements. It is effective for periods ending on or after December 15, Early implementation is permitted. We have fully updated your Guide to incorporate the requirements of SSARS No. 21, including revised engagement letters, management representation letters, procedures checklists, and much more. We ve also revised all illustrative compilation and review reports to conform to the new reporting language required by SSARS The update to your Guide includes explaining the many changes in SSARS No. 21 that will affect your special purpose framework financial statement engagements. Accounting Literature and Disclosure Checklists. We have updated your Guide for relevant FASB pronouncements issued since the prior year s edition. Programs, procedures checklists, and guidance throughout the Guide have been updated for all recently issued accounting standards that impact your firm s upcoming engagements. We have also updated the cash and tax basis disclosure checklists for changes in requirements of the professional standards through August 15, Auditing Guidance. All audit-related guidance included in your Guide has been updated for recent changes in generally accepted auditing standards. Those changes include revisions to the audit engagement letters, management representation letters, and more. Non-Authoritative Literature. We have updated for the newly issued 2015 edition of the AICPA Guide, Preparation, Compilation, and Review Engagements. Additionally, relevant information for new, revised, and/or deleted Q&As and other non-authoritative literature has been updated. GENERAL 1. Changed the term OCBOA to special purpose framework. Throughout 2. Changed the term illegal acts to noncompliance with laws and regulations. Throughout ofsp15sub 1

2 CHAPTER 1 An Introduction to Special Purpose Framework Financial Statements CHAPTER 2 Form and Style Considerations CHAPTER 3 Disclosures in Special Purpose Framework Presentations 3. Changed the term nonissuer to nonpublic entity. Throughout 4. Changed the name of AICPA Technical Practice Aids to Throughout Questions and Answers. 1. Explained why the Guide has switched to the predominate use of the term special purpose framework. 2. Updated the discussion of the SSARS clarity project and issuance of SSARS 3. Added an exhibit of the SSARS No. 21 requirements for engagements of financial statements prepared using a special purpose framework. 4. Updated the discussion of the AICPA Code of Professional Conduct (the Code) for recent changes to the Code. 5. Added a discussion on considerations when accepting a SSARS No. 21 engagement. 6. Updated this planning form to incorporate considerations related to assessing the entity s selection of an applicable financial reporting framework under SSARS 1. Revised various discussions on the accountant s report for SSARS No. 21, including the letterhead, use of a title, the address, and the signature. 2. Added a discussion about referencing the firm office location on an accountant s report for SSARS 3. Updated the discussion on the statement of changes in stockholders equity for SSARS 4. Updated the discussion on the statement of retained earnings for SSARS Paragraph Exhibit 1-2 Paragraph Appendix 1A Paragraph Paragraph Paragraph Revised the discussion of statement titles for SSARS Paragraph Revised the discussion on referencing the report for SSARS 7. Added a discussion on the legend for prepared financial statements under AR-C Updated the discussion of the SSARS literature relating to guidance provided about disclosures for SSARS 2. Added a note on FASB ASU , Income Statement Extraordinary and Unusual Items (Subtopic ): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. 3. Explained that SSARS No. 21 has revised the use of emphasisof-matter and other-matter paragraphs in a compilation report on financial statements that omit substantially all disclosures. 4. Updated the discussion on the summary of significant accounting policies for SSARS Paragraph Paragraph Paragraph Paragraph

3 CHAPTER 4 Cash Basis of Accounting CHAPTER 5 Income Tax Basis of Accounting 5. Expanded the discussion on going concern uncertainty to provide accounting guidance before and after implementation of FASB ASU , Presentation of Statements Going Concern (Subtopic ): Disclosure of Uncertainties About an Entity s Ability to Continue as a Going Concern. 6. Updated the discussion on subsequent events for SSARS 7. Added information on FASB ASU , Consolidation (Topic 810): Amendments to the Consolidation Analysis. 8. Noted that the AICPA s nonauthoritative guidance on the disclosure of open tax years regardless of whether the entity had uncertain tax positions, (previously TIS ) has been withdrawn. 9. Added a discussion on whether some disclosure of significant uncertainty is needed in order to keep the financial statements from being misleading. 1. Updated the authoritative literature discussion on cash basis financial statements for SSARS 2. Updated the discussion on determining the appropriate basis of accounting for SSARS 3. Revised the discussion of modifications of the cash basis having substantial support for SSARS 4. Updated the discussion of disclosure considerations under the cash basis of accounting for SSARS 5. Updated the Disclosure Checklist for Cash Basis Financial Statements for disclosure and presentation requirements of new accounting standards issued through August 15, Revised the compilation and review reports in the example financial statements for SSARS No. 21 language. 1. Updated the authoritative literature discussion on income tax basis financial statements for SSARS 2. Noted issuance of FASB ASU , Inventory (Topic 330): Simplifying the Measurement of Inventory. 3. Clarified the discussion on the Section 179 deduction and bonus depreciation for the tax rules that went into effect on January 1, 2014, by adding new example scenarios and explained how state income tax reporting may differ. 4. Noted the issuance of FASB ASU , Intangibles Goodwill and Other Internal-Use Software (Subtopic ): Customer s Accounting for Fees Paid in a Cloud Computing Arrangement Paragraph Paragraph Paragraph , item d Paragraph Paragraph and Appendix 4A Appendixes 4B and 4C Paragraph Paragraph Noted the issuance of ASU , Revenue from Contracts Paragraph with Customers (Topic 606): Deferral of the Effective Date,which defers the effective date of ASU by one year. 6. Noted the issuance of FASB ASU Paragraph

4 CHAPTER 6 Other Bases of Accounting CHAPTER 7 Reporting on Special Purpose Framework Financial Statements 7. Updated the Disclosure Checklist for Income Tax Basis Financial Appendix 5A Statements for disclosure and presentation requirements of new accounting standards issued through August 15, Updated certain information in the Comparison of Entity Choices table for recent changes to selected issues. 9. Revised the compilation and review reports in the example financial statements for SSARS No. 21 language. 1. Updated the authoritative literature discussion on cash basis financial statements for SSARS 2. Added a discussion explaining that SSARS No. 21 has expanded SSARS guidance about performing engagements on financial statements prepared under the regulatory basis of accounting. 3. Noted the issuance of FASB ASU , Financial Services Insurance (Topic 944): Disclosures about Short- Duration Contracts. 4. Added a discussion explaining that SSARS No 21 has expanded SSARS guidance about performing engagements on financial statements prepared under the contractual basis of accounting. 1. Added a discussion of the SSARS No. 21 non-reporting option under AR-C Revised the discussion on the use of a title on an accountant s report for SSARS 3. Updated the discussion on the use of financial statement titles for SSARS 4. Updated the authoritative literature references for SSARS Appendix 5C Appendixes 5D through 5H Paragraph Paragraph Paragraph Paragraph , , , , , and Updated the discussion on the firm signature on an accountant s report for SSARS Paragraph Revised the discussion of the report date for SSARS Revised the discussion on non-reporting options under the Paragraph SSARS. 8. Added a discussion on the required elements of compilation reports in compliance with SSARS 9. Added a discussion on the required elements of review reports in compliance with SSARS 10. Updated the discussion on the disclosure of the basis of accounting for SSARS 11. Updated the discussion of the situation when compiled financial statements disclose only selected information for SSARS Paragraph

5 CHAPTER 8 Special Entities 12. Revised the discussion of use of emphasis-of-matter and other-matter paragraphs in compilation and review reports for SSARS 13. Revised the discussion on reporting on uncertainties for the entity s ability to continue as a going concern for SSARS Added an example of an emphasis-of-matter paragraph illustrating a change in basis of accounting under SSARS Paragraph Revised the discussion on client-prepared financial statements for SSARS Updated the discussion on reporting on compiled or reviewed supplementary information for SSARS Noted the issuance of FASB ASU Paragraph Updated the discussion on regulatory basis reporting considerations for compilation and review engagements for SSARS Paragraph Revised the discussion on tax returns as financial statements for SSARS 20. Revised the discussion on contractual basis reporting for compilation and review engagements for SSARS 21. Revised the discussion on reporting on prescribed forms for SSARS 22. Updated the discussion on personal financial statements for SSARS 23. Updated the discussion of reporting on specified elements, accounts, or items of a financial statement for SSARS Paragraph and Revised all of the illustrative report examples for SSARS Appendixes 7A 7E 25. Added an Appendix section for pre-ssars No. 21 illustrative Appendix 7I reports. 1. Noted that the FASB issued an exposure draft of a proposed ASU, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities. 2. Updated the authoritative literature references for SSARS 3. Clarified the discussion on what is considered appropriate modifications for the cash basis of accounting. Paragraph , 801.8, , , , , , , and Paragraph

6 CHAPTER 9 Special Purpose Framework Engagement Considerations 4. Revised the discussion on whether disclosure of open tax years for entities that have no uncertain tax positions is appropriate due to removal of the AICPA s nonauthoritative guidance on that topic (previously TIS ). 5. Updated the discussion on compilation and review reports prepared on a basis of accounting specified in a contractual agreement for SSARS 6. Updated the discussion on prescribed forms for changes due to SSARS 7. Revised the federal estate and gift tax exemption amount for annual inflation adjustments. 8. Updated the discussion on an accountant serving as executor or trustee for SSARS 9. Updated the discussion on types of engagements performed for personal financial statements for SSARS 10. Revised the compilation and review reports in the example financial statements for SSARS No. 21 language. 1. Added authoritative references to the discussion on Statement on Quality Control Standard No Noted that the implementation of SSARS No. 21 for particular engagements may be identified by the firm as a reason for performing an EQCR. 3. Added a discussion on the new engagement level quality control requirements of SSARS No. 21 under AR-C Noted firms that are not members of the AICPA generally enroll in a peer review program administered by their state society. 5. Added a discussion about whether SSARS No. 21 preparation engagements are subject to peer review. 6. Updated the information on procedures performed by peer reviewers during an engagement review. 7. Added comments about independence considerations when performing a preparation engagement under AR-C Explained that effective for peer reviews commencing on or after May 1, 2015, firms are required to answer questions on complying with the nonattest services requirements of the Code on each engagement selected for review that includes performance of nonattest services. 9. Updated authoritative references for requirements of SSARS 10. Added a discussion on SSARS No. 21 being engagement driven. 11. Added a discussion on the SSARS No. 21 non-reporting option under AR-C and Paragraph and Paragraph Paragraph Paragraph Appendixes 8A through 8D 901.4, 901.6, and Paragraph Paragraph and Paragraph , , and Paragraph Paragraph

7 12. Clarified that while preparation engagements under AR-C 70 are Paragraph not subject to independence requirements, preparation engagements are subject to other requirements of the Code. 13. Clarified that SQCS No. 8 applies to all SSARS engagements. Paragraph Revised the communication of suspected fraud or noncompliance with laws and regulations discussion for SSARS Paragraph Updated the compilation procedures discussion for SSARS Paragraph Revised the compilation engagement checklists discussion for SSARS Revised the review procedures discussion for SSARS , , , and Revised the review engagement checklists discussion for SSARS Updated the engagement letter discussion for SSARS 904.2, , and Updated the discussion on management representation letters for SSARS 21. Updated the compilation and review engagement letters for SSARS No. 21 and expanded the practical considerations related to ET 1.295, Nonattest Services. 22. Updated the language in the audit engagement letter regarding the preparation of the tax return and financial statements. Also, updated the letter for management s responsibilities for nonattest services (along with the associated note). 23. Modified language in the audit engagement letter regarding fees. 24. For the note on the schedules and confirmations to be prepared by the client, added expanded language to the audit engagement letter that can be used regarding client assistance. 25. Expanded the practical consideration that discusses signing the audit engagement letter. 26. Revised the Compilation Procedures, Review, and Approval Form for Special Purpose Framework Engagements for SSARS Appendixes 9A-1 and 9A-2 Appendix 9A-3 Appendix 9A-3 Appendix 9A-3 Appendix 9A-3 Appendix 9B 27. Revised the acceptance and continuance form for SSARS Appendix 9C 28. Added a SSARS No. 21 compilation reporting checklist. Appendix 9E Revised the Review Procedures, Review, and Approval Form for Appendix 9F Special Purpose Framework Engagements for SSARS 30. Revised the inquiry and analytical procedures programs for SSARS Appendixes 9G-1 and 9G-2 7

8 CHAPTER 10 Interim Engagements 31. Added a SSARS No. 21 review reporting checklist. Appendix 9I Added an illustrative representation letter for SSARS Appendix 9J Added information and new items to the practical consideration Appendix 9J-3 detailing additional representations that might be obtained for the audit representation letter. 34. For the practical consideration indicating the periods that representation letters should address, added guidance from Technical Q&A For the practical consideration that addresses the existence of substantial doubt about the entity s ability to continue as a going concern, provided guidance on the issuance of ASU A new form, Engagement Independence Compliance and Nonattest Services Documentation Form, replaces the Nonattest Services Documentation Form. 1. Updated the authoritative literature references for SSARS 2. Updated the discussion of PPC s forms and checklists for interim engagements for the changes made to those forms and checklists for SSARS Appendix 9J-3 Appendix 9J-3 Appendix 9L Section Noted the issuance of FASB ASU Paragraph Added a discussion on interim reporting for SSARS No. 19 and SSARS 5. Revised the Compilation Procedures, Review, and Approval Form for Recurring Special Purpose Framework Engagements for SSARS 6. Revised all the illustrative compilation and review reports for SSARS Appendix 10A Appendixes 10B 10E 8