The document summarizes recent regulatory developments from the FASB, PCAOB, and SEC. The FASB continues work on its revenue recognition and simplification initiatives. The PCAOB seeks comment on potential audit quality indicators and disclosure of engagement partner names. The SEC issued concept releases on audit committee disclosure and CEO pay ratios and proposed a clawback rule for erroneous executive compensation.

1. 1
Regulatory and standard-setting
developments
Introduction
This document provides a summary of the activities of the FASB, PCAOB, and SEC, and
describes related international developments that may be of interest to audit committees,
companies, and their stakeholders.
Financial Accounting Standards Board
The FASB continues to make progress on
its Simplification Initiative and also
continues to address questions regarding
its new revenue standard. The FASB issued
proposed amendments to clarify (1) the
unit of account for the principal versus
agent assessment, (2) how the indicators
help an entity evaluate whether it controls
a good or service before it is transferred to
a customer, and (3) how the control
principle applies to services performed by
another party. These amendments were
released in late August, with a comment
deadline of October 15. The IASB
incorporated these amendments in a
package of proposed amendments issued in
July, with a comment period that ends
October 28, 2015. Refer to our In
transition publication for more details.
The FASB also plans to issue another
exposure draft with narrow scope
improvements. The proposed amendments
are expected to address collectability and
noncash consideration, and provide a new
practical expedient for the presentation of
sales taxes collected from customers. The
proposals will also include amendments to
(a) provide a practical expedient for
contracts that have been modified as of the
adoption date, (b) clarify when a contract is
considered “completed” for purpose of
applying the transition guidance, and (c)
allow entities to apply the modified
retrospective transition approach to all
contracts, rather than only those contracts
that are not completed as of the adoption
date. The next TRG meeting to discuss
implementation issues is scheduled for
November 9, 2015.
As anticipated, the FASB and IASB both
finalized a deferral of the effective date of
the new revenue standard by one year,
which means calendar year-end public
companies are required to apply the new
guidance beginning in 2018.
September 16, 2015

2. 2
Public Company Accounting Oversight Board
PCAOB seeks comment on potential
audit quality indicators
On July 1, 2015, the Public Company
Accounting Oversight Board (PCAOB)
issued a concept release on a group of
twenty-eight potential audit quality
indicators (AQIs). The AQIs pertain to
three broad categories:
 Audit Professionals —the availability of
resources, competence, and focus of
those performing the audit
 Audit Process —an audit firm's tone at
the top and leadership, incentives,
independence, attention to
infrastructure, and its record of
monitoring and remediating identified
matters impacting audit quality
 Audit Results — measures relating to
financial statements (such as the
number and impact of restatements
and other measures of financial
reporting quality), internal control over
financial reporting, going concern
reporting, communications between
auditors and audit committees, and
enforcement and litigation
The PCAOB is considering whether AQIs
would enhance the discussion around audit
quality and contribute to the identification
of key variables that drive audit quality.
The PCAOB is also considering one or more
approaches to communicating AQIs,
ranging from voluntary disclosures to
mandated public disclosure. Comments on
the concept release are due September 29,
2015. A roundtable will be held during the
fourth quarter of 2015. Refer to our In brief
publication for more details.
PwC responds to PCAOB request for
comment on disclosing name of
partner and others
On June 30, 2015, the PCAOB issued a
request for comment on its 2013 audit
transparency re-proposal. The proposal
considers requiring disclosure of (1) the
name of the lead engagement partner, and
(2) the names, locations, and extent of
participation of certain other independent
public accounting firms, including other
firms within the same network as the group
auditor that took part in the group audit.
As proposed, this information would be
disclosed on a new PCAOB form, Auditor
Reporting of Certain Audit Participants
(Form AP), instead of in the auditor’s
report, as proposed in 2013. The PCAOB is
considering making the requirements
effective for auditors’ reports issued or
reissued on or after June 30, 2016, or three
months after the approval of the
requirements by the SEC, whichever occurs
later. Refer to our In brief publication for
more details.
In our comment letter, we support
inclusion of this information in Form AP
instead of in the auditor’s report. We
believe use of Form AP addresses in large
measure the profession’s concerns related
to the practical challenges in obtaining
consents and litigation risks. Refer to our
PwC comment letter for more details.
PCAOB inspection in China
The PCAOB and Chinese regulators have
made progress towards oversight of the
auditors of Chinese registrants listed in
U.S. markets. The PCAOB is planning its
first inspection of an audit firm in China
under a pilot program. While there are no
final agreements, gaining access to inspect
Chinese audit firms would be a significant
step for the PCAOB.

3. 3
Personnel
In July, the SEC announced that PCAOB
member Lewis H. Ferguson has been
reappointed for a second term on the
Board. Mr. Ferguson’s new term runs until
October 2019.
Securities and Exchange Commission
Audit Committee disclosure
On July 1, 2015, the SEC published a
concept release to solicit input on possible
changes to its audit committee disclosure
requirements relating to the audit
committee’s s oversight of the independent
auditor. The majority of the SEC’s current
audit committee disclosure requirements
were adopted in 1999. Since that time,
there have been significant changes in
audit committee responsibilities, including
the 2002 Congressional mandate that the
audit committee of a listed issuer be
directly responsible for the appointment,
compensation, retention, and oversight of
the work of the independent auditor.
Current audit committee disclosure
requirements provide some information
about the audit committee’s role in
overseeing the independent auditor.
However, the SEC’s current rules do not
provide insight into how the audit
committee executes its responsibilities. The
concept release seeks public input in three
broad categories: (1) Audit committee’s
oversight of the auditor, (2) audit
committee’s process for appointing or
retaining the auditor, and (3) qualifications
of the audit firm and certain members of
the engagement team selected by the audit
committee. Comments were due by
September 8, 2015. The SEC will use the
input it receives to evaluate whether to
propose changes to its rules. Refer to our In
brief publication for more information.
PwC is supportive of mandating that audit
committees make disclosures in the three
broad categories discussed above.
However, we believe any rules should be
principles-based, and avoid prescribing the
specific content of such disclosures. Refer
to our PwC comment letter for more
details.
CEO pay ratio disclosure
Nearly 2 years after being proposed, the
SEC adopted the CEO Pay Ratio Disclosure
on August 5, 2015. The new rule requires
many public companies to disclose the
CEO’s annual total compensation, the
“median employee’s annual total
compensation,” and the ratio of these two
amounts. The determination of the median
employee involves an analysis of all full-
time, part-time, and temporary workers
employed by a company. The final rule
provides for certain computational
flexibility. The pay ratio disclosure will be
required in registration statements (other
than IPOs and Form 10), proxy and
information statements, and annual
reports that require executive
compensation disclosures. With certain
exceptions, registrants must comply with
the rule for their first fiscal year beginning
on or after January 1, 2017. Refer to our In
brief publication for more information.
Proposed clawback rule
In order to implement Section 954 of the
Dodd-Frank Act, on July 1, 2015, the SEC
proposed a rule that would require many
public companies to adopt policies to
recover (i.e., clawback) “erroneously
awarded” incentive-based compensation if
the company is required to restate
previously issued financial statements to
correct a material error. The proposed rule
would apply on a “no-fault” basis to the
company’s President, CFO, CAO, vice
presidents in charge of a unit, division, or
function, and any other officer that
performs a policy-making function.
Incentive-based compensation received
during the three-year period preceding the
determination to restate would be subject
to clawback.

4. 4
If adopted as proposed, the new rule would
differ from the existing clawback
requirements created in 2002 by Section
304 of the Sarbanes–Oxley Act, which
apply only to the CEO and CFO, cover a
period of 12 months, are triggered only
when the restatement is as a result of
misconduct, and require the
reimbursement to the company of any
bonus or incentive/equity-based
compensation (not just the erroneously-
awarded portion).
The comment period for the proposal
ended September 14, 2015. With the
proposal of the clawback rule, the
commission has completed proposals on all
executive compensation rules required by
Dodd-Frank. Refer to our In brief
publication for more information.
Conflict minerals rule update
In November 2014, the U.S. Court of
Appeals for the District of Columbia Circuit
agreed to reconsider its earlier ruling in
which it found that a portion of the SEC’s
Conflict Minerals rules violated U.S.
Constitution. In August 2015, the court
reaffirmed its prior ruling. The U.S.
Department of Justice and the SEC have
not yet indicated whether they will seek
further appellate (or even Supreme Court)
review. For now, companies are continuing
to follow the interpretive guidance issued
by the SEC staff following the initial ruling
in 2014. Refer to our In brief publication
published in 2014 for more details.
Commissioner transition
In June 2015, we noted that SEC
Commissioner Daniel M. Gallagher had
submitted his resignation effective upon
the appointment of his successor. In
September 2015, Commissioner Gallagher
announced that he intends to leave the SEC
no later than Oct. 2. The President has not
yet nominated a successor for
Commissioner Gallagher or for
Commissioner Luis Aguilar, whose term
expired in June. Although his term has
expired, Commissioner Aguilar is expected
to remain at the SEC until his successor is
nominated.
International developments
Mandatory non-financial audit for
companies in India
India became the first country to make
Secretarial Audits (i.e., non-financial
audits) mandatory. These audits involve
checking the company’s compliance with
corporate and other laws, rules,
regulations, and procedures. The aim is to
provide regulators and stakeholders
comfort that a company has a disciplined
approach to compliance as a means to
evaluate and improve the effectiveness of
risk management, control, and governance
processes. The requirements are
mandatory for fiscal years ending on or
after March 31, 2015. Sanctions can be
assessed for non-compliance.

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Authored by:
Beth Paul
Partner
Phone: 1-973-236-7270
Email: elizabeth.paul@pwc.com
Brian S Caisman
Partner
Phone: 1-973-236-4453
Email: brian.s.caisman@pwc.com
Vidiya TR
Senior Manager
Phone: 1-973-236-7853
Email: vidiya.tr@pwc.com