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1、Table of contents1.Strategy for business3ESG spotlight32023 Outlook42.Accounting and financial reporting hot topics9Navigating changes to reportable segments9Standard-setting update10Tax accounting for OECD Pillar Two Taxes123.Regulatory update132022 AICPA&CIMA Conference on Current SEC and PCAOBDev
2、elopments13SEC amends insider trading rule 10b5-113Industrial products SEC comment letter trends144.Authored by152PwC|Industrial insights1.Strategy for businessESG spotlightEnvironmental:US investor survey:Focus on sustainabilityEconomic uncertainty,geopolitics,and environmental and social concerns
3、have left a deep mark on todays businesslandscape,affecting consumers and companies alike.Our recent US investor survey provides perspectives and insightinto how investors believe companies should address these matters with a focus on where the critical issue ofsustainability stands relative to othe
4、rs.Unsurprisingly,we found that US investors want companies to keep a sharp focuson innovation and financial performance.They ranked those as their two highest near-term priorities for business,withreduction in greenhouse gas emissions a lower priority.Over the next five years,however,investors expe
5、ct the threatsstemming from climate change and cybersecurity to rise.Drawing on our survey findings,along with earlier research and our ongoing work helping companies with tough businessdecisions on climate,we offer actions to guide companies to help meet investor demands including:Integrating susta
6、inability factors with core business strategy and decision making,Inventorying climate risks and opportunities,andReporting sustainability performance with the same rigor and data quality as financial performanceCheck out this recent case study to learn more about how Industrial products companies c
7、an take these steps.Social:Human capital disclosures are key components of your ESG reporting strategyAccording to a PwC survey,48%of consumers said that companies need to do more to advance societal issues,includinghuman capital management(HCM)elements like diversity,equity and inclusion(DEI),hirin
8、g practices,and fair pay.Leaders are now being called on to provide greater disclosures that can help stakeholders evaluate whether a businesshas the right workforce to meet both immediate and emerging business challenges.As the SEC prepares to propose new rules on HCM disclosure requirements which
9、were last updated in 2020 andglobal regulations ramp up,it is imperative for companies to develop a strategy for collecting,measuring and reporting onhuman capital data and to track progress over time.As you prepare for upcoming HC disclosure requirements,we recommend starting with these three steps
10、:(1)determineyour HCM reporting strategy;(2)engage the right leaders;and(3)choose standards,metrics and data collectionprocesses.Read on to learn more about how these steps can help you gain a clear understanding and develop a path forward fordelivering stronger HCM outcomes for both today and tomor
11、row.Governance:What boards should know about balancing ESG critics and keystakeholdersAt its core,ESG is about companies developing long-term strategic plans,identifying and mitigating material risks,recognizing emerging growth opportunities to their businesses,and their boards oversight of all of i
12、t.Additionally,morerobust ESG data,not less,could lead to companies making more informed decisions and to better public policy.Directors will need to balance the potential for their actions to address ESG risks and opportunities to be misconstrued and the reputational risks that follow with this inc
13、reasing market demand and the evolving regulatory disclosurerequirements.Ultimately,boards need to ask whether management is setting the right priorities,making the right promises3PwC|Industrial insightsto stakeholders and keeping those promises.Companies may not be able to mute all of their critics
14、,but being proactive onESG reporting can help them distinguish themselves from peers and potentially take advantage of the ESG asset flows.Listen to our Talking ESG:Building trust in climate commitments podcast for relevant perspectives from Emma Cox,PwCs Global Climate Leader.2023 OutlookDigital tr
15、ends in supply chainBetween an increasingly digital world and persistent operational disruptions,the effective use of technologies insupply chains has become more critical.However,as PwCs 2023 Digital Trends in Supply Chain Survey reveals,many challenges remain,and companies can do more to elevate t
16、heir supply chains in the digital age.Executives say their top priorities for the next 12-18 months are increasing efficiency and managing or reducingcosts.As a result,transformation initiatives compete with these basic priorities.Tech investments have good intentions,but results come up short for m
17、any reasonsThe adoption and application of technologies within supply chain operations varies greatly by technology.Whenasked about the levels of investment in the next two years,artificial intelligence and machine learning are predictedto see the most spending.The challenge is to make sure those in
18、vestments pay off.Only 17%of executives saytheir companys investments in supply chain technology have fully delivered the expected results.Resilience and risk are under control,but more can be doneExecutives generally think their existing processes and systems adequately manage risk in the supply ch
19、ain,with83%agreeing or strongly agreeing with that statement.At the same time,86%agree or strongly agree that theircompanies should invest more in technology to identify,track and measure supply chain risk.More opportunities to integrate ESG into the supply chainA majority of executives still consid
20、er most ESG-related issues a challenge.The top challenges to integrating ESGinto the supply chain are that employees lack digital skills with 80%of executives saying it was either a minor ormajor challenge and inadequate availability of data and digital tools(73%).See the full results as well as fur
21、ther insight into what you can do to mitigate risk and elevate your supply chain.Restructuring outlookRising interest rates,soaring inflation and a scale back of government support caused a slowdown in market activityand consumer demand in 2022.These disrupting forces have already impacted various c
22、ompanies with complex,global supply chains,high degrees of operating leverage,and inflexible pricing arrangements with customers.As these macroeconomic conditions persist throughout 2023,we can expect to see a sizable increase inrestructuring activity as borrowers run out of levers to pull and lende
23、rs choose not to extend furtheraccommodations.We are monitoring a number of sectors we think might face the heaviest challenges,including thefollowing Industrial products sub-sectors:IndustrialsCompanies with complex,global supply chains and inflexible pricing arrangements will likely continue to fa
24、cechallenges throughout 2023.A persistent market environment of inflation,rising energy costs and heightenedgeopolitical risk may impact the strategic options available to these companies.4PwC|Industrial insightsAutomotiveThe automotive industry may be in for a drastic technological disruption over
25、the course of the next decade with themove toward electric vehicles.Along with longer-term headwinds,auto suppliers also face near-term operationalchallenges related to the semiconductor chip shortage affecting light-vehicle production globally,margin contractiondue to inflationary cost pressures an
26、d increased capital costs resulting from rising interest rates.Tier 1 suppliers arefacing the squeeze from original equipment manufacturers(OEM)cost pressures,additional technical requirements,lack of accurate platform volume forecasts,shortage of labor,supply chain issues and increasing capital cos
27、ts.OEMs have been generally reactive to distress within their tier 1 supplier base.To assure continuity of supply,carmanufacturers have been providing pricing and liquidity accommodations only after their suppliers show criticalfinancial distress.We expect this trend of reactive accommodations to co
28、ntinue until some of the underlyingmacroeconomic triggers stabilize.Read on for more information.Deals outlookPwC reports on merger and acquisition(M&A)activity in each of our Industrial products subsectors.With in-depthdata analysis and insights,these reports aim to equip you with an executive over
29、view,key trends and highlights,aswell as PwCs assessment of the M&A outlook for each sector.The table below summarizes our perspective on keydeal drivers for each subsector in 2023.Read on for additional details.Key deal driversAerospace anddefenseAutomotiveChemicalsEngineering andconstructionIndust
30、rialmanufacturingIncreasingresilience andsecurityXXXXNavigatinguncertaintyXXXCapital disciplineXXXShifts inregulation,taxand tradeXSpeed tounlocking valuefrom dealsXInvestments inpurposeXTransformationalM&AXAerospace and defenseAerospace and defense deal making trends continue in the direction of sm
31、aller defense and government servicestransactions,as companies seek to optimize their portfolios and focus on areas with the greatest potential forprofitable growth.The industry remains in a very strong cash position,and we suspect many deals could be madeby leveraging the strength of balance sheets
32、.5PwC|Industrial insightsOn the commercial aerospace side of the sector,transactions in the maintenance,repair and operation(MRO)andparts spaces primarily at the lower end of the value scale continued at a steady pace.Consistent with 2022,supply chain challenges persist and may present opportunities
33、 for transactions.Key deal drivers for 2023 include:Shifts in regulation,tax and trade:It is highly likely that the US Department of Defenses view on furtherconsolidation,particularly at the prime level,will dampen large scale deal making activity in the near term.However,opportunities to carry out
34、transactions will likely continue to exist for medium-and smaller-sizedtransactions,bolstered by strong cash positions in the industry and the relentless pursuit of margins.Navigating uncertainty:The ongoing war in Ukraine is clearly front and center for many players in the industry.Most notably,we
35、believe that as European countries increase defense spending,there will be opportunities fortransactions to consolidate a relatively dispersed defense industrial base in the region.AutomotiveWe expect the discipline dealmakers in the automotive sector demonstrated in their capital deployment in 2022
36、 willcontinue in 2023.While we expect a more disciplined market,deal volumes will likely remain stable as M&Acontinues to serve as one of the swiftest ways for companies to transform their capabilities for an electric future,increase supply chain resiliency and consolidate their scale and go-to-mark
37、et approach.Key deal drivers for 2023 include:Capital discipline:In 2023,accretive deals may become more challenging to find.Dealmakers will need to bediligent in how they weather macroeconomic factors,including looking internally at divestiture options to free upand reinvest capital into core opera
38、tions.Navigating uncertainty:Automotive companies are combating the instability in global supply chains andgeopolitical unrest by relying on strategic alliances and partnerships to acquire businesses close to home or inmore geopolitically secure locations.Companies should get ahead of the uncertaint
39、y through review of theirportfolios for potential divestiture options to shore up their businesses and strengthen balance sheets in order todeploy capital where better returns are expected.Increasing resilience and security:Automotive companies continue to battle inflation-related challenges,suchas
40、increased commodity prices,continued semiconductor chip supply difficulties and a race to secure rare earthmetals necessary for the transition to electric vehicles.M&A options will likely be key to providing both short-andlong-term relief for automakers,which we have already seen through select tran
41、sactions such as Fordsinvestment in GlobalFoundries to secure semiconductor chip supply as well as General Motors strategiccollaborations with MP Materials and Vacuumschmelze to secure rare earth metals.Additionally,on the heels ofthe US ban on chip exports,2023 may bring increased M&A to shore up c
42、hip supply security within the Chineseautomotive market as companies look to invest in new production sources.ChemicalsConcerns from last year surrounding rising interest rates,the possibility of a recession,and the Russia-Ukraine warare now deepening and starting to impact dealmaking activity.Despi
43、te near-term headwinds,chemical companieswith strong balance sheets are well-positioned to power a new M&A wave once uncertainties diminish andvaluations become attractive potentially by the second half of 2023.Key deal drivers for 2023 include:Speed to unlocking value from deals:In this new environ
44、ment of higher cost of capital and inflation,chemicalscompanies are looking to gain a strategic advantage by reassessing their portfolios against their core strategy togenerate value.The need to meet ESG requirements,the global shift to decarbonization,and the ongoing energycrisis in Europe have exe
45、rted pressure on chemicals companies to speed along this process.The speed withwhich chemicals companies make objective M&A decisions and strategically manage their portfolios willultimately determine their advantage in this changing business environment.Many delayed divestments andcarve-outs in the
46、 second half of 2022 may resume in 2023 and fuel a rebound in deal volume and value.6PwC|Industrial insightsIncreasing resilience and security:In response to geopolitical unrest,chemicals companies are shiftingoperations closer to home or to more geopolitically secure locations to mitigate exposure.
47、This trend has thepotential to drive more cross-border deals,as acquirers look to reshape their geographic footprint and realignsupply chains.Companies may also look to build redundant manufacturing capabilities in multiple regions orcountries to cope with a new business environment of a fragmented
48、global supply chain.For the chemicalsindustry,M&A is often the preferred approach to achieve this strategic goal as greenfield investment takes muchlonger to carry out.Capital discipline:High interest rates and inflation are forcing companies to find less costly cash alternatives.Chemicals companies
49、 have begun to refocus efforts on working capital management,such as reducing inventoryand collecting payments quicker to provide cash to fund potential investments.Chemicals companies may alsouse divestitures to provide a source of cash,to refocus on the core business units or fund strategic acquis
50、itionsas the cost of capital continues to remain high.Engineering and constructionDeal activity could rebound in the latter half of 2023 after a slowdown in 2022 if near-term economic headwindssubside and markets grow from a new base.Tailwinds associated with balance sheet strength(both corporate an
51、dprivate equity),lower valuation multiples and upcoming tax changes that will disincentivize allocating capital to sharebuybacks could also drive deal-activity growth.Key deal drivers for 2023 include:Capital discipline and conviction:This higher cost of capital and inflationary environment requires
52、 companiesto apply a more discerning approach to M&A activities,with growth alone no longer an adequate strategicobjective.In this rapidly evolving landscape,E&C companies that reassess their portfolios against core businessstrategies and find the appropriate balance of acquisitions and divestitures
53、 will be best positioned to differentiateand drive higher returns on capital.This higher cost of capital and inflationary environment requires companies toapply a more discerning approach to M&A activities,with growth alone no longer an adequate strategic objective.In this rapidly evolving landscape
54、,E&C companies that reassess their portfolios against core business strategiesand find the appropriate balance of acquisitions and divestitures will be best positioned to differentiate and drivehigher returns on capital.Navigating uncertainty:Geopolitical instability has increasingly led E&C compani
55、es to focus on portfoliorealignment,with continued divestments of underperforming and non-core regions and reallocation of surpluscash into local,mature markets such as North America and Europe.Investments in purpose:ESG will continue to be an increasingly important lens for investors in the E&C sec
56、tor.Because the E&C industry is fragmented and lacks visibility in supply chains and subcontractor processes,it ismore challenging for it to commit to green construction.However,with customers placing greater emphasis ondecarbonizing construction,companies that support initiatives promoting sustaina
57、ble design,development andconstruction practices such as responsible sourcing,offsite construction and lower carbon technologies willattract higher valuation multiples.Increasing resilience and security:The persistence of global supply chain disruptions and sourcing challengesare affecting project p
58、rofitability.These challenges are being further exacerbated by wage inflation and laborshortages,with the available E&C workforce shrinking,as an aging cohort of skilled workers either retire or moveinto other professions offering competitive salaries.These ongoing disruptions increase the urgency f
59、or greaterinnovation,with companies expected to fine-tune their business models by leveraging technologies and focusingon solutions geared towards supply chain management.Industrial manufacturingDespite a handful of transformational deals(transactions exceeding$1 billion in deal value)in the fourth
60、quarter of2022,industrial manufacturing M&A deals declined in 2022 from historic levels in 2021.However,the 2022 level ofdeal activity is nevertheless above historical trends,specifically higher than 2019.7PwC|Industrial insightsStrategic focus areas and investment along with portfolio review and re
61、sulting divestitures are expected to supportstable deal activity going into 2023.Key deal drivers for 2023 include:Increasing resilience and security:Industrial manufacturing companies(both strategic and PE portfoliocompanies)have sought to stabilize the supply chain,including through nearshoring.Su
62、pply chain shortages ledmany companies to focus on M&A to mitigate this risk,whether through onshore or nearshore facility acquisitionsor through the acquisition of suppliers.Throughout 2023,we expect a continued focus on stabilizing supplychains.Corporate entities are likely to focus M&A activity i
63、n strategic areas to minimize supply chain risk andsupplement platforms and programs to become better positioned to weather macroeconomic challenges.Transformational mergers and acquisitions:In industrial manufacturing,we continue to see confidence indivestiture activities,as companies make decision
64、s based on their platform review to exit non-core assets orexecute transformational spins.Industrial manufacturing companies that make timely and objective divestituredecisions and strategically manage their portfolios are at an advantage in this dynamic business environment.This continued effort is
65、 expected to not only provide a stable level of deal activity,but also help companiescontinue to navigate the uncertain market with a more focused,strategic core offering.8PwC|Industrial insights2.Accounting and financial reportinghot topicsNavigating changes to reportable segmentsWith industrial pr
66、oducts companies continuing to navigate a challenging economic environment,many aremaking adjustments to their organizational structures or business strategies.Below are some timely remindersabout when these changes could require reassessing a companys reportable segments and the resultingaccounting
67、 and reporting implications.Factors that could result in a change to reportable segmentsThe segments standard does not provide specific guidance on when a company should reassess its reportablesegments,so whether a reassessment is needed will depend on a companys specific facts.Typically,segmentconc
68、lusions need to be reassessed upon significant acquisitions or dispositions and changes to theorganizational structure,such as a different individual or group being identified as the chief operating decisionmaker(CODM).Changes to reportable segments can also occur if there are changes to the individ
69、uals thatreport to the CODM,the information reviewed by the CODM,or how the CODM allocates resources,assessesperformance,or determines the budget.Other potential implicationsIf there are changes to a companys reportable segments,management should also assess whether thecompanys reporting units have
70、changed.Reporting units are defined as the same as,or one level below,theoperating segments.This is important because goodwill is tested for impairment at the reporting unit level.If the composition of one or more reporting units changes,the companys assets and liabilities should bereassigned to the
71、 reporting units affected before allocating goodwill.Then,goodwill should be reassigned using arelative fair value approach.Changes to the composition or carrying amount of a reporting units net assets maytrigger the need to perform a goodwill impairment test.It would not be appropriate,however,for
72、a company toreorganize its reporting structure simply to avoid an impairment charge.Presentation and disclosure considerationsA change to reportable segments is reflected in the period of change by recasting the segment footnote for allperiods presented,unless it is impracticable to do so.Outside of
73、 the financial statements,the company will alsoneed to update any information in MD&A about the results of operations of its individual reportable segments.Changes that occur after period end,but before issuing the financial statements,are treated as an unrecognizedsubsequent event.That is,the infor
74、mation in the segments footnote is not recast to reflect the change.However,companies should consider disclosing that a change will occur in the subsequent period.When a change to reportable segments occurs during an interim period,a company is not required to immediatelyrecast either the current ye
75、ars earlier interim periods or the prior years annual segments footnote.Recasting theprior period information is typically done in the next filing that presents those periods.However,the issuance of aregistration statement may accelerate the need to recast prior period annual financial statements.Wh
76、en a company changes its reportable segments in an interim period,there are reporting implications if thoseinterim financial statements are included or incorporated by reference into a new or amended registrationstatement before the companys next annual filing.In this situation,the company is requir
77、ed to recast its prior period annual financial statements to reflect thesegment information on a comparable basis,assuming the effect on previously issued annual financialstatements is material.If the company presents three years of financial statements,this requires recasting threeyears of segments
78、 information,rather than just the two historical years that would be required if the segments9PwC|Industrial insightsfootnote was not recast until the next annual filing after the change.MD&A may also need to be updated.For more informationFor more guidance on changes to reportable segments,refer to
79、 Section 25.7.8 of our Financial statementpresentation guide.Standard-setting updateNew disclosures for supplier finance programsBeginning in Q1 of 2023,calendar year-end companies will be required to provide new disclosures about supplierfinance programs under ASU 2022-04.While the new standard doe
80、s not address the accounting for thesearrangements,it requires disclosure intended to enhance transparency into the key terms and amounts subject tothe program.Background on supplier finance programsWhen a reporting entity(“buyer”)buys goods or services from a supplier,the buyer often recognizes its
81、 paymentobligation as a trade payable.It has become increasingly popular for buyers to establish a supplier finance programwith a bank or other financial intermediary.In a typical program,the buyer validates the invoice received from thesupplier and the intermediary may offer early payment(typically
82、 a discounted amount)to the supplier.The buyer willgenerally make its payment according to the terms of the original invoice.However,the terms of each arrangementcan vary significantly.A key judgment when accounting for supplier finance programs is whether invoices in the program should bepresented
83、as a trade payable or as debt.A range of factors and evidence should be considered in assessingwhether the substance of the obligation is more akin to a trade payable or debt.Considerations include:Has the buyers obligation been modified so significantly that it should be considered a newarrangement
84、(i.e.,debt)?Examples include significantly extending the payment terms,requiring the buyer topost collateral,changing the payables seniority,charging interest,or permitting the buyer to earn a fee based onvendor participation.Has the supplier agreed to atypical invoice terms because a supplier finan
85、ce program is in place?Extended payment terms may indicate that the buyers obligation is more akin to debt because the program isfacilitating payment terms that are well beyond what it would get with a typical trade payable.New disclosure requirementsCertain of the disclosure requirements are effect
86、ive for fiscal years beginning after December 15,2022 for allentities.Early adoption is permitted.Disclosures required for calendar year-end companies are summarized below:20232024 and beyondAll interim and annual periods:*Information about the programs key termsBalance sheet presentation as tradepa
87、yables or debtConfirmed amount outstanding at the end ofthe period(regardless of whether the amounthas been discounted to the supplier by theintermediary)*Since 2023 is the first year of adoption,allannual disclosures except for the rollforward arerequired in each interim period.The disclosuresshoul
88、d be made retrospectively for each periodfor which a balance sheet is presented.Interim periods:Confirmed amount outstanding at the end of the period(regardless of whether the amount has been discounted tothe supplier by the intermediary)Annual period:Information about the programs key termsBalance
89、sheet presentation as trade payables or debtConfirmed amount outstanding at the end of the period(regardless of whether the amount has been discounted tothe supplier by the intermediary)Rollforward of annual activity*The rollforward disclosure requirement is applied prospectively.10PwC|Industrial in
90、sightsFor more informationFor more details,refer to Section 11.3.1.5 of our Financial statement presentation guide.Also,listen to our recentlyreleased podcast,Supplier finance:New disclosures aim to enhance transparency.Other accounting standards effective in 2023In addition to new disclosures about
91、 supplier finance obligations discussed above,other standards effective forpublic calendar year-end companies in 2023 include:ASU 2021-08,Accounting for contract assets and contract liabilities from contracts with customers,requirescontract assets and contract liabilities(i.e.,deferred revenue)acqui
92、red in a business combination to berecognized and measured by the acquirer on the acquisition date in accordance with ASC 606,Revenue fromContracts with Customers,as opposed to measuring these assets and liabilities at fair value.Generally,this newguidance will result in the acquirer recognizing con
93、tract assets and contract liabilities at the same amountsrecorded by the acquiree.For more information,refer to our In depth,Accounting for acquired contract assetsand contract liabilities.ASU 2018-12,Targeted improvements to the accounting for long-duration contracts,which changes the waycompanies
94、value their obligations:how risky they are,what benefits they may need to pay,how often they needto change their assumptions,and more.For more information,refer to our Insurance contracts guide.ASU 2022-01,Fair value hedgingportfolio layer method,replaces the recently added“last-of-layer”hedgingguid
95、ance and provides the ability to hedge the benchmark interest rate risk of a closed portfolio of fixed rate fixedincome securities with multiple hedging relationships.For more information,refer to our Derivatives and hedgingguide.ASU 2022-02,Troubled debt restructurings and vintage disclosures,elimi
96、nates the troubled debt restructuringguidance for creditors that have adopted the new credit loss guidance(commonly referred to as CECL)and addsnew disclosure requirements.This guidance does not impact the accounting for borrowers.For more information,refer to our In depth,Amendments to CECL elimina
97、te TDRs and add disclosures.For a complete list of recently issued accounting standards and their effective dates,including links to PwCresources,refer to the Guidance effective for calendar year-end public companies and Guidance effective forcalendar year-end nonpublic companies pages on PwCs Viewp
98、oint.On the horizon-updates on other standard setting projectsDisaggregation-Income statement expenses,including proposed“inventory rollforward”The FASB continues to make headway on its project on disaggregation of income statement expenses.InJanuary,the FASB reached a number of tentative decisions,
99、providing a preview of new disclosures that could beproposed later this year.The FASB tentatively decided to require footnote disclosure that disaggregates each income statement expenseline item into four categories,as applicable:(1)employee compensation,(2)inventory expenses,(3)depreciationof fixed
100、 assets,and(4)amortization of intangibles.Companies would provide a qualitative description of theremaining amount not covered by these categories.Similar disaggregation would also be required for costsincurred that are capitalized into inventory during the reporting period.As illustrated in the exa
101、mple disclosuresissued by the FASB,this would require presentation of what is effectively an inventory rollforward.Lastly,companies would be required to separately disclose total“selling expenses for the reporting period.We expect the FASB to make additional decisions at an upcoming meeting before m
102、oving the project to theproposal stage.For more information,including example disclosures reflecting the FASBs tentative decisions,refer to the FASBs project page.New income tax disclosures proposal11PwC|Industrial insightsIn March,the FASB issued a new proposal that would require a number of additi
103、onal income tax disclosures,primarily focused on the disclosure of(a)income taxes paid and(b)the rate reconciliation table.Companies would need to disaggregate the disclosure of income taxes paid(net of refunds received)by federal,state,and foreign taxes,both on an interim and annual basis.On an ann
104、ual basis,companies would discloseincome taxes paid disaggregated by individual jurisdiction using a quantitative threshold of 5%of total income taxespaid.Public business entities would also be required to provide,on an annual basis,rate reconciliation information byspecific categories,including sta
105、te and local income tax,the effect of cross-border tax laws,foreign tax effects,andtax credits,among others.Additionally,some categories would then require disaggregation based on a quantitativethreshold of 5%.The foreign tax effect category would require disaggregation by both jurisdiction and natu
106、re.Theproposal also requires additional qualitative disclosures.The proposed amendments would be applied on a retrospective basis upon adoption.Comments on the proposalare due May 30.Tax accounting for OECD Pillar Two TaxesVarious jurisdictions have made significant advancements in enacting domestic
107、 legislation based upon theminimum tax described in the Global Anti-Base Erosion rules(GloBE minimum tax or“Pillar Two tax”),raisingquestions about the related accounting impact.At the FASBs February 1,2023 meeting,the FASB staff providedtheir view that the GloBE minimum tax is an alternative minimu
108、m tax as discussed in ASC 740,Income Taxes.Based on this conclusion,reporting entities would not recognize or adjust deferred tax assets and liabilities forthe estimated future effects of Pillar Two taxes as long as enacted legislation is consistent with the OECDsGloBE Model Rules and associated com
109、mentary.Rather,the tax would be accounted for as a period costimpacting the effective tax rate in the year the GloBE minimum tax obligation arises.Concurrent with these developments from the FASB,the IASB issued an Exposure Draft proposing amendmentsto IFRS guidance to introduce a temporary,but mand
110、atory,exception to the accounting for deferred taxes arisingfrom the implementation of the Pillar Two rules along with extensive disclosure requirements.The number of companies expected to be impacted by Pillar Two continues to expand as more jurisdictionsintroduce and advance domestic legislation b
111、ased upon the Pillar Two rules.While the majority of Pillar Twolegislation is anticipated to be effective in 2024 and beyond,enactment in 2023 would likely trigger disclosurerequirements.Multinational entities should continue to monitor developments of Pillar Two legislation and assessthe potential
112、accounting and disclosure implications.For more informationFor more details on the FASB staffs view,refer to our In brief,FASB staff weighs in on tax accounting for OECDPillar Two taxes.For more background on the OECDs international corporate tax reform and Pillar Twos ModelRules,read our In the loo
113、p,The OECD minimum tax:What US companies need to know.Accounting in uncertain economic timesRising interest rates,inflation,geopolitical conflict,supply chain challenges these trends continueto impact many companies in 2023.Our Accounting in uncertain economic times placemat series isan interactive
114、tool intended to help identify how different macroeconomic trends may impactaccounting and reporting,understand the judgments involved,and locate additional PwC resourcesto navigate these issues.12PwC|Industrial insights3.Regulatory update2022 AICPA&CIMA Conference on Current SEC and PCAOBDevelopmen
115、tsAreas of focus for the Division of Corporation FinanceMD&A disclosures impact of different events/factors should be discussed separately;staff referred to theirvarious sample comment letters for key considerations.Critical accounting estimates disclosures should clearly address why estimates are c
116、riticalSeveral presenters reiterated that MD&A disclosures should evolve over time to address current events.The staffreiterated that different events or economic factors should be discussed separately within MD&A.For example,companies should not combine the impact of the pandemic with the impact of
117、 the war in Ukraine,or combine theimpact of supply chain constraints and inflation in their disclosures.They noted that it is important for investors to beable to identify which items are having an impact on the companys business.Speakers emphasized thequantification of each material factor that cau
118、sed or contributed to a change,as well as any offsetting amounts.The staff also provided several considerations for preparers relating to critical accounting estimates.Thesedisclosures are intended to provide qualitative and quantitative information to understand the estimation uncertaintyand the im
119、pact that the estimate has had or is reasonably likely to have on the financial condition or results ofoperations.In the current environment,where a potential effect becomes more likely or increases in magnitude,thestaff expects the estimate and sensitivity disclosures to become more robust as facto
120、rs(e.g.,rising interest rates)are likely to have a material impact.Segments:recent staff objections to companies with a single reportable segmentA recurring topic of discussion at the Conference,this years focus was on identifying operating segments,andspecifically taking into consideration the info
121、rmation provided to the CODM.The staff reminded registrants thatidentification of the operating segment is a determination with a pervasive impact on subsequent accounting andreporting conclusions.The staff noted that they review segments holistically,including considering informationoutside of the
122、SEC filing such as earnings releases,earnings calls,and websites.The staff also provided examplesof fact patterns when they objected to a registrants determination that it had a single operating segment.Updates to SEC non-GAAP C&DIsThe SEC staff has updated its Compliance&Disclosure Interpretations(
123、C&DIs)relating to non-GAAP financialmeasures.The staff noted that the updates are intended to memorialize existing staff views provided through publicstatements or comment letters.A key focus of the updates is to provide further guidance on non-GAAP measuresthat are considered misleading,including g
124、uidance on operating expenses that are“normal and recurring,”labelingof non-GAAP measures and adjustments,and measures that represent a tailored accounting principle.Listen to ourspecial podcast episode to learn more.Refer to our In brief on the AICPA&CIMA Conference on Current SEC and PCAOB Develop
125、ments for furtherdetails.SEC amends insider trading rule 10b5-1On December 14,2022,the SEC adopted several amendments to Rule 10b5-1 of the Securities Exchange Act andadded new disclosure requirements of a registrants insider trading policies and procedures.The amendmentsinclude updates to Rule 10b5
126、-1(c)(1)which provides an affirmative defense to insider trading liability.13PwC|Industrial insightsAmendments include:Adding new conditions to the availability of the affirmative defense under Exchange Act Rule 10b5-1(c)(1),including cooling-off periods for directors,officers,and persons other than
127、 issuers;Creating new disclosure requirements regarding issuers insider trading policies and procedures and theadoption and termination(including modification)of Rule 10b5-1 and certain other trading arrangements bydirectors and officers;Creating new disclosure requirements for executive and directo
128、r compensation regarding certain equitycompensation awards made close in time to the issuers disclosure of material nonpublic information;andUpdating Forms 4 and 5 to require filers to identify transactions made pursuant to a plan that is intended tosatisfy the affirmative defense conditions of Rule
129、 10b5-1(c)and to disclose all bona fide gifts of securities onForm 4Effective dateThe amendments to Form 4 and 5 are effective on April 1,2023.Registrants need to comply with the disclosurerequirements in form 10-Q,10-K and 20-F and in proxy and information statements in the first filing that includ
130、es thefirst full fiscal period that begins on or after April 1,2023.Industrial products SEC comment letter trendsThe SEC Division of Corporation Finances filing review process monitors the disclosures made by registrants.Based on the analysis of comment letters publicly issued to Industrial Products
131、 companies in the 12 months endedDecember 31,2022,non-GAAP measures,MD&A,and climate change matters generated the highest volume ofSEC comments.We have seen an increase in frequency of comments around MD&A,climate change,and inventorycompared to the 12 months ended December 31,2021.Check out our pod
132、cast series for additional information on some of this years top trends:MD&A:SEC comment letter trendsClimate change:SEC comment letter trendsInventory and cost of sales:SEC comment letter trendsVisit our SEC comment letter trends for industrial products page to see our insights on the nature of the
133、 SEC staffcomments by topic,sample text from the SEC staffs comments,and links to where you can learn more about theaccounting and disclosure requirements addressed in each topical area.14PwC|Industrial insights4.Authored byBeth PaulPartner,Deputy Chief AccountantNational Accounting and SEC Services
134、 GTom JohnsonSenior ManagerNational Auditing Services GEddie MooreDirectorNational Auditing Services GKelley HarperDirectorNational Accounting and SEC Services GMichael KearneySenior ManagerNational Accounting and SEC Services GTom FaddenSenior ManagerNational Quality Management GChris BurkeSenior ManagerNational Inspections G15PwC|Industrial insights16PwC|Industrial insights