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Accounting Research Manager(TM)
Weekly Summary of Developments
January 15-19, 2007
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Accounting Research Manager subscriber,
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Accounting and SEC Headlines
Correcting Errors in SEC Filings Resulting from Stock Options Grants -- SEC Issues Guidance
Statement 133 Implementation Issues -- FASB Clears and Revises DIG Issues
Valuation in Financial Reporting -- FASB Issues Invitation to Comment
Fair Value Option -- FASB to Discuss Fair Value Option Project and Other Matters at January 24, 2007 Meeting
FASB Report Issued -- Not-for-Profit Initiatives Discussed
International Financial Reporting -- IASB Issues Agenda for Its Meeting on January 23-25, 2007
Government Headlines
GASB Report Issued -- GASB Discusses Exposure Drafts Issued in December
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ACCOUNTING AND SEC HEADLINES:
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Correcting Errors in SEC Filings Resulting from Stock Options Grants -- SEC Issues Guidance
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On January 16, 2007, the SEC's Division of Corporation Finance (Corp Fin) issued a sample letter to companies requesting guidance related to filing restated financial statements for errors when accounting for stock option grants. During 2006, certain registrants discovered that they had improperly complied with the accounting requirements relating to company issued stock options - a problem that includes "back-dating" as sometimes referred to. This problem is most acute in years before a company was required to adopt the accounting prescribed in FASB Statement No. 123 (Revised 2004), Share-Based Payment.
In this Corp Fin release, the SEC staff indicated that they will accept a registrant that decides to correct its errors relating to stock option grants if the registrant amends its most recent Form 10-K and furnishes various disclosures in its financial statements, MD&A, Selected Financial Data, rather than amending numerous filings for multiple periods. However, if a registrant elects this approach rather than amending all of its prior filings, the sample letter provides numerous and comprehensive detailed disclosures that must be made. The sample letter includes guidance for a company about ready to file its Form 10-K for the current year.
A registrant that has identified errors relating to its stock option grants and concludes that it should amend prior filings, should carefully review and consider the guidance in this release.
Statement 133 Implementation Issues -- FASB Clears and Revises DIG Issues
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The FASB has cleared the guidance in Derivatives Implementation Group (DIG) Issue B40, "Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets." In this release, the FASB concludes that a securitized interest in prepayable financial assets is not subject to the conditions in paragraph 13(b) of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, if it meets both of the following criteria:
1. The right to accelerate the settlement of the securitized interest cannot be controlled by the investor; and
2. The securitized interest itself does not contain an embedded derivative (including an interest-rate-related derivative) for which bifurcation would be required other than an embedded derivative that results solely from the embedded call options in the underlying financial assets.
The guidance in Issue B40 is applicable upon adoption of FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments, although the FASB provides certain exceptions as described in Issue B40. An entity that has already adopted Statement 155 may be required to retrospectively apply the guidance in Issue B40 to the date it adopted Statement 155.
As a result of this new guidance, the FASB revised its guidance in DIG Issue B39, "Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor," to reflect the views in Issue B40.
Valuation in Financial Reporting -- FASB Issues Invitation to Comment
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The FASB has issued an Invitation to Comment, Valuation Guidance for Financial Reporting. The purpose of this release is to solicit comments from interested parties regarding:
1. The need, if any, for valuation guidance, including related implementation guidance for financial reporting; the specificity of this valuation guidance; and the duration of standard-setting activities.
2. Whether the FASB should be solely responsible for providing valuation guidance or whether another organization should be involved.
3. The process that should be used to issue valuation guidance for financial reporting.
Comments on this release are due April 15, 2007.
Fair Value Option -- FASB to Discuss Fair Value Option Project and Other Matters at January 24, 2007 Meeting
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As reported in its "Action Alert" publication, the FASB will meet on January 24, 2007, and address the following projects or topics:
-Financial Statement Presentation
-Fair Value Option
When considering the topic of financial statement presentation, the FASB plans to discuss the definition of "discontinued operations," applying the working format to "hybrid" entities, and the statement of changes in equity and equity-related issues. Separately, the FASB plans to discuss whether to add a scope exception to the forthcoming final standard on the fair value option for financial assets and financial liabilities, for investments whose transfer is considered in-substance to be the sale of real estate.
FASB Report Issued -- Not-for-Profit Initiatives Discussed
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The November edition of the "FASB Report" has been issued and includes discussion of the following topics or items of interest:
-FASB Ramps Up Not-for-Profit Initiatives; Issues Proposals to Improve Mergers and Acquisitions Accounting Guidance for Not-for-Profit Organizations
-Dennis H. Chookaszian Named as Financial Accounting Standards Advisory Council Chairman
-FASB Bolsters Staff in Three Critical Areas
-FASB Issues Tentative Guidance on Statement 133 Implementation Issue
-FASB and the Accounting Standards Board of Japan Hold Second Meeting
-Who's Who
International Financial Reporting -- IASB Issues Agenda for Its Meeting on January 23-25, 2007
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The IASB has issued the agenda for its January 23-25, 2007 meeting when it is scheduled to discuss the following projects or topics:
-Business Combinations (Phase II)
-Financial Instruments - Due Process Document
-Financial Instruments Puttable at Fair Value
-Financial Statement Presentation - Phase B
-IFRIC Update
-IFRS 2 Share-Based Payment - Exposure Draft: Vesting Conditions and Cancellations
-Income Taxes
-Insurance Contracts
-Intangible Assets
-Liabilities - Amendments to IAS 37
-Liability and Equity
-Management Commentary
-Related Party Disclosures
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GOVERNMENT HEADLINES:
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GASB Report Issued -- GASB Discusses Exposure Drafts Issued in December
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The December edition of the "GASB Report" has been issued and includes the following discussion items:
-GASB Calendar
-Board Approves Exposure Drafts Relating to Pension Disclosures and Intangible Assets
-Board Meeting Summary
-Comments Sought on Issues Related to Fund Balance Reporting and Governmental Fund Type Definitions
-FAF Announces Appointments to the GASB's Advisory Council
-OPEB Implementers
In this report, the GASB announces that it is seeking governments that have already implemented the guidance in GASB Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The GASB desires to provide electronic links on its website to the financial reports of such entities to assist other governments in implementing these standards.
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