===================================================
Accounting Research Manager(TM)
Weekly Summary of Developments
May 28 - June 1, 2007
===================================================

Accounting Research Manager subscriber,

The Accounting Research Manager database now contains this week's weekly summary of developments. Click the link below to access and print the fully-formatted Weekly Summary:

For detail, please contact info@zy-cpa.com

If you do not have immediate Internet access to the Accounting Research Manager database, below is the text of this week's Weekly Summary.

Accounting and SEC Headlines

EITF Materials Issued -- Calculating Earnings per Share for a Master Limited Partnership and Other Matters for the June 14, 2007 EITF Meeting
Uncertainty in Income Taxes, Leveraged Leases, and VIEs -- Guidance Added and Updated in Our Publication "Accounting Standards"
Financial Statement Presentation -- FASB Discusses Financial Statement Presentation Project and Other Matters at May 16, 2007 Meeting
Hedging Activities -- FASB Decides to Address Statement 133 Hedging and Other Matters at May 23, 2007 Meeting
Internal Controls -- PCAOB Issues Rule Replacing A/S 2
Inspection Frequency -- PCAOB Issues Final Rule Eliminating Sunset Provision
Internal Control Reporting -- Interpretive Guidance Added
PCAOB Inspections -- PCAOB Proposes Modification of its Audit Firm Inspection Rule

Auditing and Internal Controls Headlines

Internal Controls -- PCAOB Issues Rule Replacing A/S 2
Inspection Frequency -- PCAOB Issues Final Rule Eliminating Sunset Provision
Internal Control Reporting -- Interpretive Guidance Added
PCAOB Inspections -- PCAOB Proposes Modification of its Audit Firm Inspection Rule

Government Headlines

Pension Disclosures -- GASB Issues Clarifying Guidance

=============================
ACCOUNTING AND SEC HEADLINES:
=============================

EITF Materials Issued -- Calculating Earnings per Share for a Master Limited Partnership and Other Matters for the June 14, 2007 EITF Meeting
For detail, please contact info@zy-cpa.com

The FASB has issued the following materials for the EITF meeting scheduled for June 14, 2007:

-Issue No. 07-4 (formerly Issue 07-D), "Application of the Two-Class Method under FASB Statement No. 128, 'Earnings per Share,' to Master Limited Partnerships" (Issue Summary)

-Proposed EITF Meeting Schedule for 2008

Issue 07-4 addresses whether current period earnings of a Master Limited Partnership (MLP) should be allocated to holders of incentive distribution rights (IDRs) when applying the two-class method under FASB Statement No. 128, Earnings per Share. MLPs frequently issue multiple classes of securities that may participate in partnership distributions according to a formula specified in the partnership agreement. A typical MLP consists of publicly traded common units held by limited partners (the Common Units), a general partner interest (the GP Interest), and the IDRs. The IDRs represent a separate class of nonvoting limited partner interest that the general partner (GP) initially holds but may transfer or sell separately from its GP Interest. IDR holders do not have an ownership interest in the partnership.

Uncertainty in Income Taxes, Leveraged Leases, and VIEs -- Guidance Added and Updated in Our Publication "Accounting Standards"
For detail, please contact info@zy-cpa.com

We have updated guidance in and added guidance to various sections of our Accounting Standards to reflect the guidance in FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes. We have added content to the "Exceptions to Consolidation Criteria - Consolidation of Variable Interest and Special-Purpose Entities" section of the "Investments in Subsidiaries" chapter to reflect the guidance in FASB Staff Position (FSP) FIN 46R-6, "Determining the Variability to Be Considered in Applying FASB Interpretation No. 46R." We have also added content to the "Accounting for Leveraged Leases - Finance Income" and "Accounting for Leveraged Leases - Changes in Important Assumptions" sections of the "Leases - Lessor" chapter to reflect the guidance in FSP FAS 13-2, "Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction."

Financial Statement Presentation -- FASB Discusses Financial Statement Presentation Project and Other Matters at May 16, 2007 Meeting
For detail, please contact info@zy-cpa.com

As reported in its "Action Alert" publication, the FASB met on May 16, 2007, and addressed the following projects or topics:

-Financial Statement Presentation
-Statement 133 Implementation Issue - Clarification of the Application of the "Shortcut Method"

The FASB discussed (a) the presentation of liquidity information and (b) classification issues related to diversified entities, including issues related to segment reporting. The FASB decided to revise the working principle related to presenting information about the liquidity of an entity's assets and liabilities to be as follows:

Financial statements should present information in a manner that helps a user assess an entity's ability to meet its financial commitments as they come due and to invest in business opportunities. An entity's ability to meet its existing financial commitments includes, but is not limited to, its ability to use existing assets and to raise capital. An entity's financial commitments include those related to operations, financing, and equity holders.

In applying the above working principle, the FASB decided, among other conclusions, that:

-Entities that are not financial institutions should present a classified statement of financial position;

-Entities that are financial institutions (e.g., banks, investment banks, and insurance companies) should present a detailed maturity schedule for short-term contractual assets and liabilities; and

-All entities should present a maturity schedule for long-term contractual assets and liabilities.

The FASB also decided that a consolidated reporting entity consisting of significantly different businesses (a diversified entity) should apply the classification criteria to its assets and liabilities at the reportable segment level (as that term is defined in FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information). The FASB expressed the preliminary view that the segment disclosure requirements in Statement 131 should be replaced with a requirement to disclose operating and financing category information (at a minimum) for each reportable segment for each primary financial statement (i.e., the statements of financial position, comprehensive income, and cash flows). Assets and liabilities that are managed by a reportable segment would be allocated to that segment and measured on a basis consistent with the amounts reported in the consolidated financial statements.

The other topic addressed at this meeting was whether the FASB should provide additional guidance on the application of the shortcut method as described in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The FASB concluded that it should and that the additional guidance will address the interaction between FASB Statement No. 157, Fair Value Measurements, and paragraph 68(b) of Statement 133. Specifically, interest rate swaps entered into with an initial transaction price of zero and on "at-market" terms would not violate paragraph 68(b) if their fair value was at a value other than zero due to the existence of a bid-ask spread in their primary market.

Hedging Activities -- FASB Decides to Address Statement 133 Hedging and Other Matters at May 23, 2007 Meeting
For detail, please contact info@zy-cpa.com

As reported in its "Action Alert" publication, the FASB met on May 23, 2007, and addressed the following projects or topics:

-Agenda Decision: Statement 133 Hedging Activities
-Agenda Decision: Hybrid Financial Instruments

The FASB decided to add a project to its agenda to address the accounting for hedging activities in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The FASB directed its staff initially to develop further a fair value approach. As described in the meeting materials for this meeting, the fair value approach focuses on individually measuring the change in fair value of the derivative and the change in fair value of the hedged item (the hypothetical derivative for forecasted transactions). In addition to eliminating the shortcut method that is currently permitted by Statement 133, the fair value approach would eliminate critical terms matching and assessing effectiveness. For fair value hedges, the derivative and the hedged item would be measured at fair value with changes in value recognized in earnings. For cash flow hedges, the derivative would be measured at fair value with the effective portion of the gain or loss reported in other comprehensive income (OCI), and the ineffective portion reported in earnings. The Action Alert notes that the FASB also may consider at a later date whether to develop further a bifurcation-by-risk approach.

Separately, the FASB discussed a request for additional guidance relating to the SEC announcement in EITF Abstracts, Topic D-109, "Determining the Nature of a Host Contract Related to a Hybrid Financial Instrument Issued in the Form of a Share under FASB Statement No. 133." Given the effective date and limited scope of Topic D-109, the FASB decided not to add a project to its agenda primarily because it was concerned that if a conclusion was reached to mandate an approach other than what is prescribed under Topic D-109, some registrants may be subject to multiple transitions within a fiscal year.

Internal Controls -- PCAOB Issues Rule Replacing A/S 2
For detail, please contact info@zy-cpa.com

The Public Company Accounting Oversight Board (PCAOB) issued Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with An Audit of Financial Statements, replacing its previous internal control auditing standard, Auditing Standard No. 2, similarly titled. The PCAOB also adopted the related Rule 3525, "Audit Committee Pre-Approval of Non-Audit Services Related to Internal Control Over Financial Reporting," and conforming amendments to certain of its other auditing standards.

The PCAOB believes that Auditing Standard 5 is "principles-based" and was designed to increase the likelihood that material weaknesses in internal control will be found before they result in material misstatement of a company's financial statements, and, at the same time, eliminate procedures that are unnecessary. The final standard also focuses the auditor on the procedures necessary to perform a high quality audit that is tailored to the company's facts and circumstances.

The final standard may be used by auditors immediately following SEC approval, and it, along with Rule 3525, and the conforming amendments, would be required for all audits of internal control for fiscal years ending on or after November 15, 2007.

Inspection Frequency -- PCAOB Issues Final Rule Eliminating Sunset Provision
For detail, please contact info@zy-cpa.com

The PCAOB issued a final rule that retains Rule 4003(d) and eliminates the June 30, 2007 tentative sunset provision that the PCAOB put in place when the Board adopted the rule on December 19, 2006. Rule 4003(d), which is pending approval by the SEC, provides the Board with certain limited flexibility concerning the timing of the first two Board inspections of firms that registered in 2003 or 2004. The Board is retaining the rule so that this flexibility will remain available to the Board through the first two inspections of such firms.

Internal Control Reporting -- Interpretive Guidance Added
For detail, please contact info@zy-cpa.com

We have published "Reform of the Sarbanes-Oxley Section 404 Internal Control over Financial Reporting Regime." This publication, also known as a "white paper," discusses the SEC's decision made on May 23, 2007 to provide interpretive guidance to company management on the application of section 404 of the Sarbanes-Oxley Act of 2002. The white paper also includes a discussion and analysis of Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit of Financial Statements, which was issued by the PCAOB on May 24, 2007.

PCAOB Inspections -- PCAOB Proposes Modification of its Audit Firm Inspection Rule
For detail, please contact info@zy-cpa.com

The PCAOB has proposed an amendment to Rule 4003 that would remove that rule's requirement that the Board regularly inspect certain firms that do not regularly issue audit reports, including firms that play a "substantial role" in audits but do not issue audit reports. The Sarbanes-Oxley Act of 2002 only requires the PCAOB to inspect registered firms that regularly issue audit reports. More than 800 registered firms have issued audit reports for public companies in one or both of the past two years, and the PCAOB has determined that the focus of its fixed periodic inspection program should be on such firms. The Board would still retain the discretion to inspect any registered firm at any time and so, for example, could decide to inspect a firm that played a substantial role in an engagement based on information the Board learns in inspecting the principal auditor on the engagement.

Comments on this proposal are due July 23, 2007. Any final amendment adopted must also be approved by the SEC. This action would not affect the annual inspection cycle for firms that audit more than 100 public companies.

Some of the documents listed above may not be accessible under your current subscription. For information about upgrading your subscription to include additional content, click here:
For detail, please contact info@zy-cpa.com

=======================================
AUDITING AND INTERNAL CONTROLS HEADLINES:
=======================================

Internal Controls -- PCAOB Issues Rule Replacing A/S 2
For detail, please contact info@zy-cpa.com

As discussed above in our Accounting and SEC Summaries, the PCAOB issued Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with An Audit of Financial Statements, replacing its previous internal control auditing standard, Auditing Standard No. 2, similarly titled. The PCAOB also adopted the related Rule 3525, "Audit Committee Pre-Approval of Non-Audit Services Related to Internal Control Over Financial Reporting," and conforming amendments to certain of its other auditing standards.

The PCAOB believes that Auditing Standard 5 is "principles-based" and was designed to increase the likelihood that material weaknesses in internal control will be found before they result in material misstatement of a company's financial statements, and, at the same time, eliminate procedures that are unnecessary. The final standard also focuses the auditor on the procedures necessary to perform a high quality audit that is tailored to the company's facts and circumstances.

The final standard may be used by auditors immediately following SEC approval, and it, along with Rule 3525, and the conforming amendments, would be required for all audits of internal control for fiscal years ending on or after November 15, 2007.

Inspection Frequency -- PCAOB Issues Final Rule Eliminating Sunset Provision
For detail, please contact info@zy-cpa.com

As discussed above in our Accounting and SEC Summaries, the PCAOB issued a final rule that retains Rule 4003(d) and eliminates the June 30, 2007 tentative sunset provision that the PCAOB put in place when the Board adopted the rule on December 19, 2006. Rule 4003(d), which is pending approval by the SEC, provides the Board with certain limited flexibility concerning the timing of the first two Board inspections of firms that registered in 2003 or 2004. The Board is retaining the rule so that this flexibility will remain available to the Board through the first two inspections of such firms.

Internal Control Reporting -- Interpretive Guidance Added
For detail, please contact info@zy-cpa.com

As discussed above in our Accounting and SEC Summaries, we have published "Reform of the Sarbanes-Oxley Section 404 Internal Control over Financial Reporting Regime." This publication, also known as a "white paper," discusses the SEC’s decision made on May 23, 2007 to provide interpretive guidance to company management on the application of section 404 of the Sarbanes-Oxley Act of 2002. The white paper also includes a discussion and analysis of Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit of Financial Statements, which was issued by the PCAOB on May 24, 2007.

PCAOB Inspections -- PCAOB Proposes Modification of its Audit Firm Inspection Rule
For detail, please contact info@zy-cpa.com

As discussed above in our Accounting and SEC Summaries, the PCAOB has proposed an amendment to Rule 4003 that would remove that rule's requirement that the Board regularly inspect certain firms that do not regularly issue audit reports, including firms that play a "substantial role" in audits but do not issue audit reports. The Sarbanes-Oxley Act of 2002 only requires the PCAOB to inspect registered firms that regularly issue audit reports. More than 800 registered firms have issued audit reports for public companies in one or both of the past two years, and the PCAOB has determined that the focus of its fixed periodic inspection program should be on such firms. The Board would still retain the discretion to inspect any registered firm at any time and so, for example, could decide to inspect a firm that played a substantial role in an engagement based on information the Board learns in inspecting the principal auditor on the engagement.

Comments on this proposal are due July 23, 2007. Any final amendment adopted must also be approved by the SEC. This action would not affect the annual inspection cycle for firms that audit more than 100 public companies.

Some of the documents listed above may not be accessible under your current subscription. For information about upgrading your subscription to include additional content, click here:
For detail, please contact info@zy-cpa.com

======================
GOVERNMENT HEADLINES:
======================

Pension Disclosures -- GASB Issues Clarifying Guidance
For detail, please contact info@zy-cpa.com

The GASB has issued GASB Statement No. 50, Pension Disclosures - An Amendment of GASB Statements No. 25 and No. 27. This standard more closely aligns current pension disclosure requirements for governments with those that governments are beginning to implement for retiree health insurance and other post-employment benefits. Specifically, it amends GASB Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers, by requiring:

-Disclosure in the notes to the financial statements of pension plans and certain employer governments of the current funded status of the plan-in other words, the degree to which the actuarial accrued liabilities for benefits are covered by assets that have been set aside to pay the benefits-as of the most recent actuarial valuation date.

-Governments that use the aggregate actuarial cost method to disclose the funded status and present a multi-year schedule of funding progress using the entry age actuarial cost method as a surrogate; these governments previously were not required to provide this information.

-Disclosure by governments participating in multi-employer cost-sharing pension plans of how the contractually required contribution rate is determined.

The provisions of GASB Statement 50 generally are effective for periods beginning after June 15, 2007, with early implementation encouraged. The requirements relating to governments using the aggregate actuarial cost method are effective for financial statements and required supplementary information that contains information from actuarial valuations as of June 15, 2007, or later.

Some of the documents listed above may not be accessible under your current subscription. For information about upgrading your subscription to include additional content, click here:
For detail, please contact info@zy-cpa.com