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Accounting Research Manager(TM)
Weekly Summary of Developments
June 4-8, 2007
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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:

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Accounting and SEC Headlines

EITF Materials Issued -- SEC Staff to Clarify Fair Value Option to Financial Instruments in Temporary Equity at the June 14, 2007 EITF Meeting
Going Concern Accounting -- FASB Discusses Going Concern, Liquidation Accounting and Other Matters at May 30, 2007 Meeting
Financial Assets and Liabilities -- Guidance Revised and Added in Our Interpretations of FASB Statement 140
Small Business and Internal Control Reporting -- SEC Chairman Provides Views
International Reporting -- SEC Staff Speech Issued
Internal Controls -- SEC Seeks Comments on PCAOB Standard Replacing A/S 2 and Other Rule Changes

Auditing and Internal Controls Headlines

Communicating Internal Control Related Matters Identified in an Audit -- Additional Interpretive Guidance
Internal Controls -- SEC Seeks Comments on PCAOB Standard Replacing A/S 2 and Other Rule Changes

Government Headlines

Local Government and Single Audits -- Guidance Updated on Accounting Research Manager
Reporting Restricted Net Assets -- Discussion Added to Database

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ACCOUNTING AND SEC HEADLINES:
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EITF Materials Issued -- SEC Staff to Clarify Fair Value Option to Financial Instruments in Temporary Equity at the June 14, 2007 EITF Meeting
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The FASB has issued the following materials for the EITF meeting scheduled for June 14, 2007:

-Proposed Revisions to EITF Abstracts, Topic D-98: "Classification and Measurement of Redeemable Securities"
-Issue No. 06-11, "Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards" (Issue Summary Supplement)
-Issue No. 07-1(includes Working Group Report No. 2 as Exhibit 07-1B), "Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property" (Issue Summary Supplement)
-Issue No. 07-2, "Accounting for Convertible Debt Instruments That Require or Permit Partial Cash Settlement upon Conversion" (Working Group Report)
-Issue No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities" (Issue Summary Supplement)

The SEC staff plans to announce its position regarding certain balance sheet classification practices for financial instruments (or host contracts) that meet the conditions for temporary equity classification under Accounting Series Release No. 268, Presentation in Financial Statements of "Redeemable Preferred Stocks." Previously, the SEC staff has not objected to liability classification on the balance sheet for certain financial instruments (or host contracts) that meet the conditions for temporary equity classification under ASR 268 and Topic D-98. At this EITF meeting, the SEC staff proposes to clarify that it will no longer accept liability classification for financial instruments (or host contracts) that meet the conditions for temporary equity classification under ASR 268 and Topic D-98. Consistent with SEC Regulation S-X, Articles 5-02, 7-03, and 9-03, these financial instruments should be classified on the balance sheet between captions for liabilities and shareholders' equity. As a result, the fair value option that is permitted by FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, may not be applied to any financial instrument (or host contract) that meets the conditions for temporary equity classification under ASR 268 and Topic D-98.

Going Concern Accounting -- FASB Discusses Going Concern, Liquidation Accounting and Other Matters at May 30, 2007 Meeting
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As reported in its "Action Alert" publication, the FASB met on May 30, 2007, and addressed the following projects or topics:

-Agenda Decision: Going Concern and Liquidation Basis of Accounting
-Statement 140 Implementation: Transfers of Financial Assets and Repurchase Financing Agreements
-Subsequent Events

At this meeting among other decisions reached, the FASB decided to add a project to its agenda to address an entity's assessment of its ability to continue as a going concern and the adoption of a liquidation basis of accounting. The FASB agreed to a proposed standard that seeks to converge with International Accounting Standard (IAS) 1, Presentation of Financial Statements, and IAS 10, Events after the Balance Sheet Date, supplemented by disclosure requirements in AICPA Statement on Auditing Standards No. 1, Codification of Auditing Standards and Procedures, AU Section 341, "The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern." The FASB will continue to deliberate the timing of the project and the type of evidence considered in determining when disclosures about the going concern assessment should be required. The FASB also will continue deliberating when it is appropriate for an entity to adopt a liquidation basis of accounting.

The Action Alert also notes that the FASB at its meeting scheduled for June 13, 2007 will continue its redeliberations of the June 30, 2005 Exposure Draft, Business Combinations. The FASB intends to reconsider certain of the decisions previously reached on the accounting for assets and liabilities subject to contingencies in a business combination.

Financial Assets and Liabilities -- Guidance Revised and Added in Our Interpretations of FASB Statement 140
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We have revised and updated the interpretations in our publication, Financial Assets and Liabilities - Sales, Transfers, and Extinguishments: Interpretations of FASB Statement 140. Among the revisions in this update, various changes were made to reflect the issuance of FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities.

We also updated Interpretation 15-9, "Collateral Recognition and the Right to Offset," to reflect changes in paragraph 10 of FASB Interpretation (FIN) No. 39, Offsetting of Amounts Related to Certain Contracts, by FASB Staff Position (FSP) FIN 39-1, "Amendment of FASB Interpretation No. 39." We have also updated the section entitled, "Recent Developments," for recent deliberations at the FASB on a variety of relevant projects.

Small Business and Internal Control Reporting -- SEC Chairman Provides Views
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We have published testimony given by the SEC's chairman, Christopher Cox before the Committee on Small Business, U.S. House of Representatives. Mr. Cox testified that the SEC's new guidance (not yet published) for management assessment of internal controls, along with the PCAOB's Audit Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit of Financial Statements, (issued but not yet approved by the SEC-see request for comments below), should lower compliance costs for small companies. Mr. Cox also indicated that a delay in Section 404 compliance for small businesses was not necessary, given that full compliance (both management's assessment and an independent audit of that assessment) is not required until 2009 for small businesses.

International Reporting -- SEC Staff Speech Issued
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We have published a speech by Conrad Hewitt, Chief Accountant at the SEC regarding international accounting convergence. Mr. Hewitt provides his insights into factors essential to creating a sustainable and reliable international financial reporting system. Mr. Hewitt also discussed eXtensible Business Reporting Language (XBRL) and its potential to provide financial statement information to investors around the globe via interactive data. The SEC has committed significant resources to develop XBRL, including its voluntary pilot program launched in 2006.

In this speech, Mr. Hewitt also cited concerns over the use of local variations of International Financial Reporting Standards (IFRS). In some instances, jurisdictions are allowing entities to adopt variations of the IFRS issued by the International Accounting Standards Board. Mr. Hewitt believes this development is contrary to the goal of having a single set of global standards and raises concerns with the SEC's initiative to consider allowing more IFRS, including its IFRS roadmap that considers, among other things, the elimination of the IFRS to U.S. GAAP reconciliation requirement.

Internal Controls -- SEC Seeks Comments on PCAOB Standard Replacing A/S 2 and Other Rule Changes
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The SEC has formally requested comments on various recent decisions of the PCAOB. Specifically, the SEC seeks comments on Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit of Financial Statements, and the related Rule 3525, "Audit Committee Pre-Approval of Non-Audit Services Related to Internal Control over Financial Reporting," and conforming amendments to certain other PCAOB auditing standards. As issued by the PCAOB, Auditing Standard No. 5 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.

Comments on this SEC request are due 30 days after it is published in the Federal Register. In this release, the SEC states that it intends to act on the PCAOB actions no later than 45 days after publication in the Federal Register.

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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Communicating Internal Control Related Matters Identified in an Audit -- Additional Interpretive Guidance
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We have added a GAAS Update Service that focuses on practical issues relating to Statement on Auditing Standards No. 112, Communicating Internal Control Related Matters Identified in an Audit, by using a "Question & Answer" format designed to provide practical discussion, advice, and specific implementation guidance. The Q & As address various issues including: (a) factors the auditor considers when determining whether certain control deficiencies represent significant deficiencies or material weaknesses; (b) the auditor's consideration of the possible mitigating effects of compensating controls on an identified control deficiency; (c) the auditor's consideration of whether prudent officials, having knowledge of the same facts and circumstances, would agree with the auditor's classification of the control deficiencies; and (d) the auditor's communication requirements and reporting responsibilities regarding internal control related matters.

Internal Controls -- SEC Seeks Comments on PCAOB Standard Replacing A/S 2 and Other Rule Changes
For detail, please contact info@zy-cpa.com

As discussed above in our Accounting and SEC Summaries, the SEC has formally requested comments on various recent decisions of the PCAOB. Specifically, the SEC seeks comments on Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with An Audit of Financial Statements, and the related Rule 3525, "Audit Committee Pre-Approval of Non-Audit Services Related to Internal Control over Financial Reporting," and conforming amendments to certain other PCAOB auditing standards. As issued by the PCAOB, Auditing Standard No. 5 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.

Comments on this SEC request are due 30 days after it is published in the Federal Register. In this release, the SEC states that it intends to act on the PCAOB actions no later than 45 days after publication in the Federal Register.

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

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GOVERNMENT HEADLINES:
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Local Government and Single Audits -- Guidance Updated on Accounting Research Manager
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We have published the 2007 edition of Local Government and Single Audits. This publication specifically addresses the requirements of the relevant AICPA Statements on Auditing Standards and Audit and Accounting Guides, as well as the GAO's Government Auditing Standards, and other professional literature that relates to audits of local governments. In doing so, this publication assumes that the auditor is currently planning to audit a local government that has (or shortly will have) implemented GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. In addition, this publication specifically addresses the requirements of the relevant OMB circulars and other professional literature that relates to audits performed in accordance with OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (single audits). In doing so, this publication illustrates how to efficiently conduct a single audit.

Reporting Restricted Net Assets -- Discussion Added to Database
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We have added a Governmental GAAP Update Service that provides analysis and practical guidance on reporting the net assets amount to be classified as "restricted net assets" as that term is defined in GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments.

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:
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