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Accounting Research Manager(TM)
Weekly Summary of Developments
June 25-29, 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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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 Decisions -- FASB Ratifies EITF Consensuses from June 14, 2007 EITF Meeting
Business Combinations -- FASB Discusses Business Combinations: Applying the Acquisition Method Project and Other Matters at June 21, 2007 Meeting
SEC Accounting and Enforcement Releases -- Topical Index Updated
Financial Reporting Committee -- SEC Establishes Advisory Committee
SEC Issues Proposal -- Revisions Would Shorten Holding Period under Rule 144 and Modify Rule 145
Customer Loyalty Programs -- IASB Issues IFRIC Interpretation
IASB Update -- IASB Discusses Financial Statement Presentation and Other Matters at Its June 19-22, 2007 Meeting

Auditing and Internal Controls Headlines

Knowledge-Based Audit Methodology -- Guidance Added to Accounting Research Manager

Government Headlines

Elements of Financial Statements -- GASB Issues Concepts Statement

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ACCOUNTING AND SEC HEADLINES:
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EITF Decisions -- FASB Ratifies EITF Consensuses from June 14, 2007 EITF Meeting
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We have prepared a hot topic that documents the FASB's ratification of decisions made by the EITF at its June 14, 2007 meeting. Specifically, at the FASB meeting of June 27, 2007, the FASB ratified the consensuses reached in EITF Issue No. 06-11, "Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards," and EITF Issue No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities." However, the tentative conclusion reached by the EITF on Issue No. 07-1, "Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property," was not discussed by the FASB as the FASB staff is in the process of developing an example that illustrates the application of the tentative conclusion. As such, the FASB is expected to discuss this tentative conclusion at a future meeting.

See our hot topic for complete details.

Business Combinations -- FASB Discusses Business Combinations: Applying the Acquisition Method Project and Other Matters at June 21, 2007 Meeting
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As reported in its "Action Alert" publication, the FASB met on June 21, 2007, and addressed the following projects or topics:

-Business Combinations: Applying the Acquisition Method
-Financial Statement Presentation

In connection with the Business Combinations project (currently expected to be finalized by September 30, 2007), the FASB reconsidered a few of its earlier decisions that were made as part of the redeliberations of its June 2005 Exposure Drafts, Business Combinations, and Consolidated Financial Statements, Including Accounting and Reporting of Noncontrolling Interests in Subsidiaries (NCI Statement), as explained below.

1. The FASB previously decided that if a parent controls a subsidiary when the NCI Statement is applied, the parent should recast consolidated net income in prior periods to attribute losses in excess of the noncontrolling interest's equity balance that were attributed to the parent to the noncontrolling interest. Accounting Research Bulletin No. 51, Consolidated Financial Statements, currently requires that if losses applicable to the noncontrolling interest exceed the noncontrolling interest equity balance, that excess and any further losses applicable to the noncontrolling interest are charged against the majority interest. The FASB changed that decision and decided that instead of recasting the net income of prior periods, the amounts of net income attributable to the parent and the noncontrolling interest should not change. However, the NCI Statement will require that consolidated net income be recast to combine the amount of net income attributable to the parent and noncontrolling interest.

2. Instead of recasting prior periods, the FASB decided that, in the year an entity adopts the NCI Statement, it should provide a pro forma disclosure presenting what current year net income and earnings per share would have been had the entity still been applying ARB 51, before the amendments made by the NCI Statement, with respect to the attribution of losses in excess of the noncontrolling interest's equity balance.

3. The FASB previously decided that for a replacement award that is classified as equity and attributable to past services (and therefore represents consideration transferred in the business combination), the acquirer should recognize any difference between the deferred taxes recognized at the acquisition date and the tax deduction the acquirer ultimately receives as an adjustment to equity resulting from a transaction with shareholders. That amount would not be considered remaining additional paid-in capital from excess tax benefits from previous share-based payment awards as discussed in FASB Statement No. 123 (Revised 2004), Share-Based Payment, often referred to as the "APIC pool." The FASB changed that decision and instead decided that such replacement share-based payment awards that represent consideration transferred in the business combination should be treated similarly to share-based payment awards under Statement 123R with respect to income tax effects. Any difference between the eventual tax benefit received and the amount of deferred tax assets recognized in the business combination should be recognized as additional paid-in capital similar to the accounting under such circumstances for the tax effects of share-based payment awards issued as compensation within the scope of Statement 123R.

4. The FASB retained its previous decision that the accounting for replacement awards in the NCI Statement will be limited to situations in which the acquirer is obligated to issue those replacement awards.

SEC Accounting and Enforcement Releases -- Topical Index Updated
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We have updated our Topical Index of the SEC's Accounting and Auditing Enforcement Releases (AAERs) to reflect releases by the SEC through April 30, 2007. The SEC's Division of Enforcement periodically issues AAERs to reflect civil lawsuits brought by the SEC in federal court and notices and orders concerning the institution and (or) settlement of administrative proceedings.

When updating our Index, we reviewed each AAER issued by the SEC since we last updated our Index and identified specific accounting and reporting issues addressed by the SEC (e.g., revenue recognition, business combinations, etc.) and listed them in the Topical Index. Users of Accounting Research Manager may find this Index useful when learning the views of the SEC and its staff on specific accounting or reporting topics.

Financial Reporting Committee -- SEC Establishes Advisory Committee
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We have added a hot topic that announces the creation of an advisory committee to examine the financial reporting system in the United States. This committee is being formed by the SEC under the leadership of Robert Pozen, chairman of MFS Investments, and will include senior representatives of various constituencies in the financial reporting system.

SEC Issues Proposal -- Revisions Would Shorten Holding Period under Rule 144 and Modify Rule 145
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On June 22, 2007, the SEC proposed rules for public comment that would amend Rules 144 and 145. Rule 144 allows the public resale of "restricted securities" if certain conditions are met, including minimum holding periods. Rule 145 establishes resale limitations for securities exchanged in connection with a reclassification of securities, merger, consolidation or transfers of assets that are subject to shareholder vote.

The proposed rules would shorten the minimum holding periods under Rule 144 for restricted securities of companies subject to the reporting requirements of the Securities Exchange Act of 1934. Affiliates would continue to be subject to limited resales; however, the minimum holding periods would be reduced to six months, from one year. Nonaffiliates would be permitted to engage in unlimited resales of restricted securities after holding them for six months (from two years), but would be subject to certain public information requirements. Nonaffiliates that chose to hold restricted securities for a one year holding period would be permitted to complete unlimited resales with no current public information requirements. Extensions to these minimum holding periods would be applicable for a holder involved in certain hedging transactions. The current minimum holding periods for restricted securities of companies not subject to the reporting requirements of the Securities Exchange Act of 1934 would remain at one year. Form 144 would be revised to (a) reduce the filing threshold to 1,000 shares or $50,000 (from 500 shares or $10,000) and (b) eliminate the requirement that nonaffiliates file Form 144.

The proposed rules would also amend Rule 145 to eliminate the presumptive underwriter provision for transactions involving business combinations, except those involving a shell company. In addition, the resale requirements included in 145(d) would be amended to harmonize them with resale requirements covering transactions by affiliates of a shell company.

Comments on the proposed amendments are due 60 days after publication in the Federal Register.

Customer Loyalty Programs -- IASB Issues IFRIC Interpretation
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The International Financial Reporting Interpretations Committee (IFRIC) has issued an Interpretation, IFRIC 13 Customer Loyalty Programs. The Interpretation addresses accounting by entities that grant loyalty award credits (such as 'points' or travel miles) to customers who buy other goods or services. Specifically, it explains how such entities should account for their obligations to provide free or discounted goods or services ('awards') to customers who redeem award credits.

IFRIC 13 requires entities to allocate a portion of the proceeds of the initial sale to the award credits and recognize these proceeds as revenue only when the related obligations have been fulfilled. Entities may fulfill their obligations by supplying awards themselves or engaging (and paying) a third party to do so. The effect of IFRIC 13 will be to ensure that obligations to supply customer loyalty awards are measured the same way, whether the award credits are sold separately or granted to customers as part of a larger sale.

Affected entities are required to apply the guidance in this standard to fiscal years beginning on or after July 1, 2008. Early application is permitted with disclosure.

IASB Update -- IASB Discusses Financial Statement Presentation and Other Matters at Its June 19-22, 2007 Meeting
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As reported in its "IASB Update" publication, the IASB met on June 19-22, 2007, and discussed the following projects or topics:

-Business Combinations (Phase II)
-Technical Plan
-Leases
-Financial Statement Presentation
-Post-Employment Benefits
-Conceptual Framework
-Annual Improvements Process
-Extractive Activities
-Short-Term Convergence: Joint Ventures
-IFRS 1 First-Time Adoption of International Financial Reporting Standards - Amendments
-IFRIC - Approval of Interpretations
-Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation
-Financial Instruments

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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Knowledge-Based Audit Methodology -- Guidance Added to Accounting Research Manager
For detail, please contact info@zy-cpa.com

We have added the Knowledge-Based Audit (KBA) Methodology, which consists of close to 200 resource documents, audit programs, forms and other practice aids. The KBA methodology is designed to help the auditor efficiently and effectively perform financial statement audits of nonpublic commercial entities in accordance with generally accepted auditing standards. The KBA methodology reflects the guidance in the eight Statements on Auditing Standards issued by the AICPA in March 2006 (Risk Assessment Standards) that focus on the auditor's risk assessment process. The guidance in the Risk Assessment Standards is effective for audits of financial statements for periods beginning on or after December 15, 2006.

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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GOVERNMENT HEADLINES:
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Elements of Financial Statements -- GASB Issues Concepts Statement
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The GASB has issued a Governmental Accounting Concepts Statement, Elements of Financial Statements. Known as Concepts Statement No. 4, this statement forms a conceptual framework that provides a foundation to guide the GASB's development of accounting and financial reporting standards.The GASB has defined these fundamental building blocks of financial reporting in order to further develop the basic conceptual foundation for considering the merits of alternative approaches to financial reporting, and to help the GASB develop well-reasoned financial reporting standards. The concept of a resource - an item with a present capacity to provide service - is central to the definitions. Accordingly, the new Concepts Statement defines the elements of statements of financial position as:

-Assets - resources with present service capacity that the government presently controls
-Liabilities - present obligations to sacrifice resources that the government has little or no discretion to avoid
-A deferred outflow of resources - a consumption of net assets by the government that is applicable to a future reporting period
-A deferred inflow of resources - an acquisition of net assets by the government that is applicable to a future reporting period
-Net position - the residual of all other elements presented in a statement of financial position.

Concepts Statement No. 4 defines deferred outflows and inflows of resources as distinct financial statement elements for the first time. The Concepts Statement also defines elements of resource flows statements as:

-Outflow of resources - a consumption of net assets by the government that is applicable to the reporting period
-Inflow of resources - an acquisition of net assets by the government.

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