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Accounting Research Manager(TM)
Weekly Summary of Developments
July 2-6, 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
Disclosure Checklists -- GAAP and SEC Disclosure Checklists Updated through June 30, 2007
EITF Matters -- June 14, 2007 Meeting Minutes Issued
SEC Issues Proposed Rule -- Elimination of IFRS-to-U.S. GAAP Reconciliation
Foreign Private Issuers -- SEC Staff Provides Views on IFRS Reporting for the First Time
Independence -- SEC Seeks Comments on PCAOB Revised Effective Date for its Tax Services Rule
SEC Issues Proposed Rule -- Electronic Filing and Simplification of Form D
PCAOB Standing Advisory Group Meeting -- Minutes of the June 21, 2007 Meeting
Conceptual Framework -- FASB Discusses Conceptual Framework and Other Matters at June 27, 2007 Meeting
Defined Benefit Asset -- IASB Issues IFRIC Interpretation
Real Estate Sales -- IASB Issues Draft IFRIC Interpretation
Auditing and Internal Controls Headlines
Business Valuations -- AICPA Issues Standard for Valuation Services
Internal Controls -- AICPA Issues Auditing Interpretation of Section 325
Independence -- SEC Seeks Comments on PCAOB Revised Effective Date for its Tax Services Rule
PCAOB Standing Advisory Group Meeting -- Minutes of the June 21, 2007 Meeting
Effective Engagement Letters -- Revised Edition Published
Government Headlines
Derivative Instruments -- GASB Proposes New Guidance
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ACCOUNTING AND SEC HEADLINES:
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Disclosure Checklists -- GAAP and SEC Disclosure Checklists Updated through June 30, 2007
As described in our Literature Update, we have updated our General U.S. GAAP Financial Statement Disclosures Checklist through June 30, 2007:
For detail, please contact info@zy-cpa.com
We have also updated the General U.S. GAAP Interim Financial Statement Disclosures Checklist. Among other changes, the checklists were updated to incorporate the disclosure requirements included in FASB Staff Position (FSP) FIN 39-1, "Amendment of FASB Interpretation No. 39"; AICPA Statement of Position (SOP) 07-1, Clarification of the Scope of the Audit and Accounting Guide "Investment Companies" and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies; 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 to Be Used in Future Research and Development Activities."
We have also updated the following four SEC related checklists through June 30, 2007:
-Financial Statement Disclosures - This checklist outlines the required SEC disclosures for financial statements included in 1934 and 1933 Act domestic filings that are incremental to U.S. GAAP. The checklist is organized by topic.
-Management's Discussion and Analysis - This checklist outlines the required SEC disclosures for MD&A included in 1934 and 1933 Act domestic filings, including Forms 10-K and S-1.
-Incremental Certifications, Disclosures, and Reporting Mandated by Sarbanes-Oxley - This checklist outlines the certification, disclosure and reporting requirements resulting from the SEC rules mandated by the Sarbanes-Oxley Act of 2002. The checklist provides a by-topic "tickler" and effective dates. It also provides a column for users to note implementation date.
-SEC Form 10-Q checklist - This checklist is for financial and nonfinancial information included in Form 10-Q and is organized by form item number.
Among the revisions we made to these SEC related checklists are references to certain views of the SEC staff, as documented in minutes of the AICPA SEC Regulations Committee, related to FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes. For example, the SEC staff believes a registrant should consider FIN 48 liabilities for inclusion in the contractual obligations table prescribed by Regulation S-K, Item 303(a)(5). See our Literature Update for complete details:
For detail, please contact info@zy-cpa.com
EITF Matters -- June 14, 2007 Meeting Minutes Issued
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The final minutes of the June 14, 2007 EITF meeting have been issued. The minutes document the EITF meeting results as previously described in our hot topic dated June 27, 2007:
For detail, please contact info@zy-cpa.com
SEC Issues Proposed Rule -- Elimination of IFRS-to-U.S. GAAP Reconciliation
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Currently, foreign private issuers preparing financial statements using a basis of accounting other than U.S. GAAP must include a reconciliation to U.S. GAAP in filings with the SEC. On July 2, 2007, the SEC issued a proposed rule for public comment that would eliminate this reconciliation requirement for foreign private issuers using the English version of International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB). Foreign private issuers using a basis of accounting other than the IASB's IFRS (including other versions of IFRS) would continue to be required to include a reconciliation to U.S. GAAP. The proposed rule would amend Form 20-F and Regulation S-X.
Comments on the proposed rule are due 75 days after publication in the Federal Register.
Foreign Private Issuers -- SEC Staff Provides Views on IFRS Reporting for the First Time
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We have published a hot topic that discusses views of the SEC staff as a result of reviews of financial statements issued by foreign private issuers that have been prepared for the first time using IFRS. Among the SEC observations noted was that registrants used a starting point other than what IAS 7, Cash Flow Statements, permits, or where a company inappropriately characterized items as cash equivalents or classified expenses of an operating nature, such as research or exploration expenses, as investing rather than operating cash flows.
See our hot topic for complete details.
Independence -- SEC Seeks Comments on PCAOB Revised Effective Date for its Tax Services Rule
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The SEC has formally requested comments on the PCAOB's proposed change to the effective date for certain services within the scope of Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles. In general, Rule 3523 enhances protections to auditor independence by prohibiting a registered public accounting firm, with limited exceptions, from providing tax services to persons in a financial reporting oversight role at an audit client. The SEC approved Rule 3523 on April 19, 2006.
Under the proposal, the PCAOB will not apply Rule 3523 to tax services provided on or before July 31, 2007, when those services are provided during the period subject to audit but before the professional engagement period begins. The PCAOB's proposal does not include any other textual modifications beyond the change to the effective date for these specified tax services.
Comments on the proposed modification to the effective date of Rule 3523 are due 21 days after the proposal is published in the Federal Register.
SEC Issues Proposed Rule -- Electronic Filing and Simplification of Form D
For detail, please contact info@zy-cpa.com
On June 29, 2007, the SEC issued a proposed rule for public comment that would modify the requirements associated with the filing and completion of Form D. Form D serves as the official notice of a securities offering made without registration in reliance on Regulation D, which provides for certain exemptions from the Securities Act registration requirements. The proposed rule would: (a) mandate that Form D be filed electronically using a new electronic filing system accessible via any internet connection; (b) simplify the structure of Form D; and (c) update and revise the required information on Form D. The proposed modifications to Form D and conforming changes to Regulation D are intended to eliminate unnecessary filing burdens, especially for smaller public companies, and enhance availability of Form D information to the public.
Comments on the proposed rule are due 60 days after publication in the Federal Register.
PCAOB Standing Advisory Group Meeting -- Minutes of the June 21, 2007 Meeting
For detail, please contact info@zy-cpa.com
We have prepared minutes of the PCAOB Standing Advisory Group meeting held on June 21, 2007. The more significant topics of discussion at this meeting related to the following: (a) accounting estimates and fair value measurements; (b) engagement team performance; (c) related parties; and (d) emerging issues in the subprime mortgage markets.
See our minutes for complete details.
Conceptual Framework -- FASB Discusses Conceptual Framework and Other Matters at June 27, 2007 Meeting
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As reported in its "Action Alert" publication, the FASB met on June 27, 2007, and addressed the following projects or topics:
-Conceptual Framework: Objectives and Qualitative Characteristics
-Liabilities and Equity
-Accounting for Leases
-FASB Ratification of EITF Decisions
Among other decisions reached at this meeting, the FASB modified the classification principle under the ownership approach in its liabilities and equity project. The FASB decided that only instruments that meet the definition of a direct ownership instrument should be classified as equity. All perpetual instruments that do not meet the definition of a direct ownership instrument should be classified as liabilities.
The Action Alert also notes that the following projects or topics are scheduled to be discussed by the FASB at its meeting scheduled for July 11, 2007:
-Conceptual Framework
-Useful Life and Amortization of Intangible Assets
Defined Benefit Asset -- IASB Issues IFRIC Interpretation
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The International Financial Reporting Interpretations Committee (IFRIC) has issued an Interpretation, IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. This interpretation provides general guidance on how to assess the limit in?IAS 19 Employee Benefits on the amount of surplus that can be recognized as an asset. It also explains how the pension asset or liability may be affected when there is a statutory or contractual minimum funding requirement. The IASB believes this interpretation will standardize practice and ensure that entities recognize an asset in relation to a surplus on a consistent basis.
Affected entities are required to apply the guidance in this interpretation for annual periods beginning on or after January 1, 2008. Early application is permitted.
Real Estate Sales -- IASB Issues Draft IFRIC Interpretation
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The IFRIC has issued Draft Interpretation D21, Real Estate Sales.As proposed, this interpretation is designed to standardize the accounting among real estate developers for sales of units, such as apartments or houses, before construction is complete. Currently, real estate developers interpret International Financial Reporting Standards differently and record revenue for the sale of the units at different times. Some entities record revenue when they have completed a unit and transferred title to the buyer, whereas others record revenue earlier, as construction progresses, by reference to the stage of completion of the development. IFRIC D21 proposes that revenue should be recorded as construction progresses only if the developer is providing construction services, rather than selling goods (i.e., completed real estate units).
Comments on this proposal are due October 5, 2007.
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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Business Valuations -- AICPA Issues Standard for Valuation Services
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The AICPA has issued Statement on Standards for Valuation Services (SSVS) No. 1, Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset. The AICPA Consulting Services Executive Committee has issued this standard which was designed to improve the consistency and quality of practice among AICPA members performing business valuations. AICPA members will be required to follow this standard when they perform engagements to estimate value that culminate in the expression of a conclusion of value or a calculated value. The Consulting Services Executive Committee is a body designated by the AICPA Council to promulgate technical standards under Rules 201 and 202 of the AICPA Code of Professional Conduct.
The provisions in this standard are effective for engagements to estimate value accepted on or after January 1, 2008, with early application encouraged.
Internal Controls -- AICPA Issues Auditing Interpretation of Section 325
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The AICPA has issued a new auditing interpretation, "Communicating Deficiencies in Internal Control over Compliance in an Office of Management and Budget (OMB) Circular A-133 Audit." This guidance interprets AU Section 325, Communicating Internal Control Related Matters Identified in an Audit. In this interpretation, reference is made to an amendment by the OMB to Circular A-133 and the applicability of SAS No. 112, Communicating Internal Control Related Matters Identified in an Audit, to single audits. It indicates that for single audits of periods ending on or after December 15, 2006, the terms "reportable condition" and "material weakness", as used in Circular A-133 when referring to internal control over compliance as it relates to major programs, should be replaced with the terms "significant deficiency" and "material weakness" as defined in this Interpretation.
Independence -- SEC Seeks Comments on PCAOB Revised Effective Date for its Tax Services Rule
For detail, please contact info@zy-cpa.com
As discussed above in our Accounting and SEC Summaries, the SEC has formally requested comments on the PCAOB's proposed change in effective date for certain services within the scope of Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles. In general, Rule 3523 provides protections to auditor independence by prohibiting a registered public accounting firm, with limited exceptions, from providing tax services to persons in a financial reporting oversight role at an audit client. The SEC approved Rule 3523 on April 19, 2006.
Under the proposal, the PCAOB will not apply Rule 3523 to tax services provided on or before July 31, 2007, when those services are provided during the period subject to audit but before the professional engagement period begins. The PCAOB's proposal does not include any other textual modifications beyond the change to the effective date for these specified tax services.
Comments on the proposed modification to the effective date of Rule 3523 are due 21 days after the proposal is published in the Federal Register.
PCAOB Standing Advisory Group Meeting -- Minutes of the June 21, 2007 Meeting
For detail, please contact info@zy-cpa.com
As noted above in our Accounting and SEC Summaries, we have prepared minutes of the PCAOB Standing Advisory Group meeting held on June 21, 2007. The more significant topics of discussion at this meeting related to the following: (a) accounting estimates and fair value measurements; (b) engagement team performance; (c) related parties; and (d) emerging issues in the subprime mortgage markets.
See our minutes for complete details.
Effective Engagement Letters -- Revised Edition Published
For detail, please contact info@zy-cpa.com
We have published the Seventh Edition of the CPA's Guide to Effective Engagement Letters. The primary objective of this publication is to provide practitioners with the tools they need to compose effective engagement letters. Accordingly, it includes: (a) annotated parts of an engagement letter that can be assembled to create an entire engagement letter and (b) actual engagement letters that can be customized by the practitioner for a specific engagement. This publication is comprised of eight sections that focus on engagement letters involving: (1) financial statements, (2) tax preparation and planning, (3) general accounting, (4) other engagements, (5) other letters, (6) internal controls, (7) record retention and destruction policy, and (8) disengaging.
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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Derivative Instruments -- GASB Proposes New Guidance
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The GASB has issued an Exposure Draft (ED), Accounting and Financial Reporting for Derivative Instruments. This proposed Statement would address recognition and measurement of derivative instruments and disclosure of information about derivative instruments by state and local governments. A derivative instrument is often a complex financial arrangement that a government enters into with another party. A derivative instrument's fair value is derived from some other instrument or rate. Common types of derivative instruments used by governments include interest rate and commodity swaps, interest rate locks, options (caps, floors, and collars), swaptions, forward contracts, and futures contracts.
As stated in this ED, the GASB is proposing a key provision and a major change from current practice in that most derivative instruments covered in the scope of this proposed Statement would be reported at fair value in a government's statement of net assets. Currently, most derivative instruments are recognized at historical prices in a government's statement of net assets. Historical prices for many derivative instruments are zero because their terms are developed so that the instruments may be entered without a payment being received or made. The GASB is proposing that the changes in fair value of derivative instruments that are determined not to be effective hedges should be reported in investment income.
As proposed, the provisions in the ED would be effective for financial statements for periods beginning after June 15, 2009.
Comments on this proposal are due October 26, 2007.
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