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Accounting Research Manager(TM)
Weekly Summary of Developments
July 23-27, 2007
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Accounting Research Manager subscriber,
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Accounting and SEC Headlines
Internal Controls -- SEC Approves PCAOB Auditing Standard No. 5, Related Independence Rule and Adopts Definition of Significant Deficiency
EITF Materials Issued -- Agenda Committee Report Released for September 11, 2007 EITF Meeting
Compensation Arrangements -- Interpretive Guidance Revised and Updated
Inflation Rates -- Interpretation Issued, Inflation Rates for Judging Whether an Economy Is Highly Inflationary - June 2007
Derivatives Shortcut Method -- FASB Releases Proposed Guidance
Codification Issues -- FASB Discusses Codification Issues and Other Matters at July 18, 2007 Meeting
Transfers of Financial Assets -- FASB Issues Proposed FSP Interpreting FASB Statement 140
PCAOB Proposals -- Ethics and Independence Rule and Actions Associated With Tax Services
Proxy Materials -- SEC Issues Final Rules on Shareholder Choice Regarding Proxy Materials
International Financial Reporting -- IFRIC Discusses Customer Contributions Received by a Service Provider and Other Matters at July 12, 2007 Meeting
IASB Update -- IASB Discusses Financial Statement Presentation and Other Matters at Its July 17-20, 2007 Meeting
Auditing and Internal Controls Headlines
Information Technology Audits -- Updated Edition Released
Government Auditing Standards -- GAO Issues 2007 Revision of Government Auditing Standards (Yellow Book)
Planning and Supervision -- Additional Interpretive Guidance
Internal Controls -- SEC Approves PCAOB Auditing Standard No. 5, Related Independence Rule and Adopts Definition of Significant Deficiency
PCAOB Proposals -- Ethics and Independence Rule and Actions Associated With Tax Services
Government Headlines
The Statistical Section -- Questions and Answers on GASB Statement No. 44 and the Statistical Section
Government Auditing Standards -- GAO Issues 2007 Revision of Government Auditing Standards (Yellow Book)
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ACCOUNTING AND SEC HEADLINES:
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Internal Controls -- SEC Approves PCAOB Auditing Standard No. 5, Related Independence Rule and Adopts Definition of Significant Deficiency
For detail, please contact info@zy-cpa.com
We have prepared a hot topic discussing the SEC's approval of the PCAOB's Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with An Audit of Financial Statements, in its form originally adopted by the PCAOB in May 2007. In addition, the SEC approved PCAOB Rule 3525, Audit Committee Pre-approval of Non-audit Services Related to Internal Control over Financial Reporting, and adopted a definition of "significant deficiency." The SEC also adopted several conforming amendments to update other PCAOB auditing standards. A summary of these items is provided in our hot topic.
EITF Materials Issued -- Agenda Committee Report Released for September 11, 2007 EITF Meeting
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The FASB has issued the Agenda Committee Report relating to the EITF meeting scheduled for September 11, 2007. This report contains the proposed issues that the EITF agenda committee considered when determining whether to add an issue to the EITF's agenda. This agenda committee report reflects that two issues have been added to the EITF agenda. Specifically, "Consideration of Certain Terms in Derivative Contracts When Determining Whether an Instrument Is Indexed to a Company's Own Stock," was added to the EITF agenda. This is effectively an extension of the guidance in EITF Issue No. 01-6, "The Meaning of 'Indexed to a Company's Own Stock.'" The agenda committee decided that this issue should be expanded to include practice concerns encountered when determining whether an instrument is indexed to a company's own stock including consideration of the derivative definitions established by the International Swaps and Derivatives Association, Inc. and market-based employee stock option valuation instruments.
The second issue added to the EITF agenda was "Accounting for the Sale of Real Estate to an Entity When the Agreement between the Investors Includes a Buy-Sell Clause." This issue arises when applying the guidance in FASB Statement No. 66, Accounting for Sales of Real Estate.
Separately, the agenda committee decided that the EITF's agenda should not be expanded to address a presentation issue when combined financial statements are being prepared.
Compensation Arrangements -- Interpretive Guidance Revised and Updated
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We have enhanced the guidance in our publication, Accounting for Compensation Arrangements. Among the revisions in this update, various changes were made to reflect the issuance of FASB Staff Position (FSP) FAS 123R-5, "Amendment of FASB Staff Position FAS 123(R)-1." In addition, we have added an entirely new section, Chapter 18, "Statement 123R Examples." This chapter contains easy-to-follow practical examples to guide users when applying the guidance in Statement 123R. The examples represent interpretations of Statement 123R employed in practice.
See our Literature Update for complete details of this update.
Inflation Rates -- Interpretation Issued, Inflation Rates for Judging Whether an Economy Is Highly Inflationary - June 2007
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Our interpretation, Inflation Rates for Judging Whether an Economy Is Highly Inflationary - June 2007, has been issued and reflects the latest available inflation rate information. The Dominican Republic has been reclassified from a country that has a highly inflationary economy to a country on the "watch list" of countries that may have a highly inflationary economy; and Belarus has been reclassified from a country on our "watch list" of countries that may have a highly inflationary economy to a country that does not have a highly inflationary economy.
We continue to identify those countries that are unusually slow in reporting their inflation rates. This may require further analysis by users of this Interpretation.
Derivatives Shortcut Method -- FASB Releases Proposed Guidance
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The FASB has issued proposed guidance in Statement 133 Implementation Issue (also known as "DIG" issue) No. E23, "Issues Involving the Application of the 'Shortcut Method' under Paragraph 68." The proposed guidance addresses the following matters involving the application of Statement 133's shortcut method:
-Settlement of a hedged item after the swap trade date;
-Hedged items subject to principal pay-downs before maturity;
-Application of paragraph 68(b) when the transaction price of the swap is zero;
-Determining whether the terms of an interest rate swap and a hedged item are typical;
-Effects of the normal market convention of rounding the coupon rate;
-Hedge relationships that begin after the hedged item is recognized; and
-Eligibility of a zero-coupon financial instrument as a hedged item.
Comments on this proposal are due September 21, 2007.
Codification Issues -- FASB Discusses Codification Issues and Other Matters at July 18, 2007 Meeting
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As reported in its "Action Alert" publication, the FASB met on July 18, 2007, and addressed the following projects or topics:
-Codification Issues
-Statement 140 Implementation - Repurchase Financing Agreements
The FASB began to discuss identified "codification issues." As previously announced, the FASB codification is planned to be a compilation of existing U.S. GAAP, organized by accounting topic, regardless of its source (i.e., FASB Statement, EITF consensus, AcSEC SOP, etc.). A standard structure to the codification is planned such that users can quickly know what subsections address the specific aspects of a topic (e.g., recognition, measurement, disclosure, implementation guidance, etc.). Certain SEC material is planned to be included in the codification for the use by public companies. At this meeting, the FASB reached decisions on several "escalation issues" identified during the course of the codification project. Escalation issues are a means of communicating to the FASB content its staff proposes to include or exclude from the codification of U.S. GAAP. Among the decisions reached, the FASB decided to eliminate the special treatment afforded to claims of subcontractors included in Chapter 11C, "Government Contracts - Cost-Plus-Fixed-Fee Contracts," paragraphs 24-30 of ARB 43 and require the application of FASB Statement No. 5, Accounting for Contingencies. Further, the FASB decided to revise the definitions of "proven and probable reserves" that are used in the extractive industries and in FASB Statement No. 89, Financial Reporting and Changing Prices, to be consistent with the definitions from Securities Act Industry Guide 7, referred to in EITF Issue No. 04-3, "Mining Assets: Impairment and Business Combinations." The FASB has targeted early calendar 2009 to issue the codification in final form.
The Action Alert also notes that the FASB is scheduled to meet on August 1, 2007 when it is scheduled to discuss comments received on proposed FASB Staff Position (FSP) FAS 154-a, "Considering the Effects of Prior-Year Misstatements When Quantifying Misstatements in Current-Year Financial Statements," and whether to proceed to issuing a final FSP.
Transfers of Financial Assets -- FASB Issues Proposed FSP Interpreting FASB Statement 140
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On July 24, 2007, the FASB issued proposed FASB Staff Position (FSP) FAS 140-d, "Accounting for Transfers of Financial Assets and Repurchase Financing Transactions." In this proposal, the FASB addresses whether there are circumstances that would permit a transferor and a transferee to evaluate the accounting for a transfer of a financial asset separately from a repurchase agreement that relates to a previously transferred financial asset (repurchase financing), when the counterparties to the two transactions are the same under FASB Statement No. 140, Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
Comments on this proposed FSP are due September 14, 2007.
PCAOB Proposals -- Ethics and Independence Rule and Actions Associated With Tax Services
For detail, please contact info@zy-cpa.com
On July 24, 2007, the PCAOB issued Release No. 2007-008 for public comment which includes the following three proposals: (1) an ethics and independence rule that would require a registered public accounting firm to communicate to a registrant's audit committee about any relationships between the firm and the registrant that may reasonably be thought to impact the firm's independence; (2) an amendment to Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles, that would exclude from the scope of the rule the portion of the audit period that proceeds the beginning of the professional engagement; and (3) an adjustment to not apply Rule 3523 to tax services provided on or before April 30, 2008, when those services are provided during the audit period and completed before the professional engagement period begins.
Comments on this proposal are due September 7, 2007.
Proxy Materials -- SEC Issues Final Rules on Shareholder Choice Regarding Proxy Materials
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The SEC issued final rules on shareholder choice regarding proxy materials. The rules provide shareholders with the ability to choose the method they can receive proxy materials - via the Internet, through electronic mail (e-mail) or paper copies in the mail. Registrants and other proxy solicitors are required to post proxy materials on an Internet web site and provide shareholders with a notice of the materials availability and a method to request paper copies or via e-mail. The SEC believes the new rules will significantly lower the costs associated with proxy solicitations.
The final rules are generally effective January 1, 2008. Compliance with the new rules is determined by filer status as follows:
-Large accelerated filers (excluding registered investment companies) must comply with the new rules for proxy solicitations commencing on or after January 1, 2008;
-All other type of filers and other proxy solicitors must comply with the new rules for proxy solicitations commencing on or after January 1, 2009. Such registrants may elect to comply with the new rules for proxy solicitations commencing on or after January 1, 2008.
As a reminder, a large accelerated filer, as defined in Exchange Act Rule 12b-2, is an issuer that, as of the end of its fiscal year, has an aggregate worldwide market value of the voting and nonvoting common equity held by its nonaffiliates of $700 million or more, as measured on the last business day of the issuer's most recently completed second fiscal quarter; has been subject to the requirements of Section 13(a) or 15(d) of the Exchange Act for a period of at least twelve calendar months; has filed at least one annual report pursuant to Section 13(a) or 15(d) of the Exchange Act; and is not eligible to use Forms 10-KSB and 10-QSB for its annual and quarterly reports.
International Financial Reporting -- IFRIC Discusses Customer Contributions Received by a Service Provider and Other Matters at July 12, 2007 Meeting
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As reported in the IASB's "IFRIC Update" publication, the IFRIC met on July 12, 2007, and discussed the following matters:
-IAS 18 Revenue - Customer contributions
-IAS 27 Consolidated and Separate Financial Statements - Demergers and other distributions
-IAS 39 Financial Instruments: Recognition and Measurement
-IFRS 2 Share-based Payment - Group cash-settled share-based payment transactions
-IFRIC agenda decisions
-Tentative agenda decisions
At this meeting, the IFRIC began to develop guidance on the accounting by a service provider when receiving customer contributions. Such contributions arise in situations when customers provide an asset to a service provider that is then used to deliver an ongoing service to customers. The IFRIC discussed whether such a contribution meets the criteria for recognition as an asset by the service provider. It concluded that, in some situations, the contributed asset would meet the criteria for recognition by the service provider. Additional deliberations on this issue are planned for a future meeting.
IASB Update -- IASB Discusses Financial Statement Presentation and Other Matters at Its July 17-20, 2007 Meeting
For detail, please contact info@zy-cpa.com
As reported in its "IASB Update" publication, the IASB met on July 17-20, 2007, and discussed the following projects or topics:
-Post-Employment Benefits
-Update on IFRIC activities
-Conceptual Framework
-Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation
-Annual Improvements Process
-IAS 27 Consolidated and Separate Financial Statements
-IAS 37 Redeliberations
-IFRS 2 Share-Based Payment
-Short-Term Convergence: Joint Ventures
-Short-Term Convergence: Income Taxes
-Short-Term Convergence: Earnings per Share
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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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Information Technology Audits -- Updated Edition Released
For detail, please contact info@zy-cpa.com
We have published the 2007 edition of Information Technology Audits. The primary objective of this publication is to provide audit practitioners with a cost-effective approach for conducting high-quality integrated information technology audits. Reflecting real-life situations, it offers practical discussions and consideration of the day-to-day management of a variety of audit engagements and reviews. This publication translates the technical language of official pronouncements and complex information technology (IT) control issues into easy-to-read and understand advice and procedures.
Government Auditing Standards -- GAO Issues 2007 Revision of Government Auditing Standards (Yellow Book)
For detail, please contact info@zy-cpa.com
On July 27, 2007, the Government Accountability Office (GAO) issued the 2007 revision of Government Auditing Standards, (commonly known as the "Yellow Book") which supersedes the 2003 revision and updates the January 2007 revision. The July 2007 version contains the January 2007 revision to the standards and updates the quality control and peer review sections in chapter 3. The major changes made by the GAO include revisions related to (1) ethics and independence, (2) professional judgment and competence, (3) quality control and assurance (5) all types of GAGAS audits and attestation engagements, (5) internal auditors, (6) financial audits, (7) attestation engagements, (8) performance audits, and (9) guidance material.
Planning and Supervision -- 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. 108, Planning and Supervision, by using a "Question & Answer" format designed to provide practical discussion, advice, and specific implementation guidance. The Q & As address various issues including: (a) establishing an understanding with the client regarding the services to be performed; (b) performing procedures regarding the continuance of the client relationship, including the specific audit engagement; (c) dealing with various planning and supervisory issues, including supervising the work of assistants; and (d) considering additional matters in initial audit engagements.
Internal Controls -- SEC Approves PCAOB Auditing Standard No. 5, Related Independence Rule and Adopts Definition of Significant Deficiency
For detail, please contact info@zy-cpa.com
As discussed above in our Accounting and SEC Summaries, we have prepared a hot topic discussing the SEC's approval of the PCAOB's Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with An Audit of Financial Statements, in its form originally adopted by the PCAOB in May 2007. In addition, the SEC approved PCAOB Rule 3525, Audit Committee Pre-approval of Non-audit Services Related to Internal Control over Financial Reporting, and adopted a definition of "significant deficiency." The SEC also adopted several conforming amendments to update other PCAOB auditing standards. A summary of these items is provided in our hot topic.
PCAOB Proposals -- Ethics and Independence Rule and Actions Associated With Tax Services
For detail, please contact info@zy-cpa.com
As discussed above in our Accounting and SEC Summaries, on July 24, 2007, the PCAOB issued Release No. 2007-008 for public comment which includes the following three proposals: (1) an ethics and independence rule that would require a registered public accounting firm to communicate to a registrant's audit committee about any relationships between the firm and the registrant that may reasonably be thought to impact the firm's independence; (2) an amendment to Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles, that would exclude from the scope of the rule the portion of the audit period that proceeds the beginning of the professional engagement; and (3) an adjustment to not apply Rule 3523 to tax services provided on or before April 30, 2008, when those services are provided during the audit period and completed before the professional engagement period begins.
Comments on this proposal are due September 7, 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
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GOVERNMENT HEADLINES:
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The Statistical Section -- Questions and Answers on GASB Statement No. 44 and the Statistical Section
For detail, please contact info@zy-cpa.com
We have added a Governmental GAAP Update Service that summarizes implementation issues in GASB Statement No. 44, Economic Condition Reporting, as they relate to general questions regarding the statistical section information and questions regarding financial trend information. Future updates will address implementation issues and commonly asked questions regarding the remaining types of information specified in GASB 44.
Government Auditing Standards -- GAO Issues 2007 Revision of Government Auditing Standards (Yellow Book)
For detail, please contact info@zy-cpa.com
As discussed above in our Auditing and Internal Controls Summaries, on July 27, 2007, the Government Accountability Office (GAO) issued the 2007 revision of Government Auditing Standards, (commonly known as the "Yellow Book") which supersedes the 2003 revision and updates the January 2007 revision. The July 2007 version contains the January 2007 revision to the standards and updates the quality control and peer review sections in chapter 3. The major changes made by the GAO include revisions related to (1) ethics and independence, (2) professional judgment and competence, (3) quality control and assurance (5) all types of GAGAS audits and attestation engagements, (5) internal auditors, (6) financial audits, (7) attestation engagements, (8) performance audits, and (9) guidance material.
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