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Accounting Research Manager(TM)
Weekly Summary of Developments
July 30 - August 3, 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
Accounting for Business Combinations -- Interpretive Guidance Revised and Added to Our Interpretations of Accounting for Business Combinations
Earnings per Share -- FASB Discusses Earnings per Share and Other Matters at July 25, 2007 Meeting
Financial Statement Disclosures -- Updated Manual Added to Database
Accounting for Insurance Contracts -- FASB Issues Invitation to Comment
PCAOB Auditing Standard No. 5 -- SEC Issues Order Approving AS/5
FASB Report Issued -- Convergence Discussed
Proxy Proposals -- SEC Proposes Revisions in Proxy Statements
Auditing and Internal Controls Headlines
PCAOB Auditing Standard No. 5 -- SEC Issues Order Approving AS/5
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ACCOUNTING AND SEC HEADLINES:
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Accounting for Business Combinations -- Interpretive Guidance Revised and Added to Our Interpretations of Accounting for Business Combinations
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We have revised and updated our publication, Accounting for Business Combinations, Goodwill, and Other Intangible Assets - Interpretations of U.S. and International Accounting Standards. Various interpretations were added or revised in this update, primarily to reflect views of the SEC staff expressed at the 2006 AICPA National Conference on Current SEC and PCAOB Developments. We also updated the section entitled, "Recent Developments," to document current developments at the FASB.
Earnings per Share -- FASB Discusses Earnings per Share and Other Matters at July 25, 2007 Meeting
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As reported in its "Action Alert" publication, the FASB met on July 25, 2007, and addressed the following projects or topics:
-Earnings per Share
-Convertible Debt Instruments That May Be Settled in Cash upon Conversion (including partial cash settlement)
-Insurance - Risk Transfer
-Derivative Disclosures
Among the decisions reached at this meeting, the FASB discussed issues that arose in the drafting of the revised exposure draft (ED) on the proposed amendments to FASB Statement No. 128, Earnings per Share. Prior EDs were issued on December 15, 2003, and September 30, 2005. The following decisions were reached:
1. No changes should be made to FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, to achieve convergence with IAS 33, Earnings per Share, because the earnings per share guidance in Statement 150 on forward purchase contracts that require gross physical settlement is consistent with the accounting treatment for those instruments.
2. The objective of the convergence project is to arrive at the same denominator in the diluted earnings per share calculation. Therefore, convergence will be achieved when both U.S. GAAP and IFRS result in the same diluted earnings per share denominator, regardless of any differences that may arise in the numerator (the control number used in calculating earnings per share).
3. "Fair value method" proposed at the March 28, 2007 FASB meeting should be expanded to include compound instruments for which the embedded derivative with a share settlement alternative is accounted for separately as a liability and measured at fair value through earnings for the reporting period.
4. Actual distributions (as opposed to hypothetical distributions) to outstanding common stock should be used in the computation of diluted earnings per share under the two-class method. The FASB agreed with the staff recommendation to solicit feedback from constituents on this issue in the Notice for Recipients.
5. Amendments to Statement 128 should be effective for fiscal years beginning after December 15, 2008, and should be applied retrospectively to all prior periods presented. Early adoption will not be permitted.
6. The revised ED should be exposed for a 120-day comment period to be consistent with the IASB's comment period.
In addition to the above, the FASB added a project to its agenda with the objective of issuing a proposed FASB Staff Position (FSP) that would address the accounting for convertible debt instruments that require or permit cash settlement upon conversion (including partial cash settlement). The FASB decided that the proposed FSP should require that the liability and equity components of those instruments be separately accounted for in a manner that reflects the issuer's nonconvertible debt borrowing rate. The proposed FSP would be effective for financial statements issued for fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. Earlier application would not be permitted. The guidance in the proposed FSP would be applied retrospectively to all periods presented.
Financial Statement Disclosures -- Updated Manual Added to Database
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We have published the 2007-2008 Edition of the GAAP Financial Statement Disclosures Manual, which provides comprehensive guidance on the subject of financial statement disclosures. Specifically, this manual:
-Provides over 900 examples of footnote disclosures that are realistic, technically sound, and understandable. These sample disclosures cover a variety of scenarios from the most common to the most unusual and may assist users in the preparation, audit, or review of financial statements.
-Facilitates compliance with authoritative pronouncements by integrating, in each topical chapter, the specific disclosure requirements with the sample footnotes.
-Covers areas of unusual complexity, such as financial instruments, income taxes, pensions, accounting changes, and going concern.
The Manual also discusses: (a) the specific elements of "results of operations" that are required to be presented separately under GAAP, (b) the presentation of specific types of transactions in cash flow statements, (c) alternative formats for presenting financial statements, and (d) the disclosure of noncash transactions.
Accounting for Insurance Contracts -- FASB Issues Invitation to Comment
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The FASB has issued an Invitation to Comment, An FASB Agenda Proposal: Accounting for Insurance Contracts by Insurers and Policyholders, Including the IASB Discussion Paper, "Preliminary Views on Insurance Contracts." This Invitation to Comment discusses a proposed FASB project to develop a comprehensive standard on accounting for insurance (including reinsurance) contracts. That proposed project would be a joint project with the International Accounting Standards Board (IASB). The stated objective in undertaking the proposed project would be to develop a common, high-quality standard that addresses recognition, measurement, presentation, and disclosure requirements for insurance contracts. That standard would provide accounting and reporting guidance for both the issuer and the holder of the insurance contract. It would replace all existing U.S. generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) for insurance contracts. The purpose of this Invitation to Comment is to gather information from FASB constituents to help in deciding whether to add to its agenda a joint project with the IASB on insurance contracts.
Comments on this release are due November 16, 2007.
PCAOB Auditing Standard No. 5 -- SEC Issues Order Approving AS/5
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On July 27, 2007, the SEC issued a formal Order approving Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with An Audit of Financial Statements (AS/5), 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. See our hot topic dated July 26, 2007 for complete details:For detail, please contact info@zy-cpa.com.
FASB Report Issued -- Convergence Discussed
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The June 2007 edition of the "FASB Report" has been issued and includes discussion of the following topics or items of interest:
-Closing Thoughts from Ed Trott
-FASB Talks Convergence with Global Standard-Setters
-FASB Issues Statement Expressing Strong Support for SEC Advisory Committee on Improvements to Financial Reporting
-FASB to Form Resource Group on Valuation Guidance Issues
-Who's Who
-FASB at the Podium
This edition of the FASB Report includes a discussion of convergence. Specifically, since the signing of the "Norwalk Agreement" in 2002, the collaboration between the FASB and the International Accounting Standards Board (IASB) has garnered significant attention in the quest to develop a single set of high-quality global accounting standards. Recognizing that true convergence extends beyond the U.S. and European capital markets, the FASB is reaching out to standard-setters in Korea, Japan, and China to enlist their cooperation in this worldwide effort.
See the FASB Report for more details on this topic as well as the other topics listed above.
Proxy Proposals -- SEC Proposes Revisions in Proxy Statements
On July 27, 2007, the SEC issued for public comment two proposed rules related to shareholder access to a registrant's proxy. The proposals would modify the election exclusion contained in Rule 14A-8(i)(8), which permits registrants to exclude from its proxy shareholder proposals that relate to the election of directors. A summary of the proposals is as follows:
Release No. 34-56161, Shareholder Proposals Relating to the Election of Directors - This proposal would permit proxy access to shareholders, holding at least 5% of the registrant's stock for at least a year, to propose changes to a registrant's bylaws regarding election of directors. As a result, shareholders would be able to modify the nomination requirements in order to nominate director candidates for election. In addition, shareholder proposals receiving a majority of votes would be binding on the registrant.
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Release No. 34-56160, Shareholder Proposals - This proposal essentially keeps intact current proxy rules that permit registrants to exclude shareholder access to the proxy statement to nominate or elect directors. The proposal would clarify certain aspects and application of the election exclusion, including making certain the exclusion applies to proposals related to future elections and procedures that would result in a contested election.
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Comments on these proposals are due October 2, 2007.
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AUDITING AND INTERNAL CONTROLS HEADLINES:
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PCAOB Auditing Standard No. 5 -- SEC Issues Order Approving AS/5
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As discussed above in our Accounting and SEC Summaries, on July 27, 2007, the SEC issued a formal Order approving Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with An Audit of Financial Statements (AS/5), 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. See our hot topic dated July 26, 2007 for complete details:For detail, please contact info@zy-cpa.com.
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