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Accounting Research Manager(TM)
Weekly Summary of Developments
October 15-19, 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
Fair Value Measurements and Investment Company Reporting -- FASB Decides Against Wholesale Deferral of Statement 157 and Defers Indefinitely Effective Date of SOP 07-1
Liabilities and Equity -- FASB to Issue Preliminary Views on Liabilities and Equity Project
EITF Materials Issued -- Agenda Committee Report Released for November 29, 2007 EITF Meeting
Internal Controls -- SEC Staff Updates Frequently Asked Questions
Compensation Disclosure -- SEC Staff Speech Issued
Internal Controls -- PCAOB Issues Preliminary Staff Views
PCAOB Inspections -- PCAOB Issues Amendments to its Audit Firm Inspection Rule
Auditing and Internal Controls Headlines
Omnibus Statement on Standards for Accounting and Review Services -- AICPA Issues Proposal
Internal Controls -- SEC Staff Updates Frequently Asked Questions
Internal Controls -- PCAOB Issues Preliminary Staff Views
PCAOB Inspections -- PCAOB Issues Amendments to its Audit Firm Inspection Rule
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ACCOUNTING AND SEC HEADLINES:
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Fair Value Measurements and Investment Company Reporting -- FASB Decides Against Wholesale Deferral of Statement 157 and Defers Indefinitely Effective Date of SOP 07-1
For detail, please contact info@zy-cpa.com
As reported in our Hot Topic, the FASB decided that it would not defer the required effective date in FASB Statement No. 157, Fair Value Measurements. As issued, Statement 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The FASB considered, but rejected, a "wholesale" or total one-year deferral for companies to implement Statement 157. However, the FASB left open the possibility that it might consider a less comprehensive deferral (e.g., for nonfinancial assets and liabilities, nonpublic entities). The FASB staff will review the practicality of this concept and the FASB may consider this approach at a future meeting.
Separately, the FASB decided at this meeting that it would defer the required effective date in 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. As issued, SOP 07-1 is effective for fiscal years beginning on or after December 15, 2007, with early adoption permitted. The FASB decided that it should defer indefinitely the required effective date in SOP 07-1 to enable the FASB staff to address certain implementation issues that have been brought to the FASB's attention. In addition, the FASB also agreed that early adoption of SOP 07-1 should be prohibited. These decisions will be documented in a forthcoming proposed FASB Staff Position that will have a 30-day comment period.
See our Hot Topic for complete details.
Liabilities and Equity -- FASB to Issue Preliminary Views on Liabilities and Equity Project
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As reported in its "Action Alert" publication, the FASB met on October 10, 2007, and decided to expose a Preliminary Views document on its liabilities and equity project for a six-month comment period. The FASB also decided to solicit feedback about the characteristics of a dividend payable as part of the Preliminary Views comment process.
The Action Alert also indicates that the FASB and IASB (the "Boards") will hold a joint meeting on October 22-23, 2007 to discuss the following items:
-Financial Statement Presentation;
-Conceptual Framework: Objectives and Qualitative Characteristics;
-Conceptual Framework: Elements and Recognition;
-Revenue Recognition; and
-Accounting Principles for Derecognizing Financial Assets.
The Boards will discuss an outline of the initial discussion document related to their Financial Statement Presentation project. The Boards will also discuss the length of the comment period for an upcoming Exposure Draft on their Conceptual Framework Project and continue discussions on examples of applying a proposed working definition of an asset. The staff of the Boards will also present a preliminary overview of two revenue recognition models that have been developed as part of the joint Revenue Recognition project.
EITF Materials Issued -- Agenda Committee Report Released for November 29, 2007 EITF Meeting
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The FASB has issued the Agenda Committee Report relating to the EITF meeting scheduled for November 29, 2007. This report contains the proposed issue items that the EITF agenda committee considered adding to the EITF's agenda. This agenda committee report reflects decisions against adding new issues to the EITF's agenda on: (a) lending commitments; (b) accounting for value beyond proven and probable reserves in a business combination; and (c) determining whether payments to Incentive Distribution Rights (IDR) holders in master limited partnerships represent equity distributions or compensation expense.
In addition, the Agenda Committee decided to defer the decision on whether to add an issue to the EITF's agenda regarding the measurement date approach for equity instruments issued to non-employees for goods and services.
Internal Controls -- SEC Staff Updates Frequently Asked Questions
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On September 24, 2007, the SEC staff updated its Frequently Asked Questions document (FAQ), Management's Report on Internal Control over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports. The updated FAQ was issued in order to eliminate frequently asked questions which the SEC staff believes are no longer relevant, necessary, or were addressed by the SEC's Interpretive Guidance, Commission Guidance Regarding Management's Report on Internal Control over Financial Reporting under Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The updated FAQ eliminates twelve previously existing frequently asked questions and includes four new questions specific to foreign private issuers. As a result of these changes, the frequently asked questions have been renumbered.
Compensation Disclosure -- SEC Staff Speech Issued
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We have published a speech by John W. White, Director, Division of Corporation Finance of the SEC. Mr. White discusses the recent issuance by the SEC staff of, "Staff Observations in the Review of Executive Compensation Disclosure." This release provides general observations by the SEC staff resulting from its initial review of executive compensation disclosures made under revised rules that were generally effective beginning for the 2007 proxy season.
In his speech, Mr. White discusses the principal areas the SEC staff provided comments to registrants, including:
-More meaningful analysis of compensation philosophies and decision-making processes is necessary;
-The "Compensation Discussion and Analysis" (CD&A) section is a principles-based requirement and should focus on material principles underlying a registrant's compensation policies;
-How a registrant provides required compensation information is, in many ways, as important as its content; and
-A discussion of how qualitative factors translate into specific performance targets is essential.
In addition, Mr. White provided the following advice for approaching executive compensation disclosures for the upcoming 2008 proxy season:
-Provide more analysis, including focusing on discussing the how and why certain compensation decisions were reached;
-Focus on being clear, concise and understandable in presenting the substantial amounts of required information; and
-Consider using tables, charts and other reader-friendly methods of presentation to present complex information.
Internal Controls -- PCAOB Issues Preliminary Staff Views
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The PCAOB has issued for public comment Preliminary Staff Views (Staff Views), An Audit of Internal Control That Is Integrated with an Audit of Financial Statements - Guidance for Auditors of Smaller Public Companies. This publication represents the PCAOB staff's preliminary views on how auditors can apply certain provisions of Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with An Audit of Financial Statements (AS/5), to smaller, less complex public companies. The Staff Views do not represent new rules or establish new requirements. Topics covered in the Staff Views are:
-Scaling the audit for smaller, less complex companies;
-Evaluating entity-level controls;
-Assessing the risk of management override and evaluating mitigating actions;
-Evaluating segregation of duties and alternative controls;
-Auditing information technology (IT) controls in less complex IT environments;
-Considering financial reporting competencies and their effects on internal control;
-Obtaining sufficient competent evidence when the company has less formal documentation; and
-Auditing smaller, less complex companies with pervasive control deficiencies.
Comments on the Staff Views are due December 17, 2007.
PCAOB Inspections -- PCAOB Issues Amendments to its Audit Firm Inspection Rule
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The PCAOB issued amendments to Rule 4003, Frequency of Inspections. The amendments eliminate the requirement that the PCAOB regularly inspect each registered public accounting firm that plays a "substantial role" in audits but does not issue audit reports. The amendments also eliminate the requirement that the PCAOB inspect each registered public accounting firm that issues an audit report, even if the firm does not regularly issue audit reports. The amendments have no effect on the requirements in Rule 4003 concerning the frequency of inspections of registered firms that regularly issue audit reports. The PCAOB would still retain the discretion to inspect any registered audit firm at any time.
The amendments will be submitted to the SEC for approval and are planned to be effective upon such approval.
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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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Omnibus Statement on Standards for Accounting and Review Services -- AICPA Issues Proposal
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The AICPA has issued an Exposure Draft (ED), Omnibus Statement on Standards for Accounting and Review Services - 2008, a proposed Statement on Standards for Accounting and Review Services (SSARS). The ED includes several revisions to existing standards related to accounting and review services. Topics covered by the ED are:
-Conform terminology to that utilized by other standard setters, including the Auditing Standards Board;
-Clarify the objective of a compilation of financial statements as an engagement in which no assurance is provided;
-New sections have been added to clarify the differences between compilation, review, and audit engagements;
-For review engagements, require that an accountant must: (a) apply analytical procedures to the financial statements; (b) make inquiries of management, and when appropriate, other company personnel; and (c) obtain representations from management for all financial statements and periods covered by the accountant's review report;
-Revise the definition of "third party" and introduce a definition of "management";
-Provide guidance on an accountant's consideration of an entity's ability to continue as a going concern;
-Provide guidance on an accountant's consideration of subsequent events; and
-Provide guidance with respect to analytical procedures in review engagements.
As proposed, certain sections of the ED would be effective for compilations and reviews of financial statements for periods ending on or after December 15, 2008. Early application would be permitted. Certain other sections of the proposed standard would be effective upon issuance. Comments on this proposal are due December 28, 2007.
Internal Controls -- SEC Staff Updates Frequently Asked Questions
For detail, please contact info@zy-cpa.com
As discussed in our Accounting and SEC Summaries, on September 24, 2007, the SEC staff updated its Frequently Asked Questions document (FAQ), Management's Report on Internal Control over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports. The updated FAQ was issued in order to eliminate frequently asked questions which the SEC staff believes are no longer relevant, necessary, or were addressed by the SEC's Interpretive Guidance, Commission Guidance Regarding Management's Report on Internal Control over Financial Reporting under Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The updated FAQ eliminates twelve previously existing frequently asked questions and includes four new questions specific to foreign private issuers. As a result of these changes, the frequently asked questions have been renumbered.
Internal Controls -- PCAOB Issues Preliminary Staff Views
For detail, please contact info@zy-cpa.com
As discussed in our Accounting and SEC Summaries, the PCAOB has issued for public comment Preliminary Staff Views (Staff Views), An Audit of Internal Control That Is Integrated with an Audit of Financial Statements - Guidance for Auditors of Smaller Public Companies. This publication represents the PCAOB staff's preliminary views on how auditors can apply certain provisions of Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with An Audit of Financial Statements (AS/5), to smaller, less complex public companies. The Staff Views do not represent new rules or establish new requirements. Topics covered in the Staff Views are:
-Scaling the audit for smaller, less complex companies;
-Evaluating entity-level controls;
-Assessing the risk of management override and evaluating mitigating actions;
-Evaluating segregation of duties and alternative controls;
-Auditing information technology (IT) controls in less complex IT environments;
-Considering financial reporting competencies and their effects on internal control;
-Obtaining sufficient competent evidence when the company has less formal documentation; and
-Auditing smaller, less complex companies with pervasive control deficiencies.
Comments on the Staff Views are due December 17, 2007.
PCAOB Inspections -- PCAOB Issues Amendments to its Audit Firm Inspection Rule
For detail, please contact info@zy-cpa.com
As discussed in our Accounting and SEC Summaries, the PCAOB issued amendments to Rule 4003, Frequency of Inspections. The amendments eliminate the requirement that the PCAOB regularly inspect each registered public accounting firm that plays a “substantial role” in audits but does not issue audit reports. The amendments also eliminate the requirement that the PCAOB inspect each registered public accounting firm that issues an audit report, even if the firm does not regularly issue audit reports. The amendments have no effect on the requirements in Rule 4003 concerning the frequency of inspections of registered firms that regularly issue audit reports. The PCAOB would still retain the discretion to inspect any registered audit firm at any time.
The amendments will be submitted to the SEC for approval and are planned to be effective upon such approval.
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