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Accounting Research Manager(TM)
Weekly Summary of Developments
September 15-19, 2008
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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

Transfers of Financial Assets -- FASB Issues Exposure Drafts to Amend Statement 140 and FIN 46R
Credit Derivatives -- FASB Issues Guidance on Disclosures about Credit Derivatives and Certain Guarantees
Revenue Recognition -- FASB to Discuss Revenue Recognition and Other Matters
SEC Filings -- SEC Filing Review Process Interpretation Added
Fair Value Measurements -- SEC Issues Additional Guidance on MD&A Disclosure Regarding the Application of Statement 157
PCAOB Rules -- SEC Approves PCAOB Rules for Evaluating Consistency of Financial Statements
Securities Registration -- SEC Publishes Guidance on Form D

Auditing and Internal Controls Headlines

PCAOB Rules -- SEC Approves PCAOB Rules for Evaluating Consistency of Financial Statements

Government Headlines

Derivative Instruments -- GASB Issues Plain-Language Summary of GASB 53

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ACCOUNTING AND SEC HEADLINES:
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Transfers of Financial Assets -- FASB Issues Exposure Drafts to Amend Statement 140 and FIN 46R

The FASB has issued the following three separate, but related, Exposure Drafts (EDs) for public comment:

-Proposed FASB Statement, Accounting for Transfers of Financial Assets;
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-Proposed FASB Statement, Amendments to FASB Interpretation No. 46R; and
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-Proposed FASB Staff Position (FSP) FAS 140-e and FIN 46 (R)-e, Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities
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The ED on the accounting for transfers of financial assets proposes amendments to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This ED seeks feedback on proposed amendments to Statement 140 intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about transfers of financial assets, including through securitization transactions. These include the effects of such transfers of financial assets on its financial position, financial performance, and cash flows, and a transferor's continuing involvement in transferred financial assets.

The ED to amend FASB Interpretation (FIN) No. 46 (Revised December 2003), Consolidation of Variable Interest Entities, seeks input from constituents on proposed amendments to the guidance for determining whether an enterprise must consolidate a Special-Purpose Entity (SPE), including those previously considered qualifying SPEs.

The proposed FSP would amend Statement 140 to require public entities to provide additional disclosures about transfers of financial assets and also amends FIN 46R to require public enterprises to provide additional disclosures about their involvement with variable interest entities. According to the FASB, the purpose of this FSP is to promptly improve disclosures by public entities and enterprises until the pending amendments to Statement 140 and FIN 46R are effective.

As proposed in the EDs, the two proposed FASB Statements would be effective at the beginning of each reporting entity's first fiscal year that begins after November 15, 2009. The effective date for the proposed FSP would be the first reporting period (interim or annual) that ends after issuance of the FSP for public entities. The FASB expects that this FSP would be issued in the fourth quarter of 2008 which means that it would be effective for financial statements issued as of December 31, 2008, for calendar year end, public entities.

Comments on the proposed FSP are due October 15, 2008. Comments on the two proposed FASB Statements are due November 14, 2008.

Credit Derivatives -- FASB Issues Guidance on Disclosures about Credit Derivatives and Certain Guarantees
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The FASB has issued FASB Staff Position (FSP) FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees - An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161. This FSP applies to: (a) credit derivatives within the scope of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities; (b) hybrid instruments that have embedded credit derivatives; and (c) guarantees within the scope of FASB Interpretation (FIN) No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This FSP amends Statement 133, to require disclosures by sellers of credit derivatives, including credit derivatives embedded in a hybrid instrument. This FSP also amends FIN 45, to require an additional disclosure about the current status of the payment/performance risk of a guarantee. In addition, this FSP clarifies the FASB’s intent that the disclosures required by FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, should be provided for any reporting period (annual or interim) beginning after November 15, 2008.

The provisions of this FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008. Earlier adoption is encouraged for the provisions that amend Statement 133 and FIN 45. The clarification of the effective date of Statement 161 is effective September 12, 2008.

Revenue Recognition -- FASB to Discuss Revenue Recognition and Other Matters
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As reported in its "Action Alert" publication, the FASB is scheduled to meet on September 24, 2008, to discuss:

-Revenue recognition;
-Contingency disclosures;
-Mergers and acquisitions by a not-for-profit organization;
-Disclosures about plan assets; and
-FASB ratification of EITF consensuses and tentative conclusions.

Regarding revenue recognition, the FASB is expected to discuss subsequent measurement of performance obligations in contracts with customers. Specifically, the FASB is expected to consider the key issues of an onerous test and whether remeasurement is needed in instances other than when performance obligations are deemed onerous. The FASB is also expected to discuss mergers and acquisitions by a not-for-profit organization. Specifically, the FASB is expected to discuss whether to require a different method of accounting for a merger of not-for-profit organizations than that required for an acquisition and, if so, how it should define a merger. The FASB is also expected to decide whether to retain the net asset approach to initial recognition and measurement of acquisitions and the subsequent accounting for any goodwill recognized.

The FASB is also expected to decide whether to ratify the decisions reached by the EITF at its September 10, 2008 meeting. See our previously issued EITF Flash Report for highlights of the September 10, 2008 meeting, including the decisions reached by the EITF.

No FASB meetings were held during the week of September 8, 2008.

SEC Filings -- SEC Filing Review Process Interpretation Added
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We have added an interpretation,“SEC Filing Review Process.” This interpretation provides background and practical guidance on the SEC’s periodic filing review process. The SEC, led by the staff in the Division of Corporation Finance (Corp Fin), periodically reviews selected filings (such as Forms 10-K or 10-Q) of every public company that is registered with it. The consequences of inadequately responding to an SEC review can be very serious, therefore it is important for registrants to develop the requisite knowledge and understanding of SEC review process when responding to an inquiry from the SEC or its staff.

Specific items discussed in our interpretation include:

-Basic process and structure of Corp Fin’s review;
-Consultation with Corp Fin;
-How materiality factors into the review process;
-Restatement of financial statements and related Form 8-K requirements;
-Appealing conclusions reached by Corp Fin;
-Public disclosure of comments and correspondents from the review process; and
-Requesting confidential treatment for certain information.

See our Literature Update for complete details.

Fair Value Measurements -- SEC Issues Additional Guidance on MD&A Disclosure Regarding the Application of Statement 157
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In September 2008, the SEC staff issued a follow up letter to a March 2008 letter issued by the SEC staff, that highlighted several disclosure considerations relating to the application of FASB Statement No. 157, Fair Value Measurements, that registrants should consider when preparing Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in their filings on Forms 10-K and 10-Q.

The September 2008 illustrative letter urges companies to continue to evaluate whether clearer and more transparent disclosure regarding fair value measurements can be provided in filings with the SEC. In particular, the SEC staff urges companies to consider providing such disclosure and information for financial instruments that are not actively traded and whose effects have had, or are likely to have, a material effect on financial condition or results of operations. Specifically, the SEC staff encourages companies to provide information about the judgments and assumptions underlying fair value measurements presented in SEC filings, including:

-Clearly providing the judgments and assumptions used;
-Information on the sensitivity of those measurements to the assumptions used; and
-Details about the methodology and inputs, if it would help investors better understand a company’s accounting and disclosure about its fair value measurements.

PCAOB Rules -- SEC Approves PCAOB Rules for Evaluating Consistency of Financial Statements
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The SEC has published, Public Company Accounting Oversight Board; Order Approving Proposed Rule on Auditing Standard No. 6, "Evaluating Consistency of Financial Statements and Conforming Amendments," and Conforming Amendments. These rules update the auditor’s responsibilities to evaluate and report on the consistency of an entity’s financial statements and align the auditor’s responsibilities with both FASB Statement No. 154, Accounting Changes and Error Corrections, and FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles. In addition, these rules clarify that auditor reports should indicate whether an adjustment to previously issued financial statements results from a change in accounting principle or the correction of a misstatement.

These rules become effective November 15, 2008. As a result, the effective date of Statement 162 is also November 15, 2008.

Securities Registration -- SEC Publishes Guidance on Form D

The SEC staff has issued two publications that provide guidance on the new online filing system for Form D:

-Division of Corporation Finance Guidance on Form D Filing Process; and
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-Filing and Amending a Form D Notice: A Compliance Guide for Small Entities and Others.
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Form D is a notice required to be filed with the SEC by companies and funds that have sold securities without registration under the Securities Act of 1933 (Securities Act) in an offering based on a claim of exemption under Rule 504, 505 or 506 of Regulation D or Section 4(6) of the Securities Act.

These two publications provide guidance on the following:

-Paper vs. electronic Form D filings;
-Amendments to Form D;
-Steps necessary to file an electronic Form D; and
-If necessary, obtaining EDGAR access codes and CIK numbers in order to file Form D.

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AUDITING AND INTERNAL CONTROLS HEADLINES:
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PCAOB Rules -- SEC Approves PCAOB Rules for Evaluating Consistency of Financial Statements
For detail, please contact info@zy-cpa.com

As discussed above in our Accounting and SEC Summaries, the SEC has published, Public Company Accounting Oversight Board; Order Approving Proposed Rule on Auditing Standard No. 6, "Evaluating Consistency of Financial Statements and Conforming Amendments," and Conforming Amendments. These rules update the auditor’s responsibilities to evaluate and report on the consistency of an entity’s financial statements and align the auditor’s responsibilities with both FASB Statement No. 154, Accounting Changes and Error Corrections, and FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles. In addition, these rules clarify that auditor reports should indicate whether an adjustment to previously issued financial statements results from a change in accounting principle or the correction of a misstatement.

These rules become effective November 15, 2008. As a result, the effective date of Statement 162 is also November 15, 2008.

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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Derivative Instruments -- GASB Issues Plain-Language Summary of GASB 53
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The GASB has published, Derivative Instruments: A Plain-Language Summary of GASB Statement No. 53. This Summary provides a summary of the requirements of GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. Specifically, this Summary discusses the following topics:

-Determining if an instrument is a derivative;
-Examples of derivative instruments;
-Financial instruments not covered by GASB 53;
-Why GASB issued GASB 53;
-Requirements of GASB 53;
-Information to be disclosed about derivatives in notes to financial statements;
-Identifying and reporting a hedging derivative instrument;
-Evaluating the effectiveness of a potential hedging instrument;
-Reporting derivatives with upfront payments;
-Key differences between the final standard and the exposure draft; and
-Background information on the GASB and its standard setting process.

GASB 53 is intended to improve how state and local governments report information about derivative instruments in their financial statements. Specifically, GASB 53 requires governments to measure most derivative instruments at fair value in their financial statements that are prepared using the economic resources measurement focus and the accrual basis of accounting. GASB 53 also addresses hedge accounting requirements, providing specific criteria that governments will use to determine whether a derivative instrument results in an effective hedge.

GASB 53 is effective for financial statements for reporting periods beginning after June 15, 2009. Earlier application is encouraged.

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