===================================================
Accounting Research
Manager(TM)
Weekly Summary of
Developments
September 29 - October 3,
2008
===================================================
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:
For detail, please contact info@zy-cpa.com
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 -- Disclosure Checklists Updated through
September 30, 2008
Fair Value Measurements -- FASB and SEC Issue Guidance on the
Application of Statement 157
Fair Value Measurements -- Minutes of September 23, 2008
Valuation Resource Group Meeting
Regulation S-K -- SEC Publishes Technical Amendment to
Reflect PCOAB Rule
SEC Reporting -- SEC Staff Updates Exchange Act
Compliance and Disclosure Interpretations
Acquisitions -- FASB to Discuss Mergers and
Acquisitions by Not-for-Profits and Other Matters
EITF Matters -- September 10, 2008 Meeting Minutes
Issued
Audit Risk -- AICPA Issues Audit Risk Alerts
IASB Update -- IASB Discusses Responses to Credit
Market Crisis
Auditing and Internal
Controls Headlines
Auditor Communications -- Auditing Standard on Communicating
Internal Control Related Matters Issued
Auditing Standards -- AICPA Publishes Exposure Draft of
Preface to Codification of Auditing Standards and Objectives of the Independent
Auditor
Audit Risk -- AICPA Issues Audit Risk Alerts
Internal Controls -- AICPA Issues Standard on Examination
of an Entity's Internal Control over Financial Reporting
=============================
ACCOUNTING AND SEC HEADLINES:
=============================
Disclosure Checklists --
Disclosure Checklists Updated through September 30, 2008
As discussed in our
Literature Update, the General U.S. GAAP Financial Statement Disclosures
Checklist has been updated through September 30, 2008:
For detail, please contact info@zy-cpa.com
The disclosure requirements
of the following have been incorporated into this checklist:
-EITF Issue No. 08-5,
"Issuer's Accounting for Liabilities Measured at Fair Value with a
Third-Party Credit Enhancement"; and
-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.
We have also updated: (a)
the General U.S. GAAP Interim Financial Statement Disclosures Checklist
through September 30, 2008, to reflect the interim disclosures required by the
above documents; and (b) the Industry-Specific Disclosures Checklist:
Not-for-Profit Organizations to reflect the disclosure requirements
included in FSP FAS 117-1, Endowments of Not-for-Profit Organizations: Net
Asset Classification of Funds Subject to an Enacted Version of the Uniform
Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All
Endowment Funds.
We have also updated the
following SEC disclosure-related checklists through September 30, 2008:
For detail, please contact info@zy-cpa.com
-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 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 checklists was to reference an illustrative letter issued by the SEC
staff in September 2008 reflecting additional views on MD&A disclosure
regarding the application of FASB Statement No. 157, Fair Value Measurements.
Companies applying Statement 157 may find this guidance helpful in preparing
their filings to the SEC.
See our Literature Updates
for complete details.
Fair Value Measurements --
FASB and SEC Issue Guidance on the Application of Statement 157
For detail, please contact info@zy-cpa.com
We have published a Hot Topic
discussing the FASB's decision to issue, on an
expedited basis, proposed guidance on the application of FASB Statement No.
157, Fair Value Measurements. Citing the current turmoil in the global
financial markets, the FASB is expected to issue guidance to help constituents measure fair value in markets that are not
active. This guidance is expected to be consistent with the press release
issued jointly by the FASB and the SEC on September 30, 2008, which provides
general clarification guidance on determining fair value under Statement 157.
The FASB's
proposed guidance is expected to acknowledge the “best practices” provided in a
draft document published by an expert panel of the IASB, Measuring and
disclosing the fair value of financial instruments in markets that are no
longer active. The FASB guidance is scheduled to be issued with an expected
comment period of 7 days. The FASB indicated that it would meet on October 10,
2008, to review comments received and vote on final guidance. The guidance will
be effective upon issuance.
On September 30, 2008, the
FASB and SEC jointly issued clarifications on the fair value measurement
guidance in Statement 157. This interpretive guidance is intended to help
preparers, auditors, and investors address fair value measurement questions
that have been cited as most urgent in the current environment. Specific
questions addressed in the guidance are:
-Can management's internal
assumptions (e.g., expected cash flows) be used to measure fair value when
relevant market evidence does not exist?
-How should the use of
"market" quotes (e.g., broker quotes or information from a pricing
service) be considered when assessing the mix of information available to
measure fair value?
-Are transactions that are
determined to be disorderly representative of fair value? When is a distressed
(disorderly) sale indicative of fair value?
-Can transactions in an
inactive market affect fair value measurements?
-What factors should be
considered in determining whether an investment is other-than-temporarily
impaired?
See our Hot Topic for
complete details.
Fair Value Measurements --
Minutes of September 23, 2008 Valuation Resource Group Meeting
For detail, please contact info@zy-cpa.com
We have added minutes of the September 23,
2008 meeting of the Valuation Resource Group (VRG). The FASB established the
VRG to provide the FASB with input on potential clarifying guidance on issues
relating to the application of Statement 157. At the September 23, 2008
meeting, the VRG discussed the following topics:
-IASB expert advisory panel
document, Measuring and Disclosing the Fair Value of Financial Instruments
in Markets that are No Longer Active;
-Fair value disclosures;
-Observable vs. unobservable
inputs;
-Fair value measurements of
liabilities under Statement 157;
-Allocation of in-use
valuation to individual unit of account;
-Fair value of accounts
receivable, accounts payable, and other accrued liabilities;
-Identification and
allocation of market participant synergies; and
-Fair value of a noncontrolling interest and a previously held equity
interest.
See our minutes for complete
details.
Regulation S-K -- SEC
Publishes Technical Amendment to Reflect PCOAB Rule
For detail, please contact info@zy-cpa.com
The SEC has published a final
rule, Technical Amendment to Item 407 of Regulation S-K. This rule
includes a technical amendment to Item 407 of Regulation S-K. The technical
amendment updates a reference to Independence Standards Board Standard (ISB)
No. 1, Independence Discussions with Audit Committees, which was
previously adopted by the PCAOB as an interim standard but has been superseded
by PCAOB Rule 3526, Communication with Audit Committees Concerning
Independence. The reference is being updated to refer to the applicable
requirements of the PCAOB regarding the independent accountant’s communications
with the audit committee concerning independence, instead of ISB 1.
This rule is effective
September 30, 2008.
SEC Reporting -- SEC Staff
Updates Exchange Act Compliance and Disclosure Interpretations
The SEC staff has released
updates to the following compliance and disclosure interpretations:
-Exchange Act Sections;
For detail, please contact info@zy-cpa.com
-Exchange Act Rules; and
For detail, please contact info@zy-cpa.com
-Exchange Act Forms.
For detail, please contact info@zy-cpa.com
These interpretations represent views of the
staff of the Division of Corporation Finance on various topics related to
compliance with the Securities Exchange Act of 1934. Organized in a question
and answer format, these interpretations cover a wide range of specific topics
related to the registration of securities, as wells as, subsequent current,
annual and quarterly reporting requirements. The interpretations also provide a
limited number of interpretations applicable to foreign private issuers.
Acquisitions -- FASB to
Discuss Mergers and Acquisitions by Not-for-Profits and Other Matters
For detail, please contact info@zy-cpa.com
As reported in its
"Action Alert" publication, the FASB is scheduled to meet on October
8, 2008, and discuss mergers and acquisitions by a not-for-profit organization.
Specifically, the FASB is expected to continue its discussion and decide
whether to retain or modify the proposed requirements for: (a) initial
recognition and measurement of acquisitions by not-for-profit organizations;
and (b) subsequent accounting for any goodwill recognized as a result of
an acquisition.
The FASB is also expected to
meet on October 10, 2008, to discuss comments received on proposed guidance on
measuring fair value in markets that are not active, and whether to proceed
with issuing final guidance. See our discussion of this proposed guidance
above.
As also reported in its
Action Alert publication, the FASB is met on September 24, 2008, and discussed
the following topics:
-Revenue recognition;
-Contingency disclosures;
-Mergers and acquisitions by
a not-for-profit organization;
-Disclosures about plan
assets; and
-Ratification of EITF
decisions reached at its September 10, 2008 meeting.
In deliberating its
"Revenue Recognition" project, the FASB discussed subsequent
measurement of performance obligations in contracts with customers.
Specifically, the FASB discussed the nature of an "onerous" test in
the customer consideration approach to measuring performance obligations. It
tentatively decided that a performance obligation is deemed onerous when the entity’s expected cost of performance exceeds the carrying
amount of the performance obligation. In that case, the entity would remeasure the performance obligation at the amount of its
expected cost to satisfy the performance obligation. The FASB is expected to
issue a Discussion Paper in the fourth quarter of 2008 to seek constituents’
input on which performance obligations may require remeasurement
at each financial statement date and on alternative remeasurement
approaches for those performance obligations.
The FASB also discussed
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 and clarify the proposed guidance. The FASB
affirmed its prior tentative decision to distinguish between a merger and an
acquisition, and also decided to improve the workability of the definition and
its related guidance by:
-Clarifying the scope of the
final Statement by explicitly scoping out formations of joint ventures and
making the merger definition more robust; and
-Including a discussion that:
(a) emphasizes that in a merger no one party dominates various aspects
of the merger transaction; and (b) describes factors that are helpful in
discerning a merger from other combination types.
The FASB chairman also
announced that a project was added to the FASB’s
agenda to consider whether a deferral of or any other modifications to FASB
Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes,
should be provided for private companies.
EITF Matters -- September
10, 2008 Meeting Minutes Issued
For detail, please contact info@zy-cpa.com
The final minutes of the September 10, 2008
EITF meeting have been issued. The minutes document
the meeting results as previously described in our Hot Topic dated September
24, 2008. As a result of the FASB's ratification of
its earlier decisions, the EITF has issued for public comment the following
draft abstracts:
-EITF Issue 08-6,
"Equity Method Investment Accounting Considerations";
For detail, please contact info@zy-cpa.com
-EITF Issue 08-7,
"Accounting for Defensive Intangible Assets"; and
For detail, please contact info@zy-cpa.com
-EITF Issue 08-8,
"Accounting for an Instrument (or an Embedded Feature) with a Settlement
Amount That Is Based on the Stock of an Entity's Consolidated Subsidiary".
For detail, please contact info@zy-cpa.com
Comments on all three draft
abstracts are due October 22, 2008.
The minutes also include revisions
by the SEC staff to Topic No. D-98, "Classification and
Measurement of Redeemable Securities."
Audit Risk -- AICPA Issues
Audit Risk Alerts
The AICPA has issued the
following three "Audit Risk Alert" publications:
-SEC and PCAOB
Developments - 2008;
For detail, please contact info@zy-cpa.com
-General Alert:
Strengthening Audit Integrity, Safeguarding Financial Reporting - 2008; and
For detail, please contact info@zy-cpa.com
-Compilation and Review
Developments - 2008.
For detail, please contact info@zy-cpa.com
These publications are intended to provide
auditors of financial statements with an overview of recent economic, industry,
technical, regulatory, and professional developments that may affect the audits
and other engagements they perform. These publications also
includes a section discussing current and future rulemaking or other
activities that may impact these particular areas in the near future.
IASB Update -- IASB
Discusses Responses to Credit Market Crisis
For detail, please contact info@zy-cpa.com
As reported in its "IASB
Update" publication, the IASB met on September 15-19, 2008, and discussed
the following projects or topics:
-IASB responses to credit
market crisis;
-Annual improvements process;
-Extractive activities;
-Fair value measurement;
-Financial instruments with
characteristics of equity;
-First-time adoption of IFRSs;
-IFRS for private entities
(formerly small and medium-sized entities);
-Insurance contracts;
-Related party disclosures;
-Revenue recognition;
-Share-based payment; and
-Update on IFRIC activities.
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
=======================================
AUDITING AND INTERNAL
CONTROLS HEADLINES:
=======================================
Auditor Communications --
Auditing Standard on Communicating Internal Control Related Matters Issued
For detail, please contact info@zy-cpa.com
The AICPA has issued
Statement on Auditing Standards (SAS) No. 115, Communicating Internal
Control Related Matters in an Audit. This SAS provides guidance on
communicating matters related to an entity’s internal control over financial
reporting identified in an audit of financial statements. It is applicable
whenever an auditor expresses or disclaims an opinion on financial statements.
In particular, this statement:
-Defines the terms deficiency
in internal control, significant deficiency, and material weakness;
-Provides guidance on
evaluating the severity of deficiencies in internal control identified in an
audit of financial statements; and
-Requires the auditor to
communicate, in writing, to management and those charged with governance,
significant deficiencies and material weaknesses identified in an audit.
This SAS is not applicable if
the auditor is engaged to report on the effectiveness of an entity’s internal
control over financial reporting under AT section 501, An Examination of an
Entity’s Internal Control over Financial Reporting That Is Integrated with an
Audit of Its Financial Statements.
This SAS is effective for
audits of financial statements for periods ending on or after December 15,
2009. Earlier implementation is permitted.
Auditing Standards --
AICPA Publishes Exposure Draft of Preface to Codification of Auditing Standards
and Objectives of the Independent Auditor
For detail, please contact info@zy-cpa.com
The AICPA has published for
public comment within a single Exposure Draft the following proposals:
-Proposed Preface to Codification
of Statements on Auditing Standards, Principles Governing an Audit Conducted in
Accordance with Generally Accepted Auditing Standards;
-Proposed Statement on
Auditing Standards (SAS), Overall Objectives of the Independent Auditor and
the Conduct of an Audit in Accordance with Generally Accepted Auditing
Standards.
The Preface has been drafted
in accordance with the Auditing Standards Board's (ASB) clarity drafting
conventions, consistent with the ASB's efforts to
bring clarity to SASs. Consistent with the ASB’s strategy to converge its standards with those of the
International Auditing and Assurance Standards Board (IAASB), the proposed SAS
has been drafted using ISA 200 (Revised and Redrafted), Overall Objectives
of the Independent Auditor and the Conduct of an Audit in Accordance with International
Standards on Auditing, as a base. Differences in objectives, definitions,
or requirements between the proposed SAS and ISA 200 are identified in the
exhibit to the exposure draft.
The proposed SAS will be
effective for audits of financial statements for periods beginning on or after
December 15, 2010. This effective date is provisional but will not be earlier
than December 15, 2010.
Comments on this proposal are
due December 30, 2008.
Audit Risk -- AICPA Issues
Audit Risk Alerts
As discussed above in our
Accounting and SEC Summaries, the AICPA has issued the following three
"Audit Risk Alert" publications:
-SEC and PCAOB
Developments - 2008;
For detail, please contact info@zy-cpa.com
-General Alert:
Strengthening Audit Integrity, Safeguarding Financial Reporting - 2008; and
For detail, please contact info@zy-cpa.com
-Compilation and Review
Developments - 2008.
For detail, please contact info@zy-cpa.com
These publications are intended to provide
auditors of financial statements with an overview of recent economic, industry,
technical, regulatory, and professional developments that may affect the audits
and other engagements they perform. These publications also
includes a section discussing current and future rulemaking or other
activities that may impact these particular areas in the near future.
Internal Controls -- AICPA
Issues Standard on Examination of an Entity's Internal Control over Financial
Reporting
For detail, please contact info@zy-cpa.com
The AICPA has issued
Statement on Standards for Attestation Engagements (SSAE) No. 15, An
Examination of an Entity's Internal Control over Financial Reporting That Is
Integrated with an Audit of Its Financial Statements. This SSAE provides
guidance that applies when a practitioner is engaged to perform an examination
of the design and operating effectiveness of an entity’s internal control over
financial reporting that is integrated with an audit of financial statements.
This SSAE includes guidance in the following areas:
-Evidence supporting
management's assertion;
-Integrating the examination
with the financial statement audit;
-Planning the examination;
-Role of risk assessment;
-Using the work of others;
-Using a top-down approach;
-Testing controls;
-Evaluating identified
deficiencies;
-Concluding procedures;
-Communicating certain
matters; and
-Reporting on internal
controls.
This SSAE also includes
several examples of auditor opinions on internal controls over financial
reporting.
This SSAE is effective for
integrated audits for periods ending on or after December 15, 2008. Earlier
implementation is permitted.
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