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Accounting Research
Manager(TM)
Weekly Summary of
Developments
October 13-17, 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
Income Taxes -- FASB Agrees to Defer FIN 48 Effective
Date for All Nonpublic Entities
Fair Value Measurements -- FASB Issues Guidance for Determining
Fair Value in Inactive Markets
Financial Statement
Presentation -- FASB and
IASB Jointly Publish Discussion Paper on Financial Statement Presentation
Conceptual Framework -- FASB to Discuss Conceptual Framework
and Other Matters
EITF Materials -- FASB Issues Materials for November 13,
2008 EITF Meeting
Fair Value -- SEC Staff Issues Guidance on Certain
Preferred Securities
Securities -- SEC Reopens Comment Period on Proposed
Rule Defining Annuity Contracts as Securities
Inflation Rates -- Interpretation Added, Inflation Rates
for Judging Whether an Economy Is Highly Inflationary - September 2008
Financial Instruments -- IASB Amends Guidance on the
Measurement, Recognition and Disclosure of Financial Instruments
Financial Instruments -- IASB Issues Proposal to Improve
Disclosure of Financial Instruments
Auditing and Internal
Controls Headlines
Management Letter Comments -- 2009 Edition of Publication Added
Government Headlines
GASB Report Issued -- GASB Exposure Drafts and Other Matters
Discussed
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ACCOUNTING AND SEC HEADLINES:
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Income Taxes -- FASB
Agrees to Defer FIN 48 Effective Date for All Nonpublic Entities
For detail, please contact info@zy-cpa.com
We have published a Hot Topic
discussing the FASB's decision to issue a proposed
FASB Staff Position (FSP) that would expand the scope of its limited deferral
of FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income
Taxes. The proposed FSP is expected to defer the effective date in FIN 48
for all nonpublic entities until fiscal years beginning after December 15,
2008. This decision is different from that previously reached by the FASB on
October 1, 2008, which would have limited the effective date deferral in FIN 48
to only pass-through entities based on their federal income tax status.
The proposed FSP is expected
to have a 30-day comment period. The FASB intends to finalize the FSP in late
2008 or early 2009.
See our Hot Topic for
complete details.
Fair Value Measurements --
FASB Issues Guidance for Determining Fair Value in Inactive Markets
For detail, please contact info@zy-cpa.com
The FASB issued FASB Staff
Position (FSP) FAS 157-3, Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active. The FSP clarifies the
application of FASB Statement No. 157, Fair Value Measurements, in a
market that is not active and provides an example to illustrate key considerations
in determining the fair value of a financial asset when the market for that
financial asset is not active.
The FSP is effective October
10, 2008, and for prior periods for which financial statements have not been
issued. Revisions resulting from a change in the valuation technique or its
application should be accounted for as a change in accounting estimate
following the guidance in FASB Statement No. 154, Accounting Changes and
Error Corrections. However, the disclosure provisions in Statement 154 for
a change in accounting estimate are not required for revisions resulting from a
change in valuation technique or its application.
This FSP is consistent with
the guidance issued jointly by the FASB and SEC on the application of Statement
157 discussed in our Hot Topic dated October 1, 2008: For
detail, please contact info@zy-cpa.com
See our Hot Topic for
complete details.
Financial Statement
Presentation -- FASB and IASB Jointly Publish Discussion Paper on Financial
Statement Presentation
The FASB and IASB (collectively, the Boards)
have jointly published for public comment a discussion paper (DP) on financial
statement presentation. The DP is available in both the FASB and IASB formats
as follows:
-Preliminary Views on
Financial Statement Presentation (FASB); and
For detail, please contact info@zy-cpa.com
-Preliminary Views on
Financial Statement Presentation (IASB).
For detail, please contact info@zy-cpa.com
This DP contains an analysis
of the current issues in financial statement presentation and presents the
Boards’ initial thinking on how those issues could be addressed in a possible
future format. The objective of the DP and related financial presentation
project is to create a standard that requires entities to organize financial
statements in a manner that clearly communicates an integrated financial
picture of the entity. The Boards are undertaking this project jointly.
Existing accounting guidance
provides only limited presentation guidance, and in some cases are dispersed across many standards. In addition, users of
financial statements have often expressed dissatisfaction that information is
not linked across the different statements and that dissimilar items are in
some cases aggregated into a single amount. To address these issues the Boards
propose to introduce cohesiveness and disaggregation
as the two main objectives for financial statement presentation. The Boards
believe cohesiveness would ensure that a reader of financial statements can
follow the flow of information through the different statements of an entity
and that disaggregation would ensure that items that
respond differently to economic events are shown separately.
Comments on the DP are due
April 14, 2009.
Conceptual Framework --
FASB to Discuss Conceptual Framework and Other Matters
For detail, please contact info@zy-cpa.com
As reported in its
"Action Alert" publication, the FASB is scheduled to hold a joint
meeting with the IASB on October 20-21, 2008, to discuss the following:
-Conceptual framework: elements
and recognition;
-Consolidations;
-Derecognition;
-Fair value measurement;
-Financial instruments with
characteristics of equity;
-Financial instruments:
complexity;
-Emissions trading schemes;
and
-Liabilities.
The FASB and IASB (the
Boards) are expected to consider how they might improve the clarity of the
proposed definition of an asset and of a liability, making it more
understandable to constituents. The staff is expected to present an overview of
the main similarities and differences between the proposed FASB Statement, Amendments
to FASB Interpretation No. 46(R), and the proposed new IFRS on
consolidation. The Boards will also consider how to conduct the projects
jointly. In addition, the Boards are also expected to discuss potential derecognition models and whether a joint project can be
conducted to adopt a consistent model.
As also reported in its
Action Alert publication, the FASB met on October 8, 2008, and discussed
mergers and acquisitions by a not-for-profit organization. The FASB continued
its discussion on 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 the acquisition. The FASB decided that when a not-for-profit
organization acquires an organization, business, or nonprofit activity that is
expected to be predominantly supported by contributions and returns on
investments and the amount for the liabilities assumed (and any consideration
paid) exceeds the assets acquired, that excess amount should be recognized as a
separate charge in the statement of activities rather than as goodwill. In
other circumstances, that excess amount should be recognized as goodwill.
The FASB also met on October
10, 2008, and decided to issue FASB Staff Position (FSP) FAS 157-3, Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active. See our discussion of this FSP above.
EITF Materials -- FASB Issues
Materials for November 13, 2008 EITF Meeting
For detail, please contact info@zy-cpa.com
The FASB has issued an
"Agenda Committee Report" for the November 13, 2008 EITF meeting. The
report indicates that issues addressing the following topics will be added to
the EITF's agenda:
-Accounting for share lending
arrangements in contemplation of convertible debt issuances and related EPS
determinations; and
-Selected implementation
questions on FASB Statement 160, Noncontrolling
Interests in Consolidated Financial Statements.
Fair Value -- SEC Staff
Issues Guidance on Certain Preferred Securities
For detail, please contact info@zy-cpa.com
The Office of the Chief
Accountant (OCA) of the SEC has publicly released a letter sent to Robert H. Herz, chairman of the FASB. The letter provides views of
OCA regarding challenges in assessing declines in fair value for perpetual
preferred securities under the existing other-than-temporary impairment model
in FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities. Such securities are “hybrid” in nature that are often
structured in equity form but generally possess significant debt-like
characteristics.
The letter provides that OCA
would not object to an issuer, for impairment tests in filings subsequent to
the date of this letter (October 14, 2008), applying an impairment model
(including an anticipated recovery period) similar to a debt security. OCA
would not object to this treatment provided there has been no evidence of a
deterioration in credit of the issuer (e.g., a decline in the cash flows from
holding the investment or a downgrade of the rating of the security below
investment grade) until this matter can be addressed further by the FASB.
Securities -- SEC Reopens
Comment Period on Proposed Rule Defining Annuity Contracts as Securities
For detail, please contact info@zy-cpa.com
On June 25, 2008, the SEC
released for public comment a proposed rule, Indexed Annuities and Certain
Other Insurance Contracts. This proposal would define the terms “annuity
contract” and “optional annuity contract” under the Securities Act of 1933. The
comment period for this proposed rule ended September 10, 2008. The SEC has
announced that it is reopening the comment period on this proposal. The SEC has
received numerous letters, including letters from state insurance
commissioners, members of Congress, and others, requesting that the comment
period be extended. In general, these constituents have indicated that an
extension would help them analyze the proposal and prepare meaningful comments.
In order to provide additional time for the public to thoroughly consider the
proposal, and in view of the significant continuing public interest in the
proposal, the SEC has decided that it is appropriate to reopen the comment
period.
Comments on the proposal are
due November 17, 2008.
Inflation Rates -- Interpretation
Added, Inflation Rates for Judging Whether an Economy Is Highly Inflationary -
September 2008
For detail, please contact info@zy-cpa.com
Our Interpretation,
Inflation Rates for Judging Whether an Economy Is Highly Inflationary -
September 2008, has been issued and reflects the latest available inflation
rate information. We have made the following changes since our June 2008 update:
-Kenya has been reclassified
from a country that does not have a highly inflationary economy to a country on
the "watch list" of countries that may have a highly inflationary
economy; and
-Mongolia has been
reclassified from a country that does not have a highly inflationary economy to
a country on the "watch list" of countries that may have a highly
inflationary economy.
Users of this Interpretation
should also refer to the actions of the AICPA International Practices Task
Force for further guidance in classifying countries as hyperinflationary,
particularly for countries not reporting data to the International Monetary
Fund and published in the International Financial Statistics, the source
for this Interpretation.
See our Literature Update for
complete details.
Financial Instruments --
IASB Amends Guidance on the Measurement, Recognition and Disclosure of
Financial Instruments
For detail, please contact info@zy-cpa.com
The IASB has issued
amendments to IAS 39, Financial Instruments: Recognition and Measurement,
and IFRS 7, Financial Instruments: Disclosures, which permit the
reclassification of some financial instruments. The amendments to IAS 39
introduce the possibility of reclassifications for companies applying IFRSs, which were already permitted under
The amendments are generally
effective July 1, 2008.
Financial Instruments --
IASB Issues Proposal to Improve Disclosure of Financial Instruments
For detail, please contact info@zy-cpa.com
The IASB has issued for
public comment an exposure draft (ED), Improving Disclosures about Financial
Instruments. This ED would amend IFRS 7 to enhance disclosures about fair
value measurements and the liquidity risk of financial instruments. This ED
proposes amendments to disclosure requirements that are based on a three-level
fair value hierarchy (similar to that used in FASB Statement No. 157, Fair
Value Measurements). Among other things, the amendments contained in this
ED would apply to financial instruments and require disclosures about the:
-Level of the fair value
hierarchy into which fair value measurements are
categorized in their entirety. This requirement would apply both for fair
values included in the statement of financial position and for other fair
values that are disclosed but not included in that statement.
-Fair value measurements
resulting from the use of significant unobservable inputs to valuation
techniques. For these measurements, the disclosures include a
reconciliation from the beginning balances to the ending balances.
-Movements between different
levels of the fair value hierarchy, and the reasons for those movements.
Comments on this ED are due
December 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:
For detail, please contact info@zy-cpa.com
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AUDITING AND INTERNAL
CONTROLS HEADLINES:
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Management Letter Comments
-- 2009 Edition of Publication Added
For detail, please contact info@zy-cpa.com
We have published the 2009
edition of the CPA’s Guide to Management Letter Comments. This publication
is a comprehensive resource that provides users with vital information on the
preparation of management letter comments, including:
-Numerous management letter
comment examples reflecting "real-life" situations involving all
critical areas generally encountered during an audit;
-Suggestions and examples
related to the opening and closing paragraphs of the management letter; and
-Suggestions and examples on
related communications with audit committees.
This publication can be used
during the actual preparation of the management letter as well as an efficient
review document for use in brainstorming for other effective and useful
comments that apply to a client’s situation.
See our Literature Update for
complete details.
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
======================
GOVERNMENT HEADLINES:
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GASB Report Issued -- GASB
Exposure Drafts and Other Matters Discussed
For detail, please contact info@zy-cpa.com
The September 2008 edition of
the "GASB Report" has been issued and includes the following
discussion items:
-GASB Calendar;
-GASB seeks comments on two
exposure drafts (EDs), Codification of Accounting
and Financial Reporting Guidance Contained in the AICPA Statements on Auditing
Standards, and The Hierarchy of Generally Accepted Accounting Principles
for State and Local Governments;
-Summary of August 19-20,
2008 GASB meeting;
-GASB seeks input for
derivatives implementation guide; and
-2008-2009 comprehensive
implementation guide available.
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