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Accounting Research
Manager(TM)
Weekly Summary of
Developments
March 30 - April 3, 2009
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Accounting Research
Manager subscriber,
The Accounting Research
Manager database now contains this week's weekly summary of developments. Click
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If you do not have immediate Internet access
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Weekly Summary.
Accounting and SEC
Headlines
Business Combinations -- FASB Issues Guidance on Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies
Fair Value Measurements -- FASB to Issue Additional Guidance for
Fair Value Measurements and Other-Than-Temporary Impairments
Revenue Recognition -- FASB Discusses Revenue Recognition
Project and Other Matters
Financial Statements -- FASB Discusses Financial Statement
Presentation Project and Other Matters
GAAP Hierarchy -- FASB Issues Proposal to Modify GAAP
Hierarchy
SEC Guidance -- Division of Corporation Finance Staff
Publishes Updates to Its Financial Reporting Manual
EITF Matters -- FASB Ratifies March 19, 2009 EITF
Decisions
Derivatives and Hedging -- Interpretations of Statement 133
Updated
FASB Report Issued -- FASB Codification Project and Other
Matters Discussed
Income Taxes -- IASB Issues Proposed Income Tax
Accounting Standard
Financial Instruments -- IASB Issues Proposal to Improve the Derecognition Requirements for Financial Instruments
IASB Update -- IASB Discusses Global Financial Crisis
and Other Matters
Auditing and Internal
Controls Headlines
TARP -- GAO Publishes Status Report
Government Headlines
TARP -- GAO Publishes Status Report
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ACCOUNTING AND SEC HEADLINES:
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Business Combinations --
FASB Issues Guidance on Accounting for Assets Acquired and Liabilities Assumed
in a Business Combination That Arise from Contingencies
For detail, please contact info@zy-cpa.com
The FASB has issued FASB
Staff Position (FSP) FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies.
This FSP amends the guidance in FASB Statement No. 141 (Revised December 2007),
Business Combinations, to:
-Require that assets acquired
and liabilities assumed in a business combination that arise from contingencies
be recognized at fair value if fair value can be reasonably estimated. If fair
value of such an asset or liability cannot be reasonably estimated, the asset
or liability would generally be recognized in accordance with FASB Statement
No. 5, Accounting for Contingencies, and FASB Interpretation (FIN) No.
14, Reasonable Estimation of the Amount of a Loss. Further, the FASB
decided to remove the subsequent accounting guidance for assets and liabilities
arising from contingencies from Statement 141R, and carry forward without
significant revision the guidance in FASB Statement No. 141, Business
Combinations.
-Eliminate the requirement to
disclose an estimate of the range of outcomes of recognized contingencies at
the acquisition date. For unrecognized contingencies, the FASB decided to
require that entities include only the disclosures required by Statement 5 and
that those disclosures be included in the business
combination footnote.
-Require that contingent
consideration arrangements of an acquiree assumed by
the acquirer in a business combination be treated as contingent consideration
of the acquirer and should be initially and subsequently measured at fair value
in accordance with Statement 141R.
This FSP is effective for
assets or liabilities arising from contingencies in business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008 (i.e., January 1, 2009
for a calendar year-end company).
Fair Value Measurements --
FASB to Issue Additional Guidance for Fair Value Measurements and
Other-Than-Temporary Impairments
For detail, please contact info@zy-cpa.com
As reported in its
"Summary of Board Decisions" publication, the FASB met on April 2,
2009, and discussed:
-Determining whether a market
is not active and a transaction is not distressed;
-Recognition and presentation
of other-than-temporary impairments;
-Interim disclosures about
fair value of financial instruments;
-Insurance contracts; and
-Conceptual framework and
objective and qualitative characteristics.
The FASB discussed comment
letters received on proposed FSP FAS 157-e, Determining Whether a Market Is
Not Active and a Transaction Is Not Distressed (to be issued as FSP FAS
157-4), and decided that the final FSP would:
-Affirm that the objective of
fair value when the market for an asset is not active is the price that would
be received to sell the asset in an orderly transaction.
-Clarify and include
additional factors for determining whether there has been a significant
decrease in market activity for an asset when the market for that asset is not
active.
-Eliminate the proposed
presumption that all transactions are distressed (not orderly) unless proven
otherwise. The FSP will instead require an entity to base its conclusion about
whether a transaction was not orderly on the weight of the evidence.
-Include an example that
provides additional explanation on estimating fair value when the market
activity for an asset has declined significantly.
-Require an entity to
disclose a change in valuation technique (and the related inputs) resulting
from the application of the FSP and to quantify its effects, if practicable.
-Apply to all fair value
measurements when appropriate.
FSP FAS 157-4 would be
applied prospectively and that retrospective application would not be
permitted. The FASB decided that the FSP would be effective for interim and
annual periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. An entity early adopting FSP FAS 157-4
must also early adopt FSP FAS 115-2, FAS 124-2, and EITF 99-20-2, Recognition
and Presentation of Other-Than-Temporary Impairments.
The FASB also discussed
comment letters received on proposed FSP FAS 115-a, FAS 124-a, and EITF 99-20-b
(to be issued as FSP FAS 115-2, FAS 124-2, and EITF 99-20-2), and made a number
of decisions, including:
-The change to existing
guidance for determining whether an impairment is other than temporary should
be limited to debt securities;
-To replace the existing
requirement that the entity’s management assert it has both the intent and
ability to hold an impaired security until recovery with a requirement that
management assert: (a) it does not have the intent to sell the security;
and (b) it is more likely than not it will not have to sell the security
before recovery of its cost basis;
-The guidance will
incorporate examples of factors from existing literature that should be
considered in determining whether a debt security is other-than-temporarily
impaired;
-An entity will be required
to recognize noncredit losses on held-to-maturity debt securities in other
comprehensive income and amortize that amount over the remaining life of the
security in a prospective manner by offsetting the recorded value of the asset
unless the security is subsequently sold or there are additional credit losses;
-An entity will be required
to present the total other-than-temporary impairment in the statement of
earnings with an offset for the amount recognized in other comprehensive
income; and
-When adopting the new
guidance, an entity will be required to record a cumulative-effect adjustment
as of the beginning of the period of adoption to reclassify the noncredit
component of a previously recognized other-temporary impairment from retained
earnings to accumulated other comprehensive income if the entity does not
intend to sell the security and it is not more likely than not that the entity
will be required to sell the security before recovery.
FSP FAS 115-2, FAS 124-2, and
EITF 99-20-2 will be effective for interim and annual periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15,
2009. An entity may early adopt this FSP only if it also elects to early adopt
FSP FAS 157-4.
The FASB also decided to
amend FASB Statement No. 107, Disclosures about Fair Value of Financial
Instruments, to require an entity to provide disclosures about fair value
of financial instruments in interim financial information. The FASB decided
that these disclosure requirements would be effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for periods
ending after March 15, 2009. However, an entity may early adopt these interim
fair value disclosure requirements only if it also elects to early adopt FSP
FAS 157-4 and FSP FAS 115-2, FAS 124-2, and EITF 99-20-2.
Revenue Recognition --
FASB Discusses Revenue Recognition Project and Other Matters
For detail, please contact info@zy-cpa.com
As reported in its
"Summary of Board Decisions" publication, the FASB met on April 1,
2009, and discussed:
-Revenue recognition;
-Transfers of financial
assets;
-Ratification of EITF
consensuses-for-exposure reached at its March 19, 2009 meeting; and
-Reconsideration of FASB
Interpretation (FIN) No. 46 (Revised December 2003), Consolidation of
Variable Interest Entities.
The FASB discussed its
Discussion Paper (DP), Preliminary Views on Revenue Recognition in Contracts
with Customers, that
it issued jointly with the IASB. Specifically, the FASB discussed how an entity
would determine the transaction price when the promised consideration is: (a)
payable at a time significantly different from performance by the entity; (b)
uncertain in amount; or (c) in a form other than cash. The FASB decided
that when:
-Measuring a net contract
position, an entity would reflect the time value of money whenever that effect
would be material. It would use the discount rate that would be reflected in a
financing transaction between the entity and its customer that did not involve
the provision of other goods and services; and
-The customer consideration
is uncertain (variable) in amount, the transaction price at inception is the
amount of the expected customer consideration, defined as the
probability-weighted estimate of customer consideration.
The FASB also made a number
of decisions related to disclosures required in its proposed amendment to FASB
Statement No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, including:
-The proposed disclosures
would be updated to reflect the results of the FASB’s
redeliberations of FSP FAS 140-4 and FIN 46(R)-8, Disclosures
by Public Entities (Enterprises) about Transfers of Financial Assets and
Interests in Variable Interest Entities;
-The scope of the proposed
sensitivity analysis disclosures would be finalized as proposed and would not
be expanded;
-The FASB decided to expand
its prior decision and require specific disclosures for securitization and
asset backed financing arrangements where a transferor has continuing
involvement with transferred financial assets accounted for as sales to all
transfers of financial assets accounted for as sales where the transferor has
continuing involvement with transferred financial assets; and
-All disclosure requirements
would apply to both nonpublic and public entities.
Regarding its reconsideration
of FIN 46R, the FASB reached the following decisions:
-To retain the disclosure
requirements applicable to FIN 46R within FSP FAS 140-4 and FIN 46(R)-8 with
only minor editorial changes;
-To amend the criterion in
paragraph 16(d)(1) of FIN 46R to provide an exemption for substantive mutual
transfer restrictions based on mutually agreed upon terms by willing,
independent parties;
-To amend paragraph 17 of the
Exposure Draft, Amendments to FASB Interpretation No. 46(R), to
eliminate factors (c) and (e) of that paragraph; and
-To require separate
classification of elements on the face of the primary beneficiary’s balance
sheet for: (a) those assets of consolidated Variable Interest Entities (VIEs) that can only be used to settle obligations of
consolidated VIEs; and (b) those liabilities
of consolidated VIEs for which creditors of the
consolidated VIE have no recourse to the general credit of the primary
beneficiary.
As discussed below, the FASB
also ratified the decisions made by the EITF at its March 19, 2009 meeting.
Financial Statements --
FASB Discusses Financial Statement Presentation Project and Other Matters
For detail, please contact info@zy-cpa.com
As reported in its
"Summary of Board Decisions" publication, the FASB held a joint
meeting with the IASB on March 23-24, 2009, and discussed:
-Financial statement
presentation;
-Financial instruments -
improvements to recognition and measurement;
-Conceptual framework;
-Loan loss provisioning;
-Fair value measurement;
-Work plan overview; and
-Consolidation/derecognition.
The FASB and IASB (the
Boards) discussed the design of the field test of the presentation model
proposed in the joint Discussion Paper (DP), Preliminary Views on Financial
Statement Presentation. As part of that field test, participant companies
are recasting two years of financial statements using the principles and
application guidance in the DP and completing a survey about that recasting
exercise. The staff provided a preliminary overview of the results received so
far and of quantitative information about how the participant companies’
financial statements changed as a result of applying the proposed model. The
Boards expect to hold public meetings to review the results of the field tests
at a future date as part of their financial statement presentation project.
The Boards tentatively agreed
that the objective of their project on improvements to the recognition and
measurement of financial instruments is to replace their respective financial
instruments standards with a common standard that will significantly improve
the decision usefulness of financial instrument reporting for users of
financial statements. The Boards believe that simplification of the accounting
requirements for financial instruments should be an outcome of this
improvement. The Boards tentatively agreed that although the project objective
is comprehensive, the project should be completed expeditiously.
Regarding its concept
framework project, the Boards decided:
-Each chapter will be
published as soon as it is completed;
-The reporting entity concept
will be the subject of a separate chapter;
-Each framework will maintain
its current hierarchical status;
-Current phases of this
project will continue to focus on business entities and a later phase will
consider whether modifications are needed to address issues or circumstances
unique to other types of entities, beginning with not-for-profit entities; and
-Tentatively to amend IAS 8, Accounting
Policies, Changes in Accounting Estimates and Errors, to reflect the new
qualitative characteristics as agreed by the Boards.
GAAP Hierarchy -- FASB
Issues Proposal to Modify GAAP Hierarchy
For detail, please contact info@zy-cpa.com
The FASB has issued for
public comment a proposed statement, The Hierarchy of Generally Accepted
Accounting Principles, a replacement of FASB Statement No. 162. This
proposal statement would modify the U.S. generally accepted accounting
principles (GAAP) hierarchy created by FASB Statement No. 162, The Hierarchy
of Generally Accepted Accounting Principles, by reducing GAAP to two
levels: (a) authoritative; and (b) nonauthoritative.
The FASB would accomplish this by authorizing the FASB Accounting Standards CodificationTM (Codification) to become the
single source of authoritative
As proposed, the Codification
would generally be effective July 1, 2009.
Comments on this proposal are
due May 8, 2009.
SEC Guidance -- Division
of Corporation Finance Staff Publishes Updates to Its Financial Reporting
Manual
For detail, please contact info@zy-cpa.com
The staff in the SEC's Division of
Corporation Finance (Corp Fin) has updated its Financial Reporting Manual,
as of March 31, 2009. This manual represents informal guidance prepared for use
by Corp Fin staff. Corp Fin has made this manual public as readers may find the
guidance useful in preparing filings with the SEC. Updates in this edition of
the manual include the following areas:
-Sale of a business;
-Target financial statements;
-Supplemental financial
statements;
-Form S-4;
-Length of and (or) changes
in fiscal year;
-Measuring significance
related to acquisitions;
-Age of financial statements;
-"Blind Pool"
offerings;
-Equity method investments;
-Pro forma financial
statements; and
-Foreign issuer reporting
enhancements.
EITF Matters -- FASB
Ratifies March 19, 2009 EITF Decisions
For detail, please contact info@zy-cpa.com
We have prepared a Hot Topic that discusses
the FASB's ratification of decisions made by the EITF
at its March 19, 2009 meeting. Specifically, the FASB ratified the
consensuses-for-exposure reached in:
-EITF Issue No. 08-9,
"Milestone Method of Revenue Recognition”; and
-EITF Issue No. 09-1,
“Accounting for Own-Share Lending Arrangements in Contemplation of Convertible
Debt Issuance.”
See our Hot Topic for
complete details.
Derivatives and Hedging --
Interpretations of Statement 133 Updated
For detail, please contact info@zy-cpa.com
We have updated our publication, Derivatives
and Hedging - Interpretations of Statement 133. We have updated various
interpretations within this publication to reflect the following: (a)
EITF Issue No. 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"; and (b) SEC staff comments on the application of EITF
Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entity's Own Stock”.
See our Literature Update for
complete details.
FASB Report Issued -- FASB
Codification Project and Other Matters Discussed
For detail, please contact info@zy-cpa.com
The March 2009 edition of the
"FASB Report" has been issued and includes the following discussion
items:
-Codification;
-Financial Accounting
Foundation (FAF) appointments and election of chairman;
-Appointments to the
Financial Accounting Standards Advisory Council and Investors Technical
Advisory Committee;
-18th FASB Fellow Forum
scheduled for May 5, 2009; and
-Major upcoming events at
which FASB members or staff will make presentations.
Income Taxes -- IASB
Issues Proposed Income Tax Accounting Standard
For detail, please contact info@zy-cpa.com
The IASB has published for
public comment an exposure draft, Income Tax. This exposure draft
proposes a new standard on the accounting for income taxes. If adopted, the
standard would replace the existing requirements in IAS 12, Income Taxes.
The proposed standard retains the basic approach to accounting for income
taxes, known as the temporary difference approach. The objective of that
approach is to immediately recognize the future tax consequences of past events
and transactions, rather than waiting until the taxes are payable. Although the
proposed standard retains the same principle, the IASB proposes to remove most
of the exceptions in IAS 12 to simplify the accounting and strengthen the
principle in the standard. In addition, the IASB proposes a changed structure
for the standard that will make it easier to use.
Comments on this proposal are
due July 31, 2009.
Financial Instruments --
IASB Issues Proposal to Improve the Derecognition
Requirements for Financial Instruments
For detail, please contact info@zy-cpa.com
The IASB has published for
public comment an exposure draft, Derecognition:
Proposed Amendments to IAS 39 and IFRS 7. According to the IASB, this
proposal would: (a) improve the derecognition
requirements for financial instruments; and (b) enhance disclosure
requirements, especially in situations where an entity continues to have an
ongoing involvement in a financial asset that would be derecognized under the
proposals. The additional disclosures would allow users to make a better
assessment of the risks associated with such an asset. This
proposal is part of the IASB’s comprehensive review
of off balance sheet activities and follow the publication of proposals
in December 2008, to strengthen and improve the requirements for identifying
which entities a company controls.
Comments on this proposal are
due July 31, 2009.
IASB Update -- IASB
Discusses Global Financial Crisis and Other Matters
For detail, please contact info@zy-cpa.com
As reported in its "IASB
Update" publication, the IASB met on March 16-20, 2009, and discussed the
following items:
-Global financial crisis;
-Conceptual framework;
-Emissions trading schemes;
-Financial instruments with
characteristics of equity;
-IFRIC;
-IFRS for non-publicly
accountable entities;
-Insurance contracts;
-Post-employment benefits;
-Revenue recognition;
-Annual improvements; and
-Updates on recent meetings
of the Standards Advisory Council and the Analyst Representative Group.
Some of the documents
listed above may not be accessible under your current subscription. For
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AUDITING AND INTERNAL
CONTROLS HEADLINES:
=======================================
TARP -- GAO Publishes
Status Report
For detail, please contact info@zy-cpa.com
On October 3, 2008, the
Emergency Economic Stabilization Act of 2008 was signed into law. The act established
the Office of Financial Stability (OFS) within the Department of the Treasury
and authorized the Troubled Asset Relief Program (TARP). Every 60 days, the
U.S. Comptroller General is required to report on a variety of areas associated
with the oversight of TARP. On March 31, 2009, the Government Accountability
Office (GAO) issued a report, Troubled Asset Relief Program: March 2009
Status of Efforts to Address Transparency and Accountability Issues. This
report follows up on GAO recommendations made in a previous TARP report. In
addition, this report reviews:
-The nature and purpose of
activities that had been initiated under TARP as of March 27, 2009;
-The OFS’s
hiring efforts, use of contractors, and progress in developing an internal
control system; and
-TARP performance indicators.
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:
======================
TARP -- GAO Publishes Status
Report
For detail, please contact info@zy-cpa.com
As discussed above in our
Auditing and Internal Controls Summaries, on October 3, 2008, the Emergency
Economic Stabilization Act of 2008 was signed into law. The act established the
Office of Financial Stability (OFS) within the Department of the Treasury and
authorized the Troubled Asset Relief Program (TARP). Every 60 days, the U.S.
Comptroller General is required to report on a variety of areas associated with
the oversight of TARP. On March 31, 2009, the Government Accountability Office
(GAO) issued a report, Troubled Asset Relief Program: March 2009 Status of
Efforts to Address Transparency and Accountability Issues. This report
follows up on GAO recommendations made in a previous TARP report. In addition,
this report reviews:
-The nature and purpose of
activities that had been initiated under TARP as of March 27, 2009;
-The OFS’s
hiring efforts, use of contractors, and progress in developing an internal
control system; and
-TARP performance indicators.
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