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Accounting Research
Manager(TM)
Weekly Summary of
Developments
April 6-10, 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
Fair Value Measurements -- FASB Issues Guidance for Determining
Fair Value in Inactive Markets
Other-Than-Temporary
Impairments -- FASB
Issues Guidance
Financial Instruments -- FASB Requires Disclosures about Fair
Value of Financial Instruments in Interim Financial Information
Interactive Data -- SEC Staff Publishes Small Entity
Compliance Guide
SEC Actions -- SEC Chairman Discusses Plans for
Future Regulation
Variable Interest Entities -- FASB Discusses Reconsideration of FIN
46R and Other Matters
PCAOB Standing Advisory
Committee -- Minutes of
April 2, 2009 Meeting Published
EITF Matters -- March 19, 2009 Meeting Minutes Issued
Auditing and Internal
Controls Headlines
Compliance Audits -- Proposed AICPA Auditing Standard
Discussed
PCAOB Standing Advisory
Committee -- Minutes of
April 2, 2009 Meeting Published
Government Headlines
Governmental GAAP
Hierarchy -- GASB Issues
Standard for State and Local Governments
Pension Accounting -- GASB Issues Invitation to Comment on
Pension Accounting Proposal
Bankruptcies -- GASB Study of Chapter 9 Bankruptcies
Discussed
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ACCOUNTING AND SEC HEADLINES:
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Fair Value Measurements --
FASB Issues Guidance for Determining Fair Value in Inactive Markets
For detail, please contact info@zy-cpa.com
The FASB has issued FASB
Staff Position (FSP) FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly. This FSP:
-Affirms 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.
-Clarifies and includes
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.
-Eliminates the proposed presumption
that all transactions are distressed (not orderly) unless proven otherwise. The
FSP instead requires an entity to base its conclusion about whether a
transaction was not orderly on the weight of the evidence.
-Includes an example that
provides additional explanation on estimating fair value when the market
activity for an asset has declined significantly.
-Requires 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.
-Applies to all fair value
measurements when appropriate.
FSP FAS 157-4 must be applied
prospectively and retrospective application is not permitted. FSP FAS 157-4 is
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 and FAS 124-2, Recognition
and Presentation of Other-Than-Temporary Impairments, as discussed below.
Other-Than-Temporary
Impairments -- FASB Issues Guidance
For detail, please contact info@zy-cpa.com
The FASB has issued FSP FAS 115-2
and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments. This FSP:
-Changes existing guidance
for determining whether an impairment is other than temporary to debt
securities;
-Replaces 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;
-Incorporates examples of
factors from existing literature that should be considered in determining
whether a debt security is other-than-temporarily impaired;
-Requires that an entity
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;
-Requires an entity 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 FSP FAS 115-2
and FAS 124-2, an entity is 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 and FAS 124-2 is 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.
Financial Instruments --
FASB Requires Disclosures about Fair Value of Financial Instruments in Interim
Financial Information
For detail, please contact info@zy-cpa.com
The FASB has issued FSP FAS
107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments. This FSP amends 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. This FSP also amends APB Opinion No. 28, Interim Financial
Reporting, to require those disclosures in summarized financial information
at interim reporting periods. Under this FSP, a publicly traded company shall
include disclosures about the fair value of its financial instruments whenever
it issues summarized financial information for interim reporting periods. In
addition, an entity shall disclose in the body or in the accompanying notes of its
summarized financial information for interim reporting periods and in its
financial statements for annual reporting periods the fair value of all
financial instruments for which it is practicable to estimate that value,
whether recognized or not recognized in the statement of financial position, as
required by Statement 107.
FSP 107-1 and APB 28-1 is effective for interim 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 and FAS 124-2.
Interactive Data -- SEC
Staff Publishes Small Entity Compliance Guide
For detail, please contact info@zy-cpa.com
The staff of the SEC has
published a Small Entity Compliance Guide, Interactive Data for Financial
Reporting. This guide summarizes and explains amendments adopted by the SEC
that require companies to provide their financial statements in interactive
data format using eXtensible Business Reporting
Language (XBRL) by submitting them to the SEC and posting them on their
corporate websites. The XBRL information is in addition to, rather than instead
of, disclosure in the current electronic filing formats. This guide discusses
the following topics:
-Phase-in rules for required
interactive data information, including due dates and grace periods;
-Optional early compliance;
-Creating required
interactive data;
-Financial statements to
which interactive data requirements apply;
-Website posting of
interactive data;
-Consequences of
noncompliance;
-Hardship exemptions;
-Modified liability;
-Third-party involvement; and
-Certification requirements.
SEC Actions -- SEC
Chairman Discusses Plans for Future Regulation
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SEC Chairman Mary L. Schapiro gave a speech, "Address to the Council of
Institutional Investors." Ms. Schapiro discussed
her plans for ensuring that the SEC is a strong and effective advocate for
investors. Ms. Schapiro discussed several plans for
future regulatory reform and regulations within specific areas, including:
-Enhanced disclosures of
director nominee experiences, qualifications, and skills;
-Bolstering oversight of
credit rating agencies;
-Further regulation and (or)
registration of hedge funds;
-Whether company boards
should be required to disclose to shareholders their reasons for choosing their
particular leadership structure;
-Whether current executive
compensation disclosures accomplish the objective of providing shareholders
with the most relevant information and whether such disclosures make sure
shareholders fully understand how compensation structures and practices drive
an executive’s risk-taking;
-Greater disclosures about
how the company, and in particular its board, manages risk; and
-Ensuring any procedural
requirements for shareholder proxy access are rational and not a means to
thwart effective investor participation.
Variable Interest Entities
-- FASB Discusses Reconsideration of FIN 46R 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 8,
2009, and discussed: (a) reconsideration of FASB Interpretation (FIN)
No. 46 (Revised December 2003), Consolidation of Variable Interest Entities;
and (b) emissions trading schemes. The FASB continued redeliberating its Exposure Draft (ED), Amendments to
FASB Interpretation No. 46(R), and decided to:
-Add a sentence to paragraph
14 of the ED that provides that if an enterprise concludes that power is not
shared but a single activity or group of activities that most significantly
impact the entity’s economic performance are performed by multiple parties and
each party is performing the same activity or activities, the party with the
power over the majority of the activity or activities is the primary
beneficiary of the variable interest entity;
-Modify Example 1 in the ED
so the transferor is not the equity holder and the special servicer
and state that the transferor does not hold a variable interest (even though it
is the primary servicer);
-Modify Example 8 in the ED
to be a situation in which both parties to the transaction are nonfinancial investors and include facts to illustrate the
analysis that would be performed if a conclusion was reached that power was not
shared; and
-Modify Example 9 in the ED
so the debt agreement includes a default provision such that if there is a
default, then the financial investor can take possession of (and manage or
sell) all the assets of the entity.
The FASB also discussed
emissions trading schemes but did not reach any conclusions on the accounting
questions related to initial recognition and measurement of tradeable
offsets that are issued to an entity free of charge in a cap and trade
emissions trading scheme. The FASB did note that the accounting for assets and
liabilities in an emissions trading scheme involves issues that are also being
discussed in the joint conceptual framework project and the IASB project to
amend IAS 37, Provisions, Contingent Liabilities and Contingent Assets.
PCAOB Standing Advisory
Committee -- Minutes of April 2, 2009 Meeting Published
For detail, please contact info@zy-cpa.com
We have published minutes of
the PCAOB Standing Advisory Group meeting held on April 2, 2009. As described
in our minutes, the more significant topics of discussion at this meeting
related to the following: (a) engagement quality review; (b)
audit confirmations; (c) emerging issues and (d) going concern.
EITF Matters -- March 19, 2009
Meeting Minutes Issued
For detail, please contact info@zy-cpa.com
The final meeting minutes of the March 19,
2009 EITF meeting have been issued. The minutes document results previously
described in our Hot Topic dated April 2, 2009: For
detail, please contact info@zy-cpa.com
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 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".
Comments on these two draft
abstracts are due May 5, 2009.
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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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=======================================
AUDITING AND INTERNAL
CONTROLS HEADLINES:
=======================================
Compliance Audits --
Proposed AICPA Auditing Standard Discussed
For detail, please contact info@zy-cpa.com
We have added a GAAS Update
Service that discusses the AICPA's Proposed Statement
on Auditing Standards (SAS), Compliance Audits, which would supersede
SAS No. 74 (AU Section 801), Compliance Auditing Considerations in Audits of
Governmental Entities and Recipients of Governmental Financial Assistance.
Among other matters, the proposed SAS:
-Clarifies the applicability
of the standard;
-Updates the standard for
changes in the compliance audit environment;
-Establishes a requirement
for the auditor to adapt and apply GAAS, including the risk assessment and
fraud standards, to a compliance audit and provides related guidance to
facilitate such application;
-Identifies standards (i.e.,
AU sections) that are applicable to a compliance audit and those that are not
applicable;
-Defines compliance audit
terms;
-Identifies auditor
requirements that are unique to a compliance audit;
-Provides guidance on the
factors an auditor may consider in evaluating whether an entity has materially
complied with the applicable compliance requirements; and
-Identifies the elements to
be included in an auditor’s report on compliance.
As proposed, this SAS would
be effective for compliance audits for periods ending on or after June 15,
2010.
PCAOB Standing Advisory Committee
-- Minutes of April 2, 2009 Meeting Published
For detail, please contact info@zy-cpa.com
As described above in our
Accounting and SEC Summaries, we have published minutes of the PCAOB Standing
Advisory Group meeting held on April 2, 2009. As described in our minutes, the
more significant topics of discussion at this meeting related to the following:
(a) engagement quality review; (b) audit confirmations; (c)
emerging issues and (d) going concern.
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:
======================
Governmental GAAP
Hierarchy -- GASB Issues Standard for State and Local Governments
For detail, please contact info@zy-cpa.com
The GASB has issued GASB
Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles
for State and Local Governments. GASB 55 incorporates the hierarchy of
generally accepted accounting principles (GAAP) for state and local governments
into the GASB's authoritative literature. It is
intended to make it easier for preparers of state and local government
financial statements to identify and apply the "GAAP hierarchy,"
which consists of sources of accounting principles used in the preparation of
financial statements so that they are presented in conformity with GAAP and the
framework for selecting those principles.
GASB 55 is effective
immediately and contributes to the GASB's efforts to
codify all GAAP for state and local governments so that they derive from a
single source.
Pension Accounting -- GASB
Issues Invitation to Comment on Pension Accounting Proposal
The GASB has issued the
following Invitation to Comment (ITC) and related plain-language supplement on
pension accounting:
-ITC, Pension Accounting
and Financial Reporting;
For detail, please contact info@zy-cpa.com
-Plain-Language Supplement, Pension
Accounting and Financial Reporting.
For detail, please contact info@zy-cpa.com
This ITC is intended to
obtain feedback from constituents at an early stage of the GASB's
reexamination of its pension accounting and financial reporting standards. This
ITC addresses key issues related to pension accounting and financial reporting
that were raised during the research phase of this project. The topics
considered in the ITC include:
-The process on which pension
accounting and financial reporting should focus;
-Recognition of liabilities
and expenses;
-Measurement of unfunded
pension obligations;
-The use of actuarial
methods;
-Reporting by government
employers in cost-sharing multiple-employer pension plans; and
-Reporting by pension plans
themselves.
The plain-language supplement
accompanies the ITC and describes key issues raised during the research project
and explores potential approaches to addressing them.
Comments on the ITC are due
by July 31, 2009. A public hearing, during the GASB’s
regular meeting, is scheduled for August 26, 2009, to discuss the issues in
this ITC together with any comments received.
Bankruptcies -- GASB Study
of Chapter 9 Bankruptcies Discussed
For detail, please contact info@zy-cpa.com
We have published a
Governmental GAAP Update Service that discusses the GASB's
project that examines issues related to accounting and financial reporting for
governments that have been granted protection from creditors under Chapter 9 of
the U.S. Bankruptcy Code. The GASB project includes an analysis of the
financial reporting consequences for governments that have been granted
protection, such as these types of debt reorganizations under Chapter 9. The
Update discusses the following topics:
-Relevant existing
authoritative guidance;
-Accounting and financial
reporting considerations covered by the GASB's
project;
-Current project timeline;
and
-Project status and tentative
decisions.
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