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Accounting Research
Manager(TM)
Weekly Summary of
Developments
June 14-18, 2010
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Accounting Research
Manager subscriber,
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Manager database now contains this week's weekly summary of developments. Click
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of this week's Weekly Summary.
Accounting and SEC
Headlines
Balance Sheet Offsetting -- FASB and IASB Discuss Balance Sheet
Offsetting and Other Matters
Financial Reporting -- SEC Staff Discuss Structured
Transactions and IFRS
Insurance Contracts -- Boards Discuss Insurance Contracts and
Other Matters
Auditing and Internal
Controls Headlines
Clarity Project -- AICPA Clarity Project Discussed
Government Headlines
Service Concession
Arrangements -- GASB
Issues Proposal on Accounting for Service Concession Arrangements
Pension Accounting -- GASB Issues Preliminary Views on
Potential Improvements to Pension Standards
Financial Statements -- Project on Statement of Net Position
and Other Matters Discussed
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ACCOUNTING AND SEC HEADLINES:
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Balance Sheet Offsetting
-- FASB and IASB Discuss Balance Sheet Offsetting and Other Matters
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As reported in its
"Summary of Board Decisions" publication, the FASB and IASB (the
Boards) met on June 15-17, 2010, and discussed the following topics:
-Balance sheet offsetting;
-Insurance contracts;
-Leases; and
-Accounting for financial
instruments.
Regarding their project on
balance sheet offsetting, the Boards discussed: (a) whether the
project’s scope should include all assets and liabilities or just financial
assets and financial liabilities; and (b) information needed by the
Boards before the next meeting. The Boards tentatively decided that the focus
of the project should be on financial instruments and other instruments falling
within the scope of a financial instruments standard to achieve greater
convergence of the criteria for balance sheet offsetting under IFRS and U.S.
GAAP. The Boards also requested that the staff obtain more information on the
following:
-The legal enforceability of
the offsetting provisions in "International Swaps and Derivatives
Association" and other similar master netting agreements, especially in
different jurisdictions;
-The legal enforceability of
the right of offset when it is included in a contract other than in a master
netting arrangement (e.g., a bank’s right to offset a deposit payable against a
loan receivable with the same customer when the customer is in default of the
loan);
-The usefulness of offsetting
assets and liabilities in general and in particular the different types of
risks (e.g., credit risk, liquidity risk, and market risk); and
-The operations of central
counter parties (CCPs), the extent of protection
provided by CCPs for transactions that clear through
them, and the legal basis of their operations.
Financial Reporting -- SEC
Staff Discuss Structured Transactions and IFRS
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Paul A. Beswick,
Deputy Chief Accountant in the SEC's Office of the Chief Accountant, gave a
speech discussing: (a) the structuring of transactions to achieve an
accounting result; and (b) the SEC staff's work plan on incorporating
IFRS. Mr. Beswick discussed the historical practice
of practitioners developing models to achieve a desired accounting result and
the move by accounting standard setters to develop more principles-based
accounting rules. Specifically, Mr. Beswick shared
some observations about how judgment should be used in applying the updated
guidance when a company is involved with variable interest entities. This
guidance, originally issued as FASB Statement No. 167, Amendments to FASB
Interpretation No. 46(R), is now reflected in FASB Accounting Standards CodificationTM
Topic 810, Consolidations. Topics discussed by Mr. Beswick
include:
-Nonsubstantive
terms;
-The use of "selling
expected loss notes" to third parties; and
-Shared power.
Mr. Beswick
also provided an overview of the planned efforts by the SEC staff on completing
its IFRS work plan, including in the following areas:
-Studying the development and
application of IFRS;
-Standard setting process;
-How to incorporate IFRS;
-Investor understanding and
education;
-Other regulatory regimes;
-Impact on companies; and
-Human capital.
Insurance Contracts --
Boards Discuss Insurance Contracts and Other Matters
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As reported in its "IASB
Update" publication, the Boards met on June 10, 2010, and discussed the
following topics:
-Insurance contracts; and
-Joint arrangements.
Regarding their project on
insurance contracts, the Boards discussed participating investment contracts
and risk adjustment techniques and made the following decisions:
-The IASB tentatively decided
to include investment contracts that both contain a discretionary participating
feature and also participate in the same pool of assets as participating
insurance contracts within the scope of any final standard on insurance
contracts. In addition, the IASB tentatively decided that the boundary of these
contracts should be defined as the point at which the contract holder no longer
has a contractual right to receive benefits arising from a discretionary
participating feature.
-The FASB tentatively decided
that investment contracts with a discretionary participation feature should be
within the scope of a future standard on financial instruments.
-The Boards directed the
staff to develop draft guidance that describes how techniques for measuring
risk adjustments (e.g., approaches using confidence intervals, conditional tail
expectations or cost of capital) would satisfy the proposed objective and
characteristics of the risk adjustment.
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=======================================
AUDITING AND INTERNAL
CONTROLS HEADLINES:
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Clarity Project -- AICPA
Clarity Project Discussed
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We have published a
discussion and analysis of the Clarity Project of the AICPA. The AICPA’s Auditing Standards Board (ASB) has undertaken the
Clarity Project to make existing
See our Literature Update for
complete details.
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======================
GOVERNMENT HEADLINES:
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Service Concession
Arrangements -- GASB Issues Proposal on Accounting for Service Concession
Arrangements
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The GASB has issued for
public comment a revised Exposure Draft (ED) of a proposed Statement of
Governmental Accounting Standard, Accounting and Financial Reporting for
Service Concession Arrangements. According to the GASB, the objective of
this ED is to establish accounting and financial reporting requirements for
service concession arrangements (SCAs), which are a
type of public-private or public-public partnership arrangement. This ED would
apply only to those arrangements in which specific criteria determining whether
a transferor has control over the facility are met. A transferor would report
the facility subject to an SCA as its capital asset, following existing
measurement, recognition, and disclosure guidance for capital assets. New
facilities constructed or acquired by the operator or improvements to existing
facilities made by the operator would be reported at fair value by the
transferor when the facility is placed into operation, along with a
corresponding deferred inflow of resources that would be reduced in a
systematic and rational manner over the term of the arrangement. This ED would
also require disclosures about an SCA including: (a) a general
description of the arrangement and information about the associated assets and
liabilities; (b) the rights granted and retained; and (c)
guarantees and commitments.
As proposed, the requirements
in this ED would be effective for financial statements for periods beginning
after December 15, 2011. The provisions of this proposal generally would be required
to be applied retroactively for all periods presented.
Comments on this proposal are
due August 17, 2010.
Pension Accounting -- GASB
Issues Preliminary Views on Potential Improvements to Pension Standards
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The GASB has issued a
Preliminary Views document, Pension Accounting and Financial Reporting by
Employers. This document presents the GASB’s
current views on what it believes are the most fundamental issues related to
recognition and measurement of pension obligations by state and local
government employers. The purpose of the document is to obtain comments from
constituents on those views before developing more detailed proposals for
changes to existing accounting and financial reporting standards. In addition
to the issues addressed in the Preliminary Views, the GASB will begin
deliberations in July 2010 on pension note disclosures and supporting
information for government employers and pension plan reporting issues.
The Preliminary Views is part
of the GASB’s overall project to consider
improvements to the existing standards of accounting and financial reporting
for postemployment benefits. The GASB believes the
approach presented in the Preliminary Views document would move governmental
pension accounting and reporting away from the funding orientation that now
exists, and instead introduce recognition and measurement standards that would
be based on the GASB’s conceptual framework,
including information that would help financial statement users better assess
the degree to which interperiod equity has been
achieved.
Comments are due by September
17, 2010.
Financial Statements --
Project on Statement of Net Position and Other Matters Discussed
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The May 2010 edition of the
"GASB Report" has been issued and includes the following discussion
items:
-GASB calendar;
-Project on statement of net
position added to current GASB technical agenda;
-Summary of GASB meeting held
on April 20, 2010; and
-Plain-language articles:
technical activities described in a nontechnical
manner.
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