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Accounting Research
Manager(TM)
Weekly Summary of
Developments
December 20-22, 2010
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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
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of this week's Weekly Summary.
Accounting and SEC
Headlines
Other Expenses -- FASB Provides Pharmaceutical
Manufacturers Fee Expense Guidance
Goodwill -- FASB Amends Goodwill Impairment Test
Business Combinations -- FASB Issues Guidance on Disclosure of
Pro Forma Information
New Accounting Standards -- Checklist Updated
Health Insurers -- FASB Proposes Health Insurers Fee
Expense Guidance
Revenue Recognition -- FASB Proposes Health Care Entity
Revenue Presentation Guidance
Fair Value Measurement -- FASB Discusses Fair Value Measurement
and Other Matters
EITF Matters -- November 19, 2010 Meeting Minutes
Published
Contingencies -- PCAOB Publishes Staff Practice Alert
on Auditor Consideration of Litigation and Other Contingencies
Asset-Backed Securities -- SEC Adopts Extension of Filing
Accommodation for Static Pool Information
Income Taxes -- IASB Issues IAS 12 Amendment
International Accounting -- 2011 Edition of International
Accounting/Financial Reporting Guide Published
Inflation -- IASB Amends IFRS 1
Auditing and Internal
Controls Headlines
Materiality in Planning
and Performing an Audit
-- Clarified Statement on Auditing Standards Discussed
Independence -- AICPA Publishes SSAE No. 17
AICPA Professional
Standards -- Checklist
Updated
Contingencies -- PCAOB Publishes Staff Practice Alert
on Auditor Consideration of Litigation and Other Contingencies
Government Headlines
Service Concession
Arrangements -- GASB 60
Issued
Financial Reporting Entity
-- GASB 61 Issued
GASB Standards -- GASB 60, 61 and 62 Discussed
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ACCOUNTING AND SEC HEADLINES:
=============================
Other Expenses -- FASB Provides Pharmaceutical
Manufacturers Fee Expense Guidance
For detail, please contact info@zy-cpa.com
The FASB has issued
Accounting Standards Update (ASU) No. 2010-27, Other
Expenses (Topic 720): Fees Paid to the Federal Government by Pharmaceutical
Manufacturers. This ASU provides guidance resulting from EITF Issue No.
10-D on how pharmaceutical manufacturers should recognize and classify in their
income statements fees mandated by the Patient Protection and Affordable Care
Act as amended by the Health Care and Education Reconciliation Act (the Acts).
The Acts impose an annual fee
on the pharmaceutical manufacturing industry for each calendar year beginning
on or after January 1, 2011. An entity’s portion of the annual fee is payable
no later than September 30 of the applicable calendar year and is not tax
deductible. A portion of the annual fee will be allocated to individual
entities on the basis of the amount of their branded prescription drug sales
for the preceding year as a percentage of the industry’s branded prescription
drug sales for the same period. An entity’s portion of the annual fee becomes
payable to the U.S. Treasury once a pharmaceutical manufacturing entity has a
gross receipt from branded prescription drug sales to any specified government
program or in accordance with coverage under any government program for each
calendar year beginning on or after January 1, 2011.
The amendments in this ASU
specify that the liability for the fee should be estimated and recorded in full
upon the first qualifying sale with a corresponding deferred cost that is
amortized to expense using a straight-line method of allocation unless another
method better allocates the fee over the calendar year that it is payable.
The amendments in this ASU
are effective for calendar years beginning after December 31, 2010, when the
fee initially becomes effective.
Goodwill -- FASB Amends Goodwill Impairment Test
For detail, please contact info@zy-cpa.com
The FASB has issued ASU No.
2010-28, Intangibles - Goodwill and Other (Topic 350): When to Perform Step
2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative
Carrying Amounts. This ASU reflects the decision reached in EITF Issue No.
10-A. The amendments in this ASU modify Step 1 of the goodwill impairment test
for reporting units with zero or negative carrying amounts. For those reporting
units, an entity is required to perform Step 2 of the goodwill impairment test
if it is more likely than not that a goodwill impairment exists. In determining
whether it is more likely than not that a goodwill
impairment exists, an entity should consider whether there are any adverse
qualitative factors indicating that an impairment may exist. The qualitative
factors are consistent with the existing guidance and examples, which require that
goodwill of a reporting unit be tested for impairment between annual tests if
an event occurs or circumstances change that would more likely than not reduce
the fair value of a reporting unit below its carrying amount.
For public entities, the
amendments in this ASU are effective for fiscal years, and interim periods
within those years, beginning after December 15, 2010. Early adoption is not
permitted. For nonpublic entities, the amendments are effective for fiscal
years, and interim periods within those years, beginning after December 15,
2011. Nonpublic entities may early adopt the amendments using the effective
date for public entities.
Business Combinations -- FASB Issues Guidance on Disclosure
of Pro Forma Information
For detail, please contact info@zy-cpa.com
The FASB has issued ASU
2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro
Forma Information for Business Combinations. This ASU reflects the decision
reached in EITF Issue No. 10-G. The amendments in this ASU affect any public
entity as defined by Topic 805, Business Combinations, that enters into business
combinations that are material on an individual or aggregate basis.
The amendments in this ASU
specify that if a public entity presents comparative financial statements, the
entity should disclose revenue and earnings of the combined entity as though
the business combination(s) that occurred during the current year had occurred
as of the beginning of the comparable prior annual reporting period only. The
amendments also expand the supplemental pro forma disclosures to include a
description of the nature and amount of material, nonrecurring pro forma
adjustments directly attributable to the business combination included in the
reported pro forma revenue and earnings.
The amendments are effective
prospectively for 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, 2010. Early adoption is permitted.
New Accounting Standards
-- Checklist Updated
For detail, please contact info@zy-cpa.com
We have updated our
publication "Summary Checklist of Recent Authoritative U.S. Accounting
Standards." This checklist is intended to serve as a reference tool to
help users ensure that they have considered authoritative standards recently
issued or approved by the FASB. The checklist is updated shortly after the FASB
adds content to the Codification. The standards are listed by source and a
summary of the transition guidance is provided with a reference to the relevant
Codification paragraph(s). Effective dates and application (adoption)
requirements are also presented.
We have updated our checklist
to reflect the issuance of ASU 2010-27, 2010-28 and 2010-29 discussed above.
See our Literature Update for
complete details.
Health Insurers -- FASB
Proposes Health Insurers Fee Expense Guidance
For detail, please contact info@zy-cpa.com
The FASB has issued for
public comment a proposed ASU, Other Expenses (Topic 720): Fees Paid to the
Federal Government by Health Insurers. The objective of this proposed ASU
is to address questions on how health insurers should recognize and classify in
their income statements fees mandated by the Acts. This ASU reflects the
decisions reached in EITF Issue No. 09-H.
The Acts impose an annual fee on health
insurers for each calendar year beginning on or after January 1, 2014. A health
insurer’s portion of the annual fee is payable no later than September 30 of
the applicable calendar year and is not tax deductible. A portion of the annual
fee will be allocated to individual health insurers based on the ratio of both
of the following amounts incurred by individual health insurers in relation to
the amounts incurred by all covered entities: (a) the amount of their
net premiums written with respect to health insurance for any U.S. health risk
that is written during the preceding calendar year; plus (b) 200% of the
covered entity’s third-party administrative agreement fees. A health insurance
entity’s portion of the annual fee becomes payable to the U.S. Treasury once
the entity provides health insurance for any U.S. health risk for each applicable
calendar year.
The amendments in this
proposal specify that the liability for the fee should be estimated and
recorded in full once the entity provides qualifying health insurance in the
applicable calendar year in which the fee is payable with a corresponding
deferred cost that is amortized to expense using a straight-line method of
allocation unless another method better allocates the fee over the calendar
year that it is payable. Additionally, the proposal indicates that the fee
would not meet the definition of an "acquisition cost" as amended by
FASB ASU No. 2010-26, Financial Services-Insurance (Topic 944): Accounting
for Costs Associated with Acquiring or Renewing Insurance Contracts.
As proposed, this ASU would
be effective for calendar years beginning after December 31, 2013, when the fee
initially becomes effective.
Comments on this proposal are
due by April 18, 2011.
Revenue Recognition --
FASB Proposes Health Care Entity Revenue Presentation Guidance
For detail, please contact info@zy-cpa.com
The FASB has issued for
public comment a proposed ASU, Health Care Entities (Topic 954):
Presentation and Disclosure of Net Revenue, Provision for Bad Debts, and the
Allowance for Doubtful Accounts. The amendments in this proposed ASU would
require a health care entity to change the presentation of its statement of
operations by reclassifying the provision for bad debts from an operating
expense to a reduction from revenue (net of contractual allowances and
discounts). Additionally, a health care entity would be required to provide
enhanced disclosure about how it considers collectibility
in determining the amount and timing of revenue and bad debt expense. The
amendments also would require disclosures of revenue, net of contractual
allowances and discounts, as well as a reconciliation of the activity in the
allowance for doubtful accounts by major payor type.
The effective date for the
amendments in this proposal will be determined after the EITF considers the
feedback on the proposed amendments.
Comments on this proposal are
due February 15, 2011.
Fair Value Measurement -- FASB Discusses Fair Value
Measurement and Other Matters
For detail, please contact info@zy-cpa.com
As reported in its
"Summary of Board Decisions" publication, the FASB met on December
21, 2010, and discussed the following issues: (a) fair value
measurement; and (b) accounting for financial instruments:
classification and measurement. The FASB continued its deliberations on its
project on fair value measurement and tentatively decided not to permit
exceptions for nonpublic entities to the fair value principles and concepts
applicable to the measurement of fair value in the amendments to Topic 820, Fair
Value Measurements and Disclosures. The FASB tentatively decided that the
amendments to Topic 820 will require nonpublic entities to disclose a number of
items, including the current use when a nonfinancial
asset is measured subsequently at fair value and the highest and best use of
the asset differs from its current use as well as the reasons why the asset is
being used in a manner that differs from its highest and best use. The FASB
also tentatively decided that nonpublic entities will not be required to
disclose the following:
-The level in which a fair
value measurement would be categorized within the fair value hierarchy for
assets and liabilities not recognized at fair value but for which disclosure of
fair value is required;
-Transfers between Levels 1
and 2 of the fair value hierarchy; and
-A qualitative discussion
about the sensitivity of a Level 3 fair value measurement to changes in
unobservable inputs and any inter-relationships between those inputs that
magnify or mitigate the effect on the measurement.
EITF Matters -- November 19, 2010 Meeting Minutes
Published
For detail, please contact info@zy-cpa.com
The final meeting minutes of
the November 19, 2010 EITF meeting have been issued. The minutes document the
results previously described in our EITF Flash Report. As discussed in the
minutes, the EITF reached a final consensus on:
-EITF Issue No. 09-H,
"Health Care Entities: Presentation and Disclosure of Net Revenue,
Provision for Bad Debts, and the Allowance for Doubtful Accounts" (see
discussion of proposed ASU above);
-EITF Issue No. 10-A,
"When to Perform Step 2 of the Goodwill Impairment Test for Reporting
Units with Zero or Negative Carrying Amounts" (see discussion of ASU
2010-28 above);
-EITF Issue No. 10-D, "Fees
Paid to the Federal Government by Pharmaceutical Manufacturers" (see
discussion of ASU 2010-27 above); and
-EITF Issue No. 10-G,
"Disclosure of Supplementary Pro Forma Information for Business
Combinations" (see discussion of ASU 2010-29 above).
Contingencies -- PCAOB Publishes Staff Practice
Alert on Auditor Consideration of Litigation and Other Contingencies
For detail, please contact info@zy-cpa.com
The PCAOB has issued Staff
Audit Practice Alert No. 7, Auditor Considerations of Litigation and Other
Contingencies Arising from Mortgage and Other Loan Activities. This Alert
advises auditors that the potential risks and costs associated with mortgage
and foreclosure-related activities or exposures, such as those discussed in
recent "Dear CFO" letters issued by the SEC staff that could have
implications for audits of financial statements or of internal control over financial
reporting. These implications might include accounting for litigation or other
loss contingencies and the related disclosures. Auditors should consider the
effect of these matters during their reviews of interim financial information,
year-end audits, and attestation engagements on assessments of compliance with
servicing criteria.
Asset-Backed Securities --
SEC Adopts Extension of Filing Accommodation for Static Pool Information
For detail, please contact info@zy-cpa.com
The SEC has issued a final
rule, Extension of Filing Accommodation for Static Pool Information in
Filings With Respect to Asset-Backed Securities. This final rule includes
an amendment to Rule 312 of Regulation S-T to further extend its application
for eighteen months. Rule 312 provides a temporary filing accommodation for
filings with respect to asset-backed securities that allows static pool
information required to be disclosed in a prospectus of an asset-backed issuer
to be provided on an Internet website under certain conditions. Under this
rule, such information is deemed to be included in the prospectus included in
the registration statement for the asset-backed securities. As a result of the
extension, the rule will apply to filings with respect to asset-backed
securities filed on or before June 30, 2012.
This final rule is effective
December 31, 2010.
Income Taxes -- IASB
Issues IAS 12 Amendment
For detail, please contact info@zy-cpa.com
The IASB issued amendments to
IAS 12, Income Taxes. The amendments, discussed in Deferred Tax:
Recovery of Underlying Assets, result from proposals published for public
comment in an exposure draft in September 2010. IAS 12 requires an entity to
measure the deferred tax relating to an asset depending on whether the entity
expects to recover the carrying amount of the asset through use or sale. It can
be difficult and subjective to assess whether recovery will be through use or
through sale when the asset is measured using the fair value model in IAS 40, Investment
Property. Therefore, the amendment provides a practical solution to the
problem by introducing a presumption that recovery of the carrying amount will
normally be through sale.
As a result of the
amendments, SIC-21, Income Taxes-Recovery of Revalued Non-Depreciable
Assets, would no longer apply to investment properties carried at fair
value. The amendments also incorporate into IAS 12 the remaining guidance
previously contained in SIC-21, which is now withdrawn.
International Accounting -- 2011 Edition of International
Accounting/Financial Reporting Guide Published
For detail, please contact info@zy-cpa.com
We have published the 2011
edition of the International Accounting/Financial Reporting Standards Guide.
The primary objective of this publication is to provide a resource for those
who need to understand or interpret financial statements prepared following
accounting principles issued by the IASB. This edition of the publication has
been updated to incorporate new and revised international accounting and
reporting requirements through early September 2010 relating to financial
statements for years beginning on or after January 1, 2011.
See our Literature Update for
complete details.
Inflation -- IASB Amends IFRS 1
For detail, please contact info@zy-cpa.com
The IASB has issued Severe
Hyperinflation and Removal of Fixed Dates for First-time Adopters: Amendments
to IFRS 1. This guidance replaces references to a fixed date of
"January 1, 2004" with "the date of transition to IFRSs," thus eliminating the need for companies
adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of
transition to IFRSs. This guidance is intended to
provide relief for first time adopters of IFRSs from
having to reconstruct transactions that occurred before their date of transition
to IFRSs. In addition, this guidance provides how an
entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply
with IFRSs because its functional currency was
subject to severe hyperinflation.
Entities are required to
apply the amendments for annual periods beginning on or after July 1, 2011.
Earlier application 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
=======================================
AUDITING AND INTERNAL
CONTROLS HEADLINES:
=======================================
Materiality in Planning
and Performing an Audit
-- Clarified Statement on Auditing Standards Discussed
For detail, please contact info@zy-cpa.com
We have added a GAAS Update
Service that provides discussion and analysis of a clarified Statement on
Auditing Standards (SAS), Materiality in Planning and Performing an Audit,
which was issued as part of the AICPA's Clarity
Project. The clarified SAS will supersede SAS 107 (AU Section 312), Audit
Risk and Materiality in Conducting an Audit, and addresses the auditor’s
responsibility to apply the concept of materiality in planning and performing a
financial statement audit.
The clarified SAS is
effective for audits of financial statements for periods ending on or after
December 15, 2012.
The AICPA’s
Clarity Project is intended to make existing U.S. generally accepted auditing
standards (GAAS) easier to understand, apply, and move toward converging U.S.
GAAS with International Standards on Auditing issued by the International
Auditing and Assurance Standards Board. For further information on the AICPA's Clarity Project, see our previously published
discussion and analysis in our publication "A Closer Look."
For detail, please contact info@zy-cpa.com
The Auditing and Review
Services Committee of the AICPA has issued Statement on Standards for
Attestation Engagements (SSAE) No. 17, Reporting on Compiled Prospective
Financial Statements When the Practitioner’s
SSAE 17 is effective for
compilations of prospective financial statements for periods ending on or after
December 15, 2010. Early application is permitted.
AICPA Professional
Standards -- Checklist Updated
For detail, please contact info@zy-cpa.com
We have updated our
publication "Summary Checklist of Recent Authoritative AICPA Professional
Standards." This checklist is intended to serve as a reference used to
review those engagement and other related authoritative standards recently
issued by the AICPA.
We have updated our checklist
to reflect the issuance of SSAE 17, discussed above. The checklist has also
been updated for the release of Statements on Quality Control Standards No. 8, A
Firm’s System of Quality Control (Redrafted), issued in November 2010 by
the Auditing Standards Board of the AICPA.
See our Literature Update for
complete details.
Contingencies -- PCAOB Publishes Staff Practice
Alert on Auditor Consideration of Litigation and Other Contingencies
For detail, please contact info@zy-cpa.com
As discussed above in our
Accounting and SEC Summaries, the PCAOB has issued Staff Audit Practice Alert
No. 7, Auditor Considerations of Litigation and Other Contingencies Arising
from Mortgage and Other Loan Activities. This Alert advises auditors that
the potential risks and costs associated with mortgage and foreclosure-related
activities or exposures, such as those discussed in recent "Dear CFO"
letters issued by the SEC staff, that could have
implications for audits of financial statements or of internal control over
financial reporting. These implications might include accounting for litigation
or other loss contingencies and the related disclosures. Auditors should
consider the effect of these matters during their reviews of interim financial
information, year-end audits, and attestation engagements on assessments of
compliance with servicing criteria.
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:
======================
Service Concession
Arrangements -- GASB
60 Issued
For detail, please contact info@zy-cpa.com
The GASB has issued GASB
Statement No. 60, Accounting and Financial Reporting for Service Concession
Arrangements. GASB 60 addresses how to account for and report service
concession arrangements (SCAs), a type of
public-private or public-public partnership that state and local governments
are increasingly entering into. Common examples of SCAs
include long-term arrangements in which a government (the
"transferor") engages a company or another government (the
"operator") to operate a major capital asset in return for the right
to collect fees from users of the capital asset. In these SCAs,
the operator generally makes a large up-front payment to the transferor.
Alternatively, the operator may build a new capital asset for the transferor
and operate it on the transferor's behalf.
The requirements of GASB 60
are effective for financial statements for periods beginning after December 15,
2011. In general, its provisions are required to be applied retroactively for
all periods presented.
Financial Reporting Entity
-- GASB 61 Issued
For detail, please contact info@zy-cpa.com
The GASB has issued GASB
Statement No. 61, The Financial Reporting Entity: Omnibus. GASB 61 is
designed to improve financial reporting for governmental entities by amending
the requirements of GASB Statement No. 14, The Financial Reporting Entity,
and GASB Statement No. 34, Basic Financial Statements-and Management's
Discussion and Analysis-for State and Local Governments, to better meet the
needs of users and address reporting entity issues that have come to light
since GASB 14 and GASB 34 were issued in 1991 and 1999, respectively.
GASB 61 is intended to
improve the information presented about the financial reporting entity, which
is comprised of a primary government and related entities (component units). In
addition, GASB 61 amends the criteria for blending - reporting component units
as if they were part of the primary government - in certain circumstances.
The requirements of GASB 61
are effective for financial statements for periods beginning after June 15,
2012. Earlier application is encouraged.
GASB Standards -- GASB 60, 61 and 62 Discussed
For detail, please contact info@zy-cpa.com
We have added a Governmental
GAAP Update Service that discusses the issuance of GASB 60 and 61. See our
discussion of GASB 60 and 61 above. In addition, this update discusses the
expected issuance of GASB Statement No. 62, Codification of Pre-November 30,
1989 FASB and AICPA Pronouncements, which is expected to provide a complete
set of all pre-November 30, 1989 FASB and AICPA pronouncements that are
currently in place and in use by governments.
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