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Accounting Research Manager(TM)
Weekly Summary of Developments
January 24-28, 2011
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Weekly Summary.
Accounting and SEC Headlines
Executive Compensation -- SEC Adopts Rules for "Say-on-Pay" Votes
and Golden Parachute Compensation
SEC Rules -- SEC Proposes Revised Definition of an "Accredited
Investor"
Pensions -- Defined Benefit Plans and Other Postretirement Benefit Obligations
Discussed
Fair Value -- Interpretation Updated
Inflation Rates -- Interpretation Updated on Inflation Rates for
Judging Whether an Economy Is Highly Inflationary
Financial Instruments -- FASB Discusses Accounting for Financial
Instruments
Auditing and Internal Controls Headlines
Quality Control Standards -- SQCS 8 Discussed
Government Headlines
Financial Reporting Entity -- GASB 61 Discussed
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ACCOUNTING AND SEC HEADLINES:
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Executive Compensation -- SEC Adopts Rules
for "Say-on-Pay" Votes and Golden Parachute Compensation
For detail, please contact info@zy-cpa.com
The SEC has issued a final rule, Shareholder
Approval of Executive Compensation and Golden Parachute Compensation. This
final rule adopts rules regarding shareholder approval of executive
compensation (say-on-pay) and golden parachute compensation arrangements as
required under the “Dodd-Frank Wall Street Reform and Consumer Protection Act”
(Dodd-Frank Act).
The SEC’s new rules provide shareholders with a
non-binding vote on executive compensation. The new rules specify that
say-on-pay votes required under the Dodd-Frank Act must occur at least once
every three years. Companies must also hold a "frequency" vote at
least once every six years in order to allow shareholders to decide how often
they would like to be presented with the say-on-pay vote. Following the
frequency vote, a company must disclose on Form 8-K how often it will hold the
say-on-pay vote.
Companies must comply with the new rules on
say-on-pay votes beginning with the first annual shareholders meeting taking
place on or after January 21, 2011. The SEC adopted a temporary exemption for
smaller reporting companies (public float of less than $75 million) regarding
the say-on-pay votes. These smaller companies are not required to conduct
say-on-pay and frequency votes until annual meetings occurring on or after
January 21, 2013.
The new rules adopted by the SEC also require
companies to provide additional disclosure regarding golden parachute
compensation arrangements with certain executive officers in connection with
merger transactions. Disclosure is required of all agreements and
"understandings" that the acquiring and target companies have with
the named executive officers of both companies. The rule requires this
disclosure in both narrative and tabular formats. Companies are required to
comply with the golden parachute compensation shareholder advisory vote and
disclosure requirements in proxy statements and other schedules and forms
initially filed on or after April 25, 2011.
SEC Rules -- SEC Proposes Revised Definition
of an "Accredited Investor"
For detail, please contact info@zy-cpa.com
The SEC has issued for public comment a
proposed rule, Net Worth Standard for Accredited
Investors. This proposal would amend the definition of an “accredited
investor” included in SEC rules. Specifically, the proposal reflects the
requirements of Section 413(a) of the Dodd-Frank Act which requires this
definition to exclude the value of a person’s primary residence for purposes of
determining whether the person qualifies as an “accredited investor” on the
basis of having a net worth in excess of $1 million.
Comments on this proposal are due March 11,
2011.
Pensions -- Defined Benefit Plans and Other
Postretirement Benefit Obligations Discussed
For detail, please contact info@zy-cpa.com
We have published a Hot Topic, “Defined Benefit
Pension and Other Postretirement Benefit Obligations - Current Trends.” In this
year-end publication, we have traditionally discussed the appropriate discount
rates companies should use when measuring their defined benefit pension and
other postretirement benefit obligations as well as certain other measurement
considerations and disclosure requirements. However, due to the continued
effect of the changing financial market conditions, we have chosen to again
provide additional focus on our discussion of discount rates, rates of return,
and market-related value of plan assets. We also discuss other current issues
related to employer funding of and accounting for defined benefit and other
postretirement benefit plans, such as:
-"Pension Protection Act of 2006";
-"Pension Relief Act of 2010";
-"Patient Protection and Affordable Care
Act," as amended by the "Health Care and Education Reconciliation
Act"; and the
-Future of U.S. GAAP and IFRS convergence.
See our Hot Topic for complete details.
Fair Value -- Interpretation Updated
For detail, please contact info@zy-cpa.com
We have updated our publication, Interpretations
of Topic 820, Fair Value Measurements and Disclosures (formerly known as Interpretations
of FASB Statement 157). We have added Section G, “Proposals to Change Fair
Value Accounting - Scope, Presentation, And Disclosures,” dealing primarily
with the effect of two proposed Accounting Standards Updates (ASUs) on guidance related to fair value in the FASB
Accounting Standards Codification™.
See our Literature Update for complete details.
Inflation Rates -- Interpretation Updated on
Inflation Rates for Judging Whether an Economy Is Highly Inflationary
For detail, please contact info@zy-cpa.com
Our interpretation, Inflation Rates for
Judging Whether an Economy Is Highly Inflationary - December 2010, has been
issued and reflects the latest available inflation rate information. Since our
September 2010 update,
See our Literature Update for complete details.
Financial Instruments -- FASB Discusses
Accounting for Financial Instruments
For detail, please contact info@zy-cpa.com
As reported in its "Summary of Board
Decisions" publication, the FASB met on January 25, 2011, and discussed
the accounting for financial instruments. Specifically, the FASB discussed the
business strategy criterion for classifying and measuring financial assets. The
FASB tentatively decided that classification and measurement of financial
assets should align with an entity’s primary business activities. The FASB also
tentatively decided that application of the business strategy criterion would
generally result in the following three categories for financial assets:
-Fair Value - Net Income - Financial
assets for which an entity’s business activity is trading or holding for sale,
would be classified in the fair value measurement with all changes in fair
value recognized in net income category.
-Fair Value - Other Comprehensive Income
- Financial assets for which an entity’s business activity is investing with a
focus on managing risk exposures and maximizing total return, would be
classified in the fair value measurement with qualifying changes in fair value
recognized in other comprehensive income category.
-Amortized Cost - Financial assets for which an entity’s business strategy is managing
the assets for the collection of contractual cash flows through a lending or
customer financing activity, would be measured at amortized cost.
This is a change from the FASB's
May 2010 proposed ASU, Accounting for Financial Instruments and Revisions to
the Accounting for Derivative Instruments and Hedging Activities, which
called for financial instruments to be measured at fair value, with changes in
fair value recognized in net income, unless an instrument qualified and an
entity elected to have fair value changes recognized in other comprehensive
income.
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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Quality Control Standards -- SQCS 8
Discussed
For detail, please contact info@zy-cpa.com
We have added a GAAS Update Service that
provides discussion and analysis of AICPA Statement on Quality Control
Standards (SQCS) No. 8, A Firm’s System of Quality Control (Redrafted),
which will supersede SQCS 7 of the same name. SQCS 8 has been drafted in
accordance with the ASB’s clarity drafting
conventions and does not change or expand SQCS 7 in any significant respect.
Among other matters, SQCS 8:
-Requires a firm’s system of quality control to
include policies and procedures that address each of the following six elements
of quality control: leadership responsibilities for quality within the firm
(“the tone at the top”); relevant ethical requirements; acceptance and
continuance of client relationships and specific engagements; human resources;
engagement performance; and monitoring;
-Requires firms to establish policies and
procedures for addressing and resolving differences of opinion within the
engagement team, including a requirement that reports not to be released until
the related matter is resolved;
-Requires firms to establish criteria to
determine which engagements are subject to an engagement quality control
review; and
-Provides detailed guidance on policies and
procedures relevant to human resources, including those relating specifically
to the engagement partner and the assignment of engagement teams.
SQCS 8 is applicable to a CPA firm’s system of
quality control for its accounting and auditing practice as of January 1, 2012.
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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GOVERNMENT HEADLINES:
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Financial Reporting Entity -- GASB 61
Discussed
For detail, please contact info@zy-cpa.com
We have added a Governmental GAAP Update
Service that provides a detailed review of GASB Statement No. 61, Financial Reporting
Entity: Omnibus. GASB 61 is intended to improve the information presented
about the financial reporting entity, which is comprised of a primary
government and related entities. This update discusses the following topics:
-Presentation of component unit information;
-Blending component units;
-Equity interests;
-Note to basic financial statement disclosure;
-Joint ventures;
-Effective date and transition; and
-Updated decision trees included in GASB 61.
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