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Accounting Research Manager(TM)
Weekly Summary of Developments
January 31 - February 4, 2011
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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 Internet access to the Accounting Research Manager database, below is the text of this week's Weekly Summary.

Accounting and SEC Headlines

AICPA National Conference on Current SEC and PCAOB Developments -- Newsletter Issued
Offsetting -- IASB and FASB Propose Guidance for Offsetting Financial Assets and Financial Liabilities
Financial Assets -- Boards Issue Supplementary Documents on Impairment Accounting
Troubled Debt Restructurings -- FASB Discusses Troubled Debt Restructurings and Other Matters
Revenue Recognition -- Boards Discuss Revenue Recognition and Other Matters
Financial Instruments -- Boards Discuss Financial Instruments and Other Matters

Auditing and Internal Controls Headlines

Tax Services -- AICPA Issues Proposed Interpretations on Tax Return Positions
Engagement Standards -- Chapters Updated

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ACCOUNTING AND SEC HEADLINES:
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AICPA National Conference on Current SEC and PCAOB Developments -- Newsletter Issued
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We have prepared a newsletter that documents the significant accounting, reporting and auditing matters discussed at the AICPA National Conference on Current SEC & PCAOB Developments held on December 6-8, 2010. This annual conference addresses common financial reporting issues that companies should be considering when preparing their financial statements. We believe this newsletter may be of interest to nonpublic companies and their auditors as well because a number of general interest accounting topics were discussed at the conference. Our newsletter compliments our Literature Update dated December 10, 2010, that was issued immediately after this conference.

See our Literature Update for complete details.

Offsetting -- IASB and FASB Propose Guidance for Offsetting Financial Assets and Financial Liabilities

The FASB and the IASB (the Boards) have published for public comment the following proposals to establish a common approach to offsetting financial assets and financial liabilities on the balance sheet:

-FASB Exposure Draft, Balance Sheet (Topic 210): Offsetting; and
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-IASB Exposure Draft, Offsetting Financial Assets and Financial Liabilities.
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Under the proposals, an entity would be required to offset a recognized eligible asset and a recognized eligible liability when it has an unconditional and legally enforceable right of setoff and intends either to settle the asset and liability on a net basis or to realize the asset and settle the liability simultaneously. The proposals clarify that these offsetting criteria would apply whether the right of setoff arises from a bilateral arrangement or from a multilateral arrangement. The proposals also clarify that a right of setoff must be legally enforceable in all circumstances (including default or bankruptcy of a counterparty) and that its exercisability must not be contingent on a future event. The proposals would require an entity to disclose information about offsetting and related arrangements, such as collateral agreements, to enable financial statement users to understand the effect of those arrangements on the balance sheet.

Comments on the proposals are due by April 28, 2011.

Financial Assets -- Boards Issue Supplementary Documents on Impairment Accounting

The Boards have published for public comment the following supplementary documents on the accounting for the impairment of financial assets such as loans managed in an open portfolio:

-FASB Supplementary Document, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities - Impairment; and
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-IASB Supplementary Document, Financial Instruments - Impairment.
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IFRS and U.S. GAAP currently provide for credit losses to be accounted for using an incurred loss model, which requires evidence of a loss (known as a trigger event) before financial assets can be written down. The Boards have proposed moving to an expected loss model that provides a more forward-looking approach to how credit losses are accounted for, which they believe better reflects the economics of lending decisions.

These documents supplement the FASB Exposure Draft, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities: Financial Instruments (Topic 825) and Derivatives and Hedging (Topic 815), published in May 2010, and the IASB Exposure Draft, Financial Instruments: Amortised Cost and Impairment, published in November 2009. The two exposure drafts outlined different methods to account for credit impairment. Since then, the Boards have worked to align their approaches. In doing so, they have considered responses to the original exposure drafts and recommendations provided by the Expert Advisory Panel, an external group comprised of risk management experts set up to consider the operational consequences of applying an expected loss model, as well as responses to the FASB proposal.

Comments on the supplementary documents are due April 1, 2011.

Troubled Debt Restructurings -- FASB Discusses Troubled Debt Restructurings and Other Matters
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As reported in its "Summary of Board Decisions" publication, the FASB met on February 3, 2011, and discussed the following topics:

-Troubled debt restructurings;
-Goodwill impairment assessments; and
-Insurance contracts.

The FASB redeliberated issues raised by respondents to the proposed FASB Accounting Standards Update (ASU), Receivables (Topic 310): Clarifications to Accounting for Troubled Debt Restructurings by Creditors, and decided that the project should continue according to the technical plan. The FASB tentatively decided that:

-Paragraph 310-40-15-8A of the proposed ASU should be modified to specify that the absence of a market rate for a loan with risks similar to the restructured loan is an indicator of a troubled debt restructuring, but not a determinative factor, and that this provision should be enhanced by noting that the assessment should consider all of the modified terms of the restructuring, including any additional collateral or guarantees;
-Insignificant delays in cash flows are a factor to consider when determining whether a concession has been granted, and that some additional implementation guidance should be added to any final guidance to assist creditors in applying the guidance;
-For purposes of determining whether a borrower is experiencing financial difficulty, creditors should consider whether default is “probable in the foreseeable future”; and
-For public entities, the clarifications would apply to all restructurings that occur on or after January 1, 2011, whereas nonpublic entities will have an additional year to apply the guidance.

The FASB also discussed initial outreach and research regarding the implications of alternative approaches to assessing goodwill for impairment. The FASB deliberated potential improvements to reduce the cost incurred by nonpublic entities in assessing goodwill for impairment, but did not reach any decisions at this meeting.

Revenue Recognition -- Boards Discuss Revenue Recognition and Other Matters
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As reported in its "Summary of Board Decisions" publication, the Boards met on February 1-2, 2011, and discussed the following topics:

-Revenue recognition;
-Leases; and
-Insurance contracts.

The Boards continued their redeliberations of the Exposure Draft, Revenue from Contracts with Customers, by discussing the accounting for warranties. The Boards decided that an entity should account for some warranties as a warranty obligation in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, or FASB Accounting Standards Codification^TM Topic 450, Contingencies, and other warranties as a cost accrual. Specifically, the Boards decided that if a customer:

-Has the option to purchase a warranty separately from the entity, the entity should account for the warranty as a separate performance obligation and allocate revenue to the warranty service.
-Does not have the option to purchase a warranty separately from the entity, the entity should account for the warranty as a cost accrual unless the warranty provides a service to the customer in addition to assurance that the entity’s past performance was as specified in the contract (in which case the entity would account for the warranty service as a separate performance obligation).

The Boards also discussed their project on leases by examining the definition of a lease and how to distinguish between a lease contract and a service contract. Using some examples, the Boards discussed the application of the following principles to identify a lease:

-Fulfillment of the contract depends on the supplier (lessor) providing a specified asset; and
-The contract conveys to the customer (lessee) the right to control the use of the specified asset.

Financial Instruments -- Boards Discuss Financial Instruments and Other Matters
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As reported in its "IASB Update" publication, the Boards met on January 17-21, 2011, and discussed the following topics:

-Financial instruments: impairment;
-Insurance contracts - comment letter summary;
-Insurance contracts - education session;
-Leases;
-Leases - education session on lessor accounting model(s); and
-Revenue recognition.

In addition, the IASB held a separate meeting to discuss the following topics:

-Annual improvements;
-Assessment of the proposed Annual Improvements qualifying criteria;
-Consolidation and joint arrangements;
-IFRS Interpretations Committee (IFRIC) update;
-Joint arrangements - education session; and
-Post-employment benefits.

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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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Tax Services -- AICPA Issues Proposed Interpretations on Tax Return Positions
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The AICPA has issued for public comment an exposure draft that includes the following proposed interpretations of the AICPA's Statement on Standards for Tax Services (SSTS) No. 1, Tax Return Positions:

-Interpretation No. 1-1, Reporting and Disclosure Standards; and
-Interpretation No. 1-2, Tax Planning.

SSTS 1 provides that a member should not recommend a tax return position or take a position on a tax return that the member prepares unless that position satisfies applicable reporting and disclosure standards. These proposed interpretations revise previous guidance to reflect revisions made to SSTS 1 that became effective January 1, 2010, and to provide members with additional guidance on the application of SSTS 1.

Proposed Interpretation 1-1 contains illustrations regarding the determination of which standards apply as well as illustrations of whether the realistic possibility of success and reasonable basis standards have been satisfied. Proposed Interpretation 1-2 includes references to nonsigning preparers and clarifications to the illustrations. Also, numerous language clarifications are reflected in these two proposed interpretations.

Comments on these proposed interpretations are due May 15, 2011.

Engagement Standards -- Chapters Updated
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We have updated the “Audit Engagements”, "Compilation and Review Engagements", and "Attestation Engagements" chapters of Engagement Standards. Revisions to this publication include new guidance on the following topics:

-Compliance audits;
-Other Information in documents containing audited financial statements;
-Supplementary information;
-Types of misstatements identified during an audit;
-New framework for performing and reporting on compilation and review engagements;
-Reporting on controls at a service organization; and
-Reporting on the design of internal control.

See our Literature Update for complete details.

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