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Accounting Research Manager(TM)
Weekly Summary of Developments
March 14-18, 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

Leases -- FASB and IASB Agree to Simplify Proposed Short-Term Lease Accounting and Discuss Other Matters
Auditor's Report -- PCAOB Investor Advisory Group Calls for Expanded Disclosure in Auditor's Report
Reverse Mergers -- PCAOB Publishes Research Note on Reverse Mergers from China Region
Contingent Pricing -- IFRS Interpretations Committee Discusses Contingent Pricing and Other Matters

Auditing and Internal Controls Headlines

Single Audits -- New Edition of Knowledge-Based Single Audits Issued
Auditor's Report -- PCAOB Investor Advisory Group Calls for Expanded Disclosure in Auditor's Report
Reverse Mergers -- PCAOB Publishes Research Note on Reverse Mergers from China Region

Government Headlines

GASB Standards -- Additional Guidance on GASB Statements No. 60, 61 and 62 Released
Financial Reporting -- GASB Issues Research Brief

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ACCOUNTING AND SEC HEADLINES:
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Leases -- FASB and IASB Agree to Simplify Proposed Short-Term Lease Accounting and Discuss Other Matters
For detail, please contact info@hkcmcpa.us

As reported in its "Summary of Board Decisions" publication, the FASB and IASB (the Boards) met on March 14-16, 2011, and discussed the following topics:

-Leases;
-Insurance contracts; and
-Accounting for financial instruments: hedge accounting.

The Boards agreed to simplify their proposed accounting for short-term leases. Specifically, the Boards tentatively decided that:

-A short-term lease, for both lessees and lessors, is defined as "a lease that, at the date of commencement of the lease, has a maximum possible term, including any options to renew, of 12 months or less"; and
-Lessees and lessors may elect, as an accounting policy for a class of underlying asset(s), to account for all short-term leases by not recognizing lease assets or lease liabilities and by recognizing lease payments in profit or loss on a straight-line basis over the lease term, unless another systematic and rational basis is more representative of the time pattern in which use is derived from the underlying asset.

The FASB held a separate meeting on March 14, 2011, and discussed goodwill impairment assessments. The FASB discussed the results of the extended outreach performed by its staff, affirmed previous tentative decisions, and directed its staff to prepare an exposure draft proposing a three-step approach to assessing goodwill for impairment. The FASB decided to propose an effective date of fiscal years beginning after December 15, 2011, and to permit early adoption.

Auditor's Report -- PCAOB Investor Advisory Group Calls for Expanded Disclosure in Auditor's Report
For detail, please contact info@hkcmcpa.us

We have prepared a Hot Topic that discusses the PCAOB Investor Advisory Group's finding that the auditor's report on corporate financial statements is essentially a boilerplate document that leaves investors with too little information with which to make an informed investment decision. The group indicates that the status quo on auditor's reports is no longer either appropriate or sustainable. The PCAOB is scheduled to discuss the auditor’s reporting model at its meeting scheduled for March 22, 2011.

See our Hot Topic for complete details.

Reverse Mergers -- PCAOB Publishes Research Note on Reverse Mergers from China Region
For detail, please contact info@hkcmcpa.us

The PCAOB has issued its first public Research Note, which provides new data on the growth of reverse merger transactions involving companies from the China region (i.e., The People's Republic of China (PRC), Hong Kong Special Administrative Region, and Taiwan). The Research Note, “Activity Summary and Audit Implications for Reverse Mergers Involving Companies from the China Region (January 1, 2007 through March 31, 2010),” was prepared to provide further context to the issues discussed in PCAOB Staff Audit Practice Alert No. 6, Auditor Considerations Regarding Using the Work of Other Auditors and Engaging Assistants from Outside the Firm , issued on July 12, 2010.

In recent years, there has been an increase in the number of reverse mergers between private operating companies based in the China region and public shell companies, the securities of which are registered in the United States (referred to here as a “Chinese Reverse Merger” or “CRM”). While reverse merger transactions, including CRMs, are not inherently problematic, CRMs often result in a company with substantially all of its operations in the China region having its securities trade in the U.S., often with its financial statements audited by a U.S. auditor. As stated in the Release Note, based on observations from the inspection process, the PCAOB staff has indicated that it is concerned that some U.S. registered accounting firms may not be conducting audits of companies with operations outside of the U.S. in accordance with PCAOB standards.

The Research Note provides additional data on the market capitalization of the reverse merger companies as well as other such information. The PCAOB hopes to provide more related financial data to investors later this year.

Contingent Pricing -- IFRS Interpretations Committee Discusses Contingent Pricing and Other Matters
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As reported in its "IFRIC Update" publication, the IFRS Interpretations Committee met on March 10-11, 2011, and discussed the following topics:

-Current agenda (contingent pricing, stripping costs, and put options);
-IFRS Interpretations Committee agenda decisions;
-Post-implementation review;
-Work in progress; and
-Vacancies for IFRS Interpretations Committee members.

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For detail, please contact info@hkcmcpa.us

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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Single Audits -- New Edition of Knowledge-Based Single Audits Issued
For detail, please contact info@hkcmcpa.us

We have published the 2011 edition of Knowledge-Based Single Audits. This publication is designed to help the auditor efficiently and effectively perform the compliance audit portion of the single audit in accordance with auditing standards generally accepted in the United States of America (GAAS), Government Auditing Standards (GAGAS), and the audit requirements in Circular A-133 issued by the U.S. Office of Management and Budget.

This edition of the publication includes revisions and updates to reflect current accounting authoritative literature and, among other things, auditing pronouncements through AICPA Statement on Auditing Standards No. 120, Required Supplementary Information. Included is also a discussion regarding the status of the AICPA Auditing Standards Board's Auditing Standards Clarity Project. 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@hkcmcpa.us

See our Literature Update for complete details.

Auditor's Report -- PCAOB Investor Advisory Group Calls for Expanded Disclosure in Auditor's Report
For detail, please contact info@hkcmcpa.us

As discussed above in our Accounting and SEC Summaries, we have prepared a Hot Topic that discusses the PCAOB Investor Advisory Group's finding that the auditor's report on corporate financial statements is essentially a boilerplate document that leaves investors with too little information with which to make an informed investment decision. The group indicates that the status quo on auditor's reports is no longer either appropriate or sustainable. The PCAOB is scheduled to discuss the auditor’s reporting model at its meeting scheduled for March 22, 2011.

See our Hot Topic for complete details.

Reverse Mergers -- PCAOB Publishes Research Note on Reverse Mergers from China Region
For detail, please contact info@hkcmcpa.us

As discussed above in our Accounting and SEC Summaries, the PCAOB has issued its first public Research Note, which provides new data on the growth of reverse merger transactions involving companies from the China region (i.e., The People's Republic of China (PRC), Hong Kong Special Administrative Region, and Taiwan). The Research Note, “Activity Summary and Audit Implications for Reverse Mergers Involving Companies from the China Region (January 1, 2007 through March 31, 2010),” was prepared to provide further context to the issues discussed in PCAOB Staff Audit Practice Alert No. 6, Auditor Considerations Regarding Using the Work of Other Auditors and Engaging Assistants from Outside the Firm, issued on July 12, 2010.

In recent years, there has been an increase in the number of reverse mergers between private operating companies based in the China region and public shell companies, the securities of which are registered in the United States (referred to here as a “Chinese Reverse Merger” or “CRM”). While reverse merger transactions, including CRMs, are not inherently problematic, CRMs often result in a company with substantially all of its operations in the China region having its securities trade in the U.S., often with its financial statements audited by a U.S. auditor. As stated in the Release Note, based on observations from the inspection process, the PCAOB staff has indicated that it is concerned that some U.S. registered accounting firms may not be conducting audits of companies with operations outside of the U.S. in accordance with PCAOB standards.

The Research Note provides additional data on the market capitalization of the reverse merger companies as well as other such information. The PCAOB hopes to provide more related financial data to investors later this year.

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@hkcmcpa.us

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GOVERNMENT HEADLINES:
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GASB Standards -- Additional Guidance on GASB Statements No. 60, 61 and 62 Released

The GASB has released the following plain-language articles:

-"GASB Statement Provides Guidance on Partnerships Between Governments and Public or Private Entities" (Article 1);
For detail, please contact info@hkcmcpa.us

-"GASB Statement Concludes Review of Standards Defining the Financial Reporting Entity" (Article 2); and
For detail, please contact info@hkcmcpa.us

-"GASB Statement Codifies FASB and AICPA Pronouncements Applicable to State and Local Governments" (Article 3).
For detail, please contact info@hkcmcpa.us

Article 1 provides guidance on GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. GASB 60 addresses how to account for and report service concession arrangements, a type of public-private or public-public partnership that state and local governments are increasingly entering into.

Article 2 provides guidance on 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.

Article 3 provides guidance regarding GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB 62 is intended to enhance the usefulness of the Codification of Governmental Accounting and Financial Reporting Standards by incorporating guidance that previously could only be found in certain FASB and AICPA pronouncements.

Financial Reporting -- GASB Issues Research Brief
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The GASB has issued a research brief, “The Timeliness of Financial Reporting by State and Local Governments Compared with the Needs of Users.” According to the GASB, the timeliness of financial reporting is the most frequent and common concern expressed to the GASB by users of state and local government financial reports. Therefore, the GASB engaged in the research summarized in this document to answer two questions:

-How long after the end of the fiscal year does it take governments to issue financial reports prepared in conformity with generally accepted accounting principles?
-How does the passage of time between fiscal year-end and issuance of the financial report affect the usefulness of financial report information for decision-making?

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@hkcmcpa.us