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Accounting Research Manager®
Weekly Summary of Developments
May 2-6, 2011
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Accounting Research Manager
subscriber,
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Accounting and SEC
Headlines
Repurchase Agreements -- FASB Issues Guidance on
Reconsideration of Effective Control for Repurchase Agreements
New Accounting Standards -- Checklist Updated
International Accounting -- Comparison of U.S. GAAP and IFRS
Updated
Financial Instruments -- FASB Discusses Financial
Instruments and Other Matters
SEC Regulations Committee -- CAQ SEC Regulations Committee
Minutes Issued
International Accounting -- IFRS Foundation Publishes
Strategy Review Report
Insurance Contracts -- IASB and FASB Discuss Insurance
Contracts and Other Matters
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ACCOUNTING AND SEC HEADLINES:
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Repurchase Agreements --
FASB Issues Guidance on Reconsideration of Effective Control for Repurchase
Agreements
For detail, please contact info@hkcmcpa.us
The FASB has issued Accounting
Standards Update (ASU) No. 2011-03, Transfers and Servicing (Topic 860):
Reconsideration of Effective Control for Repurchase Agreements. The ASU is
intended to improve financial reporting of repurchase agreements (“repos”) and
other agreements that both entitle and obligate a transferor to repurchase or
redeem financial assets before their maturity.
In a typical repo transaction,
an entity transfers financial assets to a counterparty
in exchange for cash with an agreement for the counterparty to return the same
or equivalent financial assets for a fixed price in the future. FASB
Accounting Standards Codification™ (Codification) Topic 860, Transfers
and Servicing, prescribes when an entity may or may not recognize a sale
upon the transfer of financial assets subject to repo agreements. That
determination is based, in part, on whether the entity has maintained effective
control over the transferred financial assets.
The amendments to the
Codification in this ASU are intended to improve the accounting for these
transactions by removing from the assessment of effective control the criterion
requiring the transferor to have the ability to repurchase or redeem the
financial assets. The guidance in the ASU is effective for the first interim or
annual period beginning on or after December 15, 2011. The guidance should be
applied prospectively to transactions or modifications of existing transactions
that occur on or after the effective date. Early adoption is not permitted.
New Accounting Standards --
Checklist Updated
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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
or revises content in 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 No. 2011-03, discussed above.
See our Literature Update for
complete details.
International Accounting --
Comparison of
For detail, please contact info@hkcmcpa.us
We have published an updated
version of Comparison between
See our Literature Update for
complete details.
Financial Instruments --
FASB Discusses Financial Instruments and Other Matters
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As reported in its
"Summary of Board Decisions" publication, the FASB met on May 4,
2011, and discussed the accounting for financial instruments. The FASB
discussed the characteristics of the instrument criterion for classifying and
measuring financial instruments and decided on criterion for measuring certain
financial instruments at fair value with all changes in fair value recognized
in net income.
The FASB also discussed the classification
and measurement of convertible debt instruments from the issuer’s perspective
that qualify for the exception in Codification paragraph 815-10-15-74(a) and do
not require separation under paragraph 470-20-25-12. The FASB decided that
those convertible debt instruments should be measured at amortized cost in
their entirety. This decision would not affect the classification and
measurement of convertible debt instruments that require bifurcation under
current U.S. GAAP.
The FASB and IASB (the Boards)
held a joint meeting on May 4, 2011, and discussed insurance contracts.
Specifically, the Boards discussed the unbundling of noninsurance goods and
services and investment components. The Boards discussed whether noninsurance
goods and services should be unbundled from an insurance contract in accordance
with the principles for identifying separate performance obligations in the
revenue recognition project. The Boards indicated their intention to be
consistent with the approach in the revenue recognition project, subject to
consideration of whether the pattern of transfer criterion is needed in this
context and to future decisions on allocation. The Boards will consult the
Insurance Working Group on the practicality of implementing the approach being developed.
The Boards also tentatively
decided that an insurer should unbundle explicit account balances that are
credited with an explicit return that is based on the account balance using
criteria based on those being developed in the revenue recognition project for
identifying separate performance obligations. An insurer would not unbundle
implicit account balances.
SEC Regulations Committee
-- CAQ SEC Regulations Committee Minutes Issued
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The Center for Audit Quality
SEC Regulations Committee has issued minutes from its joint meeting with the
staff of the SEC held on March 29, 2011. This committee meets periodically with
the SEC staff to discuss emerging technical accounting and reporting issues
relating to SEC rules and regulations. Topics discussed at this meeting
included the following:
-Update on the SEC’s Division of Corporation Finance personnel and
organizational changes;
-Various financial reporting
matters including: (a) potential financial reporting challenges related
to the recent earthquake in Japan; (b) loss contingency disclosures; (c)
preliminary financial information included in registration statements; and (d)
disclosure of net tangible book value;
-Implementation issues and
observations associated with the SEC’s requirements
on the use of eXtensible Business Reporting Language
(XBRL), and Staff Accounting Bulletin No. 114, “Technical Revisions to
Codification of the Staff Accounting Bulletin Series”;
-Income averaging and the
significant subsidiary test;
-Transition issues related to
pending FASB accounting standards (leases, revenue recognition, etc.);
-Age of acquired foreign
business financial statements in connection with filing Form 8-K;
-Determining smaller reporting
company status following a reverse merger between two operating companies; and
-Determining whether a parent
company has independent assets or operations for purposes of applying Rule
3-10(h)(5) of Regulation S-X.
International Accounting --
IFRS Foundation Publishes Strategy Review Report
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The IFRS Foundation, the
oversight body of the IASB, has published a consultation document related to
its current strategy review. The consultation document, “IFRSs
as the Global Standard: Setting a Strategy for the Foundation’s Second Decade”
(Strategy Review Report), seeks additional input from stakeholders on the
following four strategic issues: (1) the IFRS Foundation’s mission; (2) its
governance; (3) the standard-setting process; and (4) financing of the IFRS
Foundation.
On November 5, 2010, the
Trustees of the IFRS Foundation initiated their review of the strategy of the
IFRS Foundation, now entering its second decade, with the issuance of its first
consultation document. The current Strategy Review Report is the second such
consultation document.
Comments on the Strategy
Review Report are due by July 25, 2011.
Insurance Contracts -- IASB
and FASB Discuss Insurance Contracts and Other Matters
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As reported in its "IASB
Update" the Boards met on April 27, 2011, and discussed insurance
contracts. The IASB also met separately to discuss hedge accounting for
financial instruments. Regarding their project on insurance contracts, the
Boards discussed whether a different approach should be used for the accounting
in the pre-claims period for contracts, typically of short duration, that meet specified criteria. The Boards tentatively decided
that:
-They would consider whether
the pre-claims obligation should reflect the time value of money, based on
their tentative decision in the revenue recognition project on reflecting the
time value of money.
-The insurer shall reduce the
measurement of the pre-claims obligations over the coverage period on the basis
of time. However, the reduction in the measurement of pre-claims obligations
should be done on the basis of the expected timing of incurred claims and
benefits if that pattern differs significantly from the passage of time.
-An insurer should perform an
onerous contract test if facts and circumstances indicate that the contract has
become onerous in the pre-claims period.
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