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Accounting
Research Manager®
Weekly
Summary of Developments
November
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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ACCOUNTING
AND SEC HEADLINES:
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Revenue
Recognition -- FASB and IASB Publish Revised Revenue Recognition Proposals
The FASB and
the IASB (the Boards) have issued for public comment the following revised
exposure drafts:
-FASB
Proposed Accounting Standards Update, Revenue Recognition (Topic 605):
Revenue from Contracts with Customers
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-IASB
Exposure Draft, Revenue from Contracts with Customers.
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The Boards’
objective is to improve and converge the financial
reporting requirements of IFRS and U.S. GAAP for revenue (and some related
costs) from contracts with customers. The Boards decided to re-expose the June
2010 proposals because of the importance of the financial reporting of revenue
to all entities and the Boards’ desire to avoid unintended consequences arising
from the final standards.
The core
principle of the revised proposals is the same as that of the 2010 exposure
drafts; that is, an entity would recognize revenue from contracts with
customers when it transfers promised goods or services to the customer. The
amount of revenue recognized would be the amount of consideration promised by
the customer in exchange for the transferred goods or services. However, in
response to feedback received from nearly 1,000 comment letters on the 2010
exposure drafts and extensive outreach activities, the Boards further refined
their original proposals. In particular they:
-Added
guidance on how to determine when a good or service is transferred over time;
-Simplified
the proposals on warranties;
-Simplified
how an entity would determine a transaction price (including collectibility, time value of money, and variable
consideration);
-Modified
the scope of the onerous test to apply to long-term services only;
-Added a
practical expedient that permits an entity to recognize as an expense costs of
obtaining a contract (if one year or less); and
-Provided
exemption from some disclosures for non-public entities that apply U.S. GAAP.
Comments on
both these revised exposure drafts are due March 13, 2012.
SEC Work
Plan -- SEC Staff Publishes Reports on Incorporation of IFRS
The staff of
the SEC has published the following reports:
-A
Comparison of
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-An
Analysis of IFRS in Practice (Analysis Report).
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These
reports contribute to the SEC staff’s ongoing execution of a “Work Plan”
included in the Commission Statement in Support of Convergence and Global
Accounting Standards, issued in February 2010. The purpose of the Work Plan
is to consider specific areas and factors relevant to a determination by the
SEC as to whether, when, and how the current financial reporting system for
The
Comparison Report summarizes the SEC staff’s analysis of the text of IFRS as
issued by the IASB as compared to the text of U.S. GAAP. The SEC staff reviewed
U.S. GAAP accounting requirements and compared those requirements to equivalent
or corresponding IFRS requirements, as applicable. The SEC staff omitted from
its review any U.S. GAAP requirements and the IFRS equivalents that are subject
to the ongoing joint standard-setting efforts of the Boards. This report
summarizes the SEC staff’s observations at a principles level for each topic in
the FASB Accounting Standards CodificationTM (Codification) evaluated.
The SEC staff supplemented high-level observations on these Codification topics
with more specific examples of differences between U.S. GAAP and IFRS.
The Analysis
Report presents observations by the SEC staff regarding the application of IFRS
in practice. The SEC staff analyzed the most recent annual consolidated
financial statements of 183 companies, including both SEC registrants and
companies that are not SEC registrants, which prepare financial statements in
accordance with IFRS. The SEC staff determined that company financial
statements generally appeared to comply with IFRS requirements, but not always,
and indicated that the transparency and clarity of the financial statements
could be enhanced. In addition, the SEC staff indicated that diversity in the
application of IFRS, attributed to a variety of factors, presents challenges to
the comparability of financial statements across countries and industries.
Research
and Development -- AICPA Issues Working Draft of Accounting and Valuation Guide
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The AICPA
has issued for public comment a working draft of an Accounting and Valuation
Guide, Assets Acquired to Be Used in Research and Development Activities.
This guide, which would replace the practice aid that was originally issued in
2001, provides guidance and illustrations for valuation specialists, preparers
of financial statements, and independent auditors related to initial and
subsequent accounting for, disclosures, and valuation of acquired in-process
research and development assets. This guide addresses many new accounting and
valuation issues that have emerged over the years.
Comments on
this working draft are due by March 15, 2012.
Leases --
FASB and IASB Discuss Leases and Other Matters
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As reported
in its "Summary of Board Decisions" publication, the Boards met on
November 16, 2011, and discussed the following topics: (a) leases; and (b)
insurance contracts. Regarding their project on leases, the Boards discussed
consequential amendments to the business combinations guidance and the
borrowing costs guidance in IFRS and U.S. GAAP and transition issues related to
business combinations. During this meeting, the Boards reached a number of
tentative decisions in relation to the measurement of lease assets and lease
liabilities acquired in a business combination, including the following:
-If the acquiree is a lessee, an acquirer should recognize a
liability to make lease payments and a right-of-use asset;
-If the acquiree is a lessor applying the
receivable and residual approach, an acquirer should recognize a right to
receive lease payments and a residual asset;
-If the acquiree is a lessor of
investment property, an acquirer should apply the guidance in IFRS 3, Business
Combinations, or FASB Codification Topic 805, Business Combinations,
that relates to acquired operating leases; and
-If the acquiree has short-term leases, an acquirer should not
recognize separate assets or liabilities related to the lease contract at the
acquisition date.
The Boards
also tentatively decided that, on transition, a lessor
would continue to account for the securitization of lease receivables
associated with current operating leases as secured borrowings in accordance
with existing U.S. GAAP and IFRS.
Not-for-Profit
Entities -- FASB Chairman Adds Two Projects to FASB Agenda
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As reported
in its "Summary of Board Decisions" publication, the FASB met on
November 9, 2011, to discuss whether to add one or more projects to its agenda
to improve the existing standards for presentation of financial statements and
related disclosures for not-for-profit entities. The FASB Chairman decided to
add a standards-setting project and a research project on reporting by
not-for-profit entities. The standards-setting project is expected to reexamine
existing standards for financial statement presentation by not-for-profit
entities and focus on improving: (a) net asset classification
requirements; and (b) information provided in financial statements and
notes about liquidity, financial performance, and cash flows. The research
project is expected to study communications other than financial statements
that not-for-profit entities use to tell their financial story.
Levies
Charged -- IFRS Interpretations Committee Discusses Levies Charged and Other
Matters
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As reported
in its "IFRIC Update" publication, the IFRS Interpretations Committee
(IFRIC) met on November 3-4, 2011, and discussed the following topics:
-Current
agenda (levies charged for participation in a market on a specified date and
the accounting for put options written over non-controlling interests);
-IFRIC
agenda decisions and tentative agenda decisions;
-Issues
considered for the Annual Improvements Project; and
-Work in
progress.
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additional content, click here:
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=======================================
AUDITING AND
INTERNAL CONTROLS HEADLINES:
=======================================
Going
Concern -- AICPA Issues Going Concern Proposal
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The AICPA
has issued for public comment an exposure draft of a proposed Statement on
Auditing Standards (SAS), The Auditor’s Consideration of an Entity’s Ability
to Continue as a Going Concern (Redrafted). This
proposed SAS would supersede SAS No. 59, The Auditor's Consideration of an
Entity's Ability to Continue as a Going Concern, as amended (AICPA,
Professional Standards, AU sec. 341 and AU-C sec. 570), and represents the
redrafting of SAS 59 to apply the Auditing Standards Board’s clarity drafting
conventions.
The proposed
SAS would require the auditor to obtain written representations from management
if conditions or events have been identified that indicate there could be
substantial doubt about the entity's ability to continue as a going concern.
Although included in appendix B, “Additional Illustrative Representations,” of
AU section 333, Management Representations, neither SAS 59 nor AU
section 333 currently requires such representations.
In addition,
Interpretation No. 1, "Eliminating a Going-Concern Explanatory Paragraph
From a Reissued Report," of AU section 341, The Auditor's Consideration
of an Entity's Ability to Continue as a Going Concern, which addresses the
auditor's responsibilities when the auditor agrees to reissue an audit report
that contained a going-concern explanatory paragraph, has been incorporated
into the proposed SAS. The proposed SAS would require the auditor to reassess
the going-concern status of the entity by performing certain procedures when
determining whether to eliminate the going-concern emphasis-of-matter
paragraph.
The proposed
SAS would be effective for audits of financial statements for periods ending on
or after December 15, 2012.
Comments on
this proposal are due by January 31, 2012.
Research
and Development -- AICPA Issues Working Draft of Accounting and Valuation Guide
For detail, please contact info@hkcmcpa.us
As discussed
above in our Accounting and SEC Summaries, the AICPA has issued for public
comment a working draft of an Accounting and Valuation Guide, Assets
Acquired to Be Used in Research and Development Activities. This guide,
which would replace the practice aid that was originally issued in 2001,
provides guidance and illustrations for valuation specialists, preparers of
financial statements, and independent auditors related to initial and
subsequent accounting for, disclosures, and valuation of acquired in-process
research and development assets. This guide addresses many new accounting and
valuation issues that have emerged over the years.
Comments on
this working draft are due by March 15, 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@hkcmcpa.us