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Accounting Research Manager®
Weekly Summary of Developments
December 19-22, 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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Offsetting Disclosures -- Boards Issue Guidance

The eligibility criteria for offsetting are different in IFRS and U.S. GAAP. Offsetting, otherwise known as netting, is the presentation of assets and liabilities as a single net amount in the statement of financial position (balance sheet). Unlike IFRS, U.S. GAAP allows companies the option to present net in their balance sheets derivatives that are subject to a legally enforceable netting arrangement with the same party where rights of set-off are only available in the event of default or bankruptcy.

To address these differences between IFRS and U.S. GAAP, in January 2011 the FASB and the IASB (the Boards) issued an exposure draft that proposed new criteria for netting that were narrower than the current conditions currently in U.S. GAAP. Nevertheless, in response to feedback from their respective stakeholders, the Boards decided to retain their existing offsetting models. Instead, the Boards have issued common disclosure requirements related to offsetting arrangements to allow investors to better compare financial statements prepared in accordance with IFRS or U.S. GAAP.

Specifically, the FASB has issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments to the FASB Accounting Standards Codification^TM (Codification) in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position.

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Coinciding with the release of ASU No. 2011-11, the IASB has issued Disclosures - Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7). This amendment requires disclosures about the offsetting of financial assets and financial liabilities common to those in ASU No. 2011-11.

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An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented.

Offsetting Requirements -- IASB Issues IAS 32 Amendments
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The IASB has issued Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32), to clarify its requirements for offsetting financial instruments. The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32 Financial Instruments: Presentation. The amendments clarify: (a) the meaning of “currently has a legally enforceable right of set-off”; and (b) that some gross settlement systems may be considered equivalent to net settlement.

The amendments are effective for annual periods beginning on or after January 1, 2014, and are required to be applied retrospectively.

New Accounting Standards -- Checklist Updated
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We have updated our publication "Summary Checklist of Recent Authoritative U.S. Accounting Standards," to reflect the issuance of ASU No. 2011-11, discussed above. 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.

See our Literature Update for complete details.

Financial Assets and Liabilities -- Guidance Updated
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We have revised our publication, Financial Assets and Liabilities - Sales, Transfers, and Extinguishments: Interpretations of U.S. GAAP, to reflect amendments to the Codification through ASU No. 2011-09, Compensation-Retirement Benefits-Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan, and FASB Editorial and Maintenance Update 2011-19.

In addition, we have added various new interpretations and clarifying changes to our guidance and have updated the section, “Recent Developments.”

See our Literature Update for complete details.

Communications with Audit Committees -- PCAOB Reproposes Auditing Standard
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The PCAOB has issued for public comment a reproposed auditing standard, “Communications with Audit Committees.” The newly proposed standard, issued in PCAOB Release No. 2011-08, “Proposed Auditing Standard Related to Communications with Audit Committees; Related Amendments to PCAOB Standards; and Transitional Amendments to AU Sec. 380,” represents a reproposal of a standard on communications with audit committees initially released on March 29, 2010. Like the original proposal, the reproposed standard would establish requirements that enhance the relevance and quality of the communications between the auditor and the audit committee.

As proposed, the new auditing standard would supersede PCAOB interim standard AU sec. 380, “Communication With Audit Committees,” and AU sec. 310, “Appointment of the Independent Auditor,” and amend other PCAOB standards. Any new auditing standard and amendments to other PCAOB standards adopted by the PCAOB will be submitted to the SEC for approval.

Comments on the proposed standard are due February 29, 2012.

Promotional and Sales Material -- SEC Staff Guidance Issued
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The staff in the Division of Corporation Finance (Corp Fin) of the SEC has issued CF Disclosure Guidance: “Topic No. 3, Staff Observations in the Review of Promotional and Sales Material Submitted Pursuant to Securities Act Industry Guide 5.” This guidance summarizes observations by Corp Fin in the review of promotional and sales material submitted by registrants under Securities Act Industry Guide 5 (the Guide). The Guide applies only to real estate limited partnerships, but the SEC has indicated that the requirements included in the Guide should be considered in the preparation of registration statements for real estate investment trusts and for all other limited partnership offerings.

Mine Safety Disclosure -- SEC Publishes Final Rule
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The SEC has published a final rule, “Mine Safety Disclosure.” This rule contains amendments to SEC rules to implement Section 1503 of the Dodd-Frank Act. Section 1503(a) of the Act requires issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. Section 1503(b) of the Act mandates the filing of a Form 8-K disclosing the receipt of certain orders and notices from the Mine Safety and Health Administration.

This final rule is effective 30 days after it is published in the Federal Register.

Accredited Investor Definition -- SEC Publishes Final Rule
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The SEC has published a final rule, “Net Worth Standard for Accredited Investors.” This rule contains amendments to the accredited investor standards in SEC rules under the Securities Act of 1933 (Securities Act) to implement the requirements of Section 413(a) of the Dodd-Frank Act. Section 413(a) requires the definitions of “accredited investor” in Securities Act rules 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. This change to the net worth standard was effective upon enactment by operation of the Dodd-Frank Act, but Section 413(a) also required revision of current Securities Act rules to conform to the new standard. The SEC is also adopting technical amendments to Form D and a number of other rules to conform them to the requirements of Section 413(a) and to correct cross-references to former Section 4(6) of the Securities Act, which was renumbered Section 4(5) by Section 944 of the Dodd-Frank Act.

This final rule is effective 60 days after it is published in the Federal Register.

Financial Instruments -- IASB Defers Effective Date in IFRS 9
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The IASB has issued Mandatory Effective Date and Transition Disclosures (Amendments to IFRS 9 and IFRS 7), deferring the mandatory effective date in IFRS 9 Financial Instruments, from January 1, 2013, to January 1, 2015. The IASB believes the deferral will make it possible for all phases of the project to have the same mandatory effective date.

The amendments to IFRS 9 also provide relief from the requirement to restate comparative financial statements for the effect of applying IFRS 9. This relief was originally only available to companies that chose to apply IFRS 9 prior to 2012. Instead, additional transition disclosures will be required to help investors understand the effect that the initial application of IFRS 9 has on the classification and measurement of financial instruments. Early application of IFRS 9 continues to be permitted.

IFRS 10 -- IASB Proposes Transition Amendments
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The IASB has published for public comment proposed amendments to IFRS 10 Consolidated Financial Statements. The objective of the proposed amendments is to clarify the transition guidance in IFRS 10 by confirming when an entity needs to apply IFRS 10 retrospectively. The proposed amendments are being made to address concerns of some who thought that the transition provisions were more burdensome than originally intended. It is proposed that the effective date of the proposed amendments would be aligned with the effective date of IFRS 10, that is, for annual periods beginning on or after January 1, 2013.

Comments on the proposal are due by March 21, 2012.

Financial Instrument Impairment -- Boards Discuss Financial Instruments and Other Matters
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As reported in its “IASB Update” publication, the Boards met on December 14-16 and discussed the following topics:

-Impairment of financial instruments;
-Insurance contracts; and
-Leases.

In addition, the IASB held separate sessions on December 13 to discuss the following topics:

-Comment period for the exposure draft, “Transition Guidance (Proposed Amendments to IFRS 10)”;
-Update from the last meeting of the IFRS Interpretations Committee;
-Limited modifications to IFRS 9;
-Macro hedge accounting; and
-Work plan.

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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Internal Control - Integrated Framework -- COSO Proposes Updates
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The Committee of Sponsoring Organizations of the Treadway Commission (COSO) has released, for public comment, a proposed update to the “Internal Control - Integrated Framework” (Framework). The proposed revised Framework, according to COSO, is intended to help organizations improve performance with greater agility, confidence, and clarity.

A broad range of professionals from industry as well as representatives and observers from academia, government agencies, and nonprofit organizations have provided their perspective on how the original Framework can be refreshed. The Framework was originally issued in 1992, and the proposed update retains the core definition of internal control and the five components of a system of internal control. One of the most significant enhancements is the codification of internal control concepts introduced in the original framework into 17 principles and supporting attributes. Those principles and attributes further support organizations as they apply judgment in managing risk and improving performance in an increasingly complex and rapidly changing environment.

Comments on the proposed update are due March 31, 2012. Release of the final Framework is expected in fall of 2012.

Communications with Audit Committees -- PCAOB Reproposes Auditing Standard
For detail, please contact info@hkcmcpa.us

As discussed above in our Accounting and SEC Summaries, the PCAOB has issued for public comment a reproposed auditing standard, “Communications with Audit Committees.” The newly proposed standard, issued in PCAOB Release No. 2011-08, “Proposed Auditing Standard Related to Communications with Audit Committees; Related Amendments to PCAOB Standards; and Transitional Amendments to AU Sec. 380,” represents a reproposal of a standard on communications with audit committees initially released on March 29, 2010. Like the original proposal, the reproposed standard would establish requirements that enhance the relevance and quality of the communications between the auditor and the audit committee.

As proposed, the new auditing standard would supersede PCAOB interim standard AU sec. 380, “Communication With Audit Committees,” and AU sec. 310, “Appointment of the Independent Auditor,” and amend other PCAOB standards. Any new auditing standard and amendments to other PCAOB standards adopted by the PCAOB will be submitted to the SEC for approval.

Comments on the proposed standard are due February 29, 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