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5/14/12- FASB to Discuss Investment Companies Project
As discussed in the article entitled "Amendments to Topic 946 Are Slated for Review" in the May 11, 2012, issue of Accounting & Compliance Alert, the FASB plans to deal with four projects during its May 16 weekly meeting.
The board is planning review the comments submitted in response to Proposed Accounting Standards Update (ASU) No. 2011-200, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, before moving ahead to a final standard.
The proposal deals with the criteria a business must meet in order to be considered an investment company.
Board members have also scheduled discussions on the insurance contracts project and the classification and measurement phase of the financial instruments project.
The agenda also includes an update on the board's work on not-for-profit accounting. The FASB formally began the project in November and is still drafting a plan for how to proceed with it.
5/11/12 -- FASB Won't Classify Modified Loans as Good Performers
As discussed in the article entitled "Modified Loans Won't Be Classified as Good Performers in U.S. GAAP" in the May 10, 2012, issue of Accounting & Compliance Alert, the FASB on May 9 decided that loans restructured to help customers afford payments would not automatically be classified as good performers.
The decision is part of the impairment model the FASB is developing with the IASB for the pending financial instruments standard. The model divides loans and other financial instruments into three groups, or buckets. The best assets start in Bucket 1, deteriorating assets in Bucket 2, and the worst in Bucket 3. Assets move from bucket to bucket based on expectations of credit losses.
Loans in default would never qualify for the best category. But most FASB members worried that if these loans were renegotiated and the new terms were used to categorize them, the loans could shift to a better bucket and give investors misinformation about the loan's soundness.
Investors need to know that the loans have been in trouble, a majority of FASB members said.
5/9/12 -- FAF Moves Toward Private Company Decision
As discussed in the article entitled "FAF Moves Toward Private Company Decision" in the May 7, 2012, issue of Accounting & Compliance Alert, the Financial Accounting Foundation expects at a May 23 meeting in Washington to announce its decision on a formal plan to deal with private company issues in setting accounting standards.
The FAF, the parent organization of the FASB and GASB, in October released a Request for Comment, Plan to Establish the Private Company Standards Improvement Council, which proposed creating an advisory group to help the FASB write accounting standards for private companies.
The group would be chaired by a member of the FASB, and all seven members of the accounting board would be at its meetings. The FASB would have ultimate veto power over any decisions made by the group.
The proposal was an effort to address persistent complaints from private companies and their auditors that the FASB ignores the needs of smaller, private companies when it writes accounting standards. The critics say the FASB's complicated standards are better suited for large, publicly traded companies.
5/8/12 -- FASB to Discuss Financial Risk Disclosure Proposal Before Publication
As discussed in the article entitled "Financial Risk Disclosure Proposal Needs One More Look" in the May 7, 2012, issue of Accounting & Compliance Alert, the FASB wants companies to provide information about their ability to borrow short-term funds and raise cash in the footnotes to their financial statements. It also wants financial institutions to show how changes in interest rates will affect their earnings.
But before the proposal is released for public comment, the board plans to revisit two issues at its May 9 meeting, the definition of the term "financial institutions" and some of the proposed disclosure requirements, according to a FASB agenda.
Once the items are cleared up, the FASB expects to release the proposal for a 90-day comment period.
The proposal aims to provide information about the risk a business faces meeting its financial obligations.
5/4/12 -- FASB Moves Closer to Publishing Liquidation Accounting Proposal
As discussed in the article entitled "Liquidation Accounting Proposal Moves Closer to Publication" in the May 3, 2012, issue of Accounting & Compliance Alert, at its May 2 weekly meeting, the FASB resolved a lingering question on its liquidation project and now the board is ready to release a draft version of the standard for public comment.
Under the proposal being drafted, a business would have to use the liquidation basis of accounting when it's close to failing and is selling off assets to pay creditors.
Businesses that have a set expiration date-such as a 10-year private equity fund, some joint ventures, partnerships, and securitization trusts-should not automatically use the method, the FASB decided.
The exposure draft is tentatively called Proposed Accounting Standards Update, Presentation of Financial Statements (Topic 205): The Liquidation Basis of Accounting, according to a staff memo.
5/2/12 - FASB Decides Small Banks May Be Eligible for Some Private Company Breaks
As discussed in the article entitled "Small Banks May Be Eligible for Some Private Company Breaks" in the May 1, 2012, issue of Accounting & Compliance Alert, privately held community banks, credit unions, and some insurance companies will fall under the definition of private company in U.S. GAAP, the FASB decided in a 5-2 vote.
The decision does not automatically mean that depository institutions will get more time to adopt new accounting rules or a break on disclosure requirements.
Instead, the FASB will take each amendment to accounting standards case-by-case and determine when privately held banks and other financial companies are allowed the same relief as other private companies.
The decision was part of the board's effort to produce a consistent definition of private company.
4/30/12 -- FASB to Consider Some Changes to Liquidation Accounting Proposal for Trusts, Partnerships
As discussed in the article entitled "Liquidation Accounting Proposal May Be Adapted for Trusts, Partnerships" in the April 27, 2012, issue of Accounting & Compliance Alert, the FASB's work on a proposed amendment to U.S. GAAP dealing with the liquidation basis of accounting may include provisions for a class of businesses called "limited-life entities."
The topic is scheduled to come up at the board's May 2 weekly meeting.
Limited-life entities include trusts that issue trust-preferred securities, partnerships, and some foreign companies that issue common stock. Trust-preferred securities are often used by banking companies to raise capital.
The FASB discussed the implications of the liquidation basis of accounting for the limited-life entities in May 2007 but hasn't done much with the issue since then.
More recently, the FASB set aside its work on a proposed going concern standard, but it decided to continue with the related work on liquidation accounting and is close to releasing a proposed version of the standard.
4/27/12 -- FASB's Disclosure Framework Paper May Be Ready by Midyear
As discussed in the article entitled "Disclosure Framework Paper May Be Ready by Midyear" in the April 26, 2012, issue of Accounting & Compliance Alert, the FASB is moving closer to soliciting public comment for its project to produce a standardized format for writing disclosure requirements in U.S. GAAP.
The accounting board decided that an upcoming discussion paper on the topic should ask about the costs and consequences of disclosure rules and how the board should address disclosure requirements for quarterly and monthly financial statements.
The release of a discussion paper and the ensuing public comment period is part of a FASB effort to write a guide the accounting board could use when it drafts disclosure requirements for standards.
Companies and their accountants complain that disclosure requirements are becoming more onerous. Investors are dissatisfied when important information gets buried in increasingly lengthy financial statement footnotes.
4/25/12 -- FASB, IASB Say Main Convergence Projects Will Be Done by Mid-2013
As discussed in the article entitled "Main Convergence Projects Slated for Mid-2013 Completion" in the April 23, 2012, issue of Accounting & Compliance Alert, the FASB and IASB said they'll finish some of the remaining international convergence projects two years behind their original schedule.
"Delays in completing these much-needed improvements to financial reporting are unfortunate, but necessary to ensure that any changes are operational and will bring about an improvement," the boards said in an April 20 statement submitted to the Group of 20 industrialized nations.
The statement was part of a collection of documents routed through the Financial Stability Board to the G-20. The FSB is a global consortium of central banks and finance ministries that coordinates bank and securities regulation internationally.
Starting with the 2008 financial crisis, the G-20 has been urging the IASB and FASB to complete their work on a common financial instruments standard.
4/24/12 -- FASB Close to Publishing Disclosure Framework Discussion Paper
As discussed in the article entitled "Publication Nears for Disclosure Framework Discussion Paper" in the April 20, 2012, issue of Accounting & Compliance Alert, the FASB plans to hold its first formal discussion about writing a disclosure framework at its April 25 weekly meeting.
The framework would serve as a guide to help the board when it comes up with disclosure requirements for U.S. GAAP. Board members have described the framework as possibly taking the form of a series of questions or guidelines about writing disclosures.
For years, accountants have complained that they have to write too many disclosures. Investors complain that important information gets buried in the financial statement footnotes.
The FASB has been holding informal educational meetings to discuss where to go with the project. The board is expected to take a vote on what to do with disclosures in quarterly financial reports and the costs associated with disclosure rules, according to the meeting agenda.
4/23/12 -- FASB Seeks Amended Fair Value Guidance for Movie Costs in Proposed ASU No. EITF-12E
As discussed in the article entitled "Amended Fair Value Guidance for Movie Costs Is in Proposed ASU No. EITF-12E" in the April 18, 2012, issue of Accounting & Compliance Alert, the FASB issued Proposed Accounting Standards Update (ASU) No. EITF-12E, Entertainment-Films (Topic 926): Accounting for Fair Value Information That Arises after the Measurement Date and Its Inclusion in the Impairment Analysis of Unamortized Film Costs (a consensus of the FASB Emerging Issues Task Force), on April 17.
The proposal is an effort by the FASB's Emerging Issues Task Force to produce a more consistent approach to the use of fair value measurements by movie companies.
The comment deadline is July 16.
The EITF proposal tells movie production companies to use only the information they have at the end of the quarter when they do an impairment test for unamortized film costs.
4/20/12 -- FASB Seeks to Clear up Application of Topic 230 with Proposed ASU No. EITF-12A
As discussed in the article entitled "Proposed ASU No. EITF-12A Seeks to Clear up Application of Topic 230" in the April 18, 2012, issue of Accounting & Compliance Alert, the FASB released Proposed Accounting Standards Update (ASU) No. EITF-12A, Statement of Cash Flows (Topic 230): Not-for-Profit Entities: Classification of the Sale of Donated Securities in the Statement of Cash Flows (a consensus of the FASB Emerging Issues Task Force), on April 17.
The proposal is an effort to come up with a consistent approach for recognizing assets contributed to not-for-profit organizations.
The proposal is out for comment until July 16. The FASB said it's waiting until the comment period closes before it determines the effective date.
Proposed ASU No. EITF-12A asks not-for-profits to present the cash generated by sales of donated securities as an operating activity because the securities are often sold once a charity or foundation receives them.
4/19/12 -- FASB's Proposed ASU No. EITF-12C Provides Guidance for Government-Backed Bank Deals
As discussed in the article entitled "Proposed ASU No. EITF-12C Provides Guidance for Government-Backed Bank Deals" in the April 18, 2012, issue of Accounting & Compliance Alert, the FASB issued Proposed Accounting Standards Update (ASU) No. EITF-12C, Business Combinations (Topic 805): Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution (a consensus of the FASB Emerging Issues Task Force), on April 17.
The proposal deals with recognition of government support in the takeover of a failed bank.
The comment deadline is July 16.
The FASB is waiting until the comment period closes before it determines the effective date. The board said the amendments can be applied without revising the financial results from prior fiscal quarters and years in a process the board calls prospective application.
Proposed ASU No. EITF-12C is intended to provide guidance for banks that get support from the Federal Deposit Insurance Corp. or the National Credit Union Administration when they buy other banks that failed. The FASB is proposing an amendment to FASB ASC 805-20, Business Combinations-Identifiable Assets and Liabilities, and Any Noncontrolling Interest, formerly SFAS No. 141(R).
4/16/12 -- FASB Ready to Issue Risk Disclosures Proposal
As discussed in the article entitled "Risk Disclosures Proposal Approved for Release" in the April 12, 2012, issue of Accounting & Compliance Alert, the FASB unanimously agreed to propose that companies include tables in their financial statement footnotes with information about their ability to borrow short-term funds and raise cash.
Financial institutions would have to provide extra information revealing how changes in interest rates will affect their earnings.
The draft changes to U.S. GAAP are scheduled to be out for a 90-day comment period. The seven-member board approved the changes at its April 11 weekly meeting at its Norwalk, CT, offices.
The proposal aims to provide information about the risk surrounding a business's ability to meet its financial obligations. For banks and other financial companies, the disclosures are meant to shed light on their vulnerability to fluctuations in market interest rates. In addition to assessing the risk numerically, businesses would have to include a written description about problems they have raising funds.
4/13/12 - FASB and IASB to Review Business Model for Financial Instruments
As discussed in the article entitled "Business Model for Financial Instruments Slated for Another Review" in the April 12, 2012, issue of Accounting & Compliance Alert, the FASB and IASB are planning to meet April 17-19 in London to discuss three of their joint projects.
The agenda includes a review of the financial instruments project's classification-and-measurement and impairment phases.
For classification and measurement, the standard-setters want to look at the accounting for the investment returns on long-term assets in the held-to-maturity category. The boards are also considering whether some bonds should have changes in fair value appear in the other comprehensive income statement instead of net income.
The accounting boards are also reviewing a plan to sort assets by credit quality in a process they've debated since early 2011 called the "three-bucket approach." High quality loans or bonds would be assigned to Bucket 1. As the credit quality deteriorates, assets would slide down to Buckets 2 and 3.
4/11/12 - FASB Approves Three EITF Proposals for Public Comment
As discussed in the article entitled "Three EITF Proposals Get Cleared for Public Comment" in the April 10, 2012, issue of Accounting & Compliance Alert, the FASB unanimously approved on April 9 publishing three proposals from its Emerging Issues Task Force for 90-day comment periods.
The proposals deal with areas of U.S. GAAP regarding not-for-profit groups, government-assisted acquisitions of failed banks, and the accounting practices movie companies should use in some instances for a film's unamortized expenses.
EITF Issue No. 12-A, "Not-for-Profit Entities: Classification of Gifts of Securities in the Statement of Cash Flows," asks not-for-profits to present sales of donated securities as an operating activity because the securities are often sold once a charity or foundation receives them.
EITF Issue No. 12-C, "Subsequent Accounting for an Indemnification Asset Recognized as a Result of a Government-Assisted Acquisition of a Lending Institution," would provide guidance for banks that get support from the Federal Deposit Insurance Corp. when they buy banks that have failed. The issue seeks to amend FASB ASC 805-20, Business Combinations-Identifiable Assets and Liabilities, and Any Noncontrolling Interest, formerly SFAS No. 141(R).
EITF Issue No. 12-E, "Accounting for Fair Value Information That Arises Subsequent to the Measurement Date and Its Inclusion in the Impairment Analysis of Unamortized Film Costs," aims to clear up a conflict between the guidance in Subtopic 926-20, Entertainment-Films-Other Assets-Film Costs, formerly the AICPA's Statement of Position (SOP) No. 00-2 and Topic 820, Fair Value Measurement, formerly SFAS No. 157.
4/10/12 -- FASB Close to Issuing Proposal on Financial Risk Disclosure
As discussed in the article entitled "Financial Risk Disclosure Project
Nears Proposal Stage" in the April 9, 2012, issue of Accounting & Compliance
Alert, the FASB is readying a draft version of a standard that will
call upon companies to provide investors with information about significant
financial risks.
The accounting board is scheduled to discuss the draft in an April 11 meeting. If the standard is finalized, companies will have to include written disclosures with their financial statements about their access to short-term funding. Financial companies will also have to provide information about the sensitivity of their assets and liabilities to shifts in interest rates.
The FASB plans to discuss the date the standard will become effective and guidance for making the transition to the standard.
The risks disclosures project is a response to the 2008 financial crisis. Investors told accounting standard-setters that they wanted more information about the cash a business has on hand so they could get a clearer picture of the business's financial health.
4/03/12 -- FASB Could Amend Guidance for Bank Repurchase Trades By End
of Year
As discussed in the article entitled "Amended Guidance for Bank Repurchase
Trades May Be Done in 2012" in the March 29, 2012, issue of Accounting
& Compliance Alert, the FASB wants to issue its next amendment to
the standard for asset transfers by the end of 2012.
The year-end completion date should allow the accounting board time to go through its normal process of a proposed amendment, public comments, and a final review before publication, according to testimony the board's technical director, Susan Cosper, was prepared to give before the House Financial Services Subcommittee on Oversight and Investigations on March 28.
The panel was investigating the failure last October of commodities firm, MF Global. Most of the hearing was devoted to MF Global's handling of client funds for its proprietary accounts, but Cosper was there to explain the accounting rules that govern repurchase agreements, or repos, and that the trades are typically accounted for as secured loans.
The FASB may also tie its work on repos to its financial instruments project with the IASB and the effort to produce better information in financial statement footnotes about a company's risk.
4/02/12 -- EITF Proposal on Topic 230 Awaits FASB's Review
As discussed in the article entitled "EITF Proposal on Topic 230 Awaits FASB's Review" in the March 30, 2012, issue of Accounting & Compliance Alert, the FASB's Emerging Issues Task Force sent to the accounting board a proposal concerning a not-for-profit group's presentation of the sale of donated securities in its cash flow statement.
The FASB is expected to discuss EITF Issue No. 12-A, "Not-for-Profit Entities: Classification of Gifts of Securities in the Statement of Cash Flows," at its next meeting, which is tentatively scheduled for April 9, and vote on whether the proposed amendment should be released for public comment.
If the comment letters back the amendment, then the FASB may move ahead with incorporating the change into U.S. GAAP.
Not-for-profit groups typically sell securities they receive from donors and use the cash as soon as it's needed, according to a FASB staff memo. But the memo said Topic 230, Statement of Cash Flows, formerly SFAS No. 95, is inconsistent on how to present the sale proceeds.
The sale can be reported as either an operating or investing activity.
The EITF voted that the sale be presented as an operating activity because the securities are often sold once a charity or foundation receives them, which is consistent with trading rather than investment.
3/30/12 -- FASB to Start Discussions on Definition of Private Company
As discussed in the article entitled "Discussions to Start on Standardizing the Definition of Private Company" in the March 28, 2012, issue of Accounting & Compliance Alert, in its effort to set a uniform definition of a private company, the FASB may have to start by deciding the types of businesses shouldn't make the cut.
During an informal educational session March 21, the FASB's research staff presented the board with examples of criteria to determine when a business should be considered a private company.
The board wants to study a range of issues, including a company's SEC filing status, subsidiaries of public companies that have to file financial statements, banks that don't trade publicly but file audited financials with their regulators, and securitized trusts.
No decisions are made at education sessions. The discussion was the first step in the FASB's project to write a consistent definition of private company that would apply throughout U.S. GAAP.
3/29/12 -- EITF Proposal for ASC 805 Headed for FASB Review
As discussed in the article entitled "EITF Proposal for ASC 805 Headed for Board Review" in the March 28, 2012, issue of Accounting & Compliance Alert, the March 15 meeting of the FASB's Emerging Issues Task Force produced a plan to amend U.S. GAAP to reflect some government-assisted acquisitions of failed banks.
The decision on EITF Issue No. 12-C, "Subsequent Accounting for an Indemnification Asset Recognized as a Result of a Government-Assisted Acquisition of a Lending Institution," won't be published as a proposal until it's approved at an upcoming FASB meeting, which is tentatively scheduled for April 9.
The task force proposed amending FASB ASC 805-20,Business Combinations-Identifiable Assets and Liabilities, and Any Noncontrolling Interest, formerly SFAS No. 141(R), to provide guidance for banks that buy other banks that have failed.
The financial support that buying banks get from the Federal Deposit Insurance Corp. or the National Credit Union Administration is typically in the form of a loss-sharing agreement and shields the buyer from excessive losses on the failed bank's loan portfolio. Banks treat the FDIC support as an asset.
If the estimated losses on the loan portfolio change once the loans come on a buyer's balance sheet, then the value of the FDIC's support has to be adjusted.
3/28/12 -- FASB Seeks Middle Ground on Disclosure Framework Project
As discussed in the article entitled "Disclosure Framework Will Have to Balance Length Versus Substance" in the March 27, 2012, issue of Accounting & Compliance Alert, the FASB's effort to write a guide on writing financial disclosures may not lead to shorter financial statement footnotes.
That's not the point of the project-nor should it be the goal, said members of the FASB and its main advisory group, the Financial Accounting Standards Advisory Council, at the FASAC's March 23 quarterly meeting.
"We are concerned that the issue has become one of clearing the clutter and disclosure overload," said Sandy Peters, head of the financial reporting policy group at the CFA Institute and a FASAC member. "Those terms imply volume, and we don't believe it's a volume issue, in fact. The issue is constructing meaning to the story."
Accountants and auditors have long complained about having to comply with disclosure rules that result in lengthy explanations on narrow readings of accounting standards and pages upon pages of text in the management discussion and analysis section of SEC filings.
SEC officials routinely say they are looking for less repetition in the disclosures and more context and clarity.
Investors, creditors, and others who rely on financial reports also complain about having to dig through lengthy reports to find the few pieces of important information that are buried somewhere in the middle. In 2009, then-FASB Chairman Robert Herz said the board would take on a project to address what he called "disclosure overload."
3/27/12 -- FASB and IASB Define Investment Components of Insurance Contracts
As discussed in the article entitled "Components of Insurance Contracts Are Defined" in the March 23, 2012, issue of Accounting & Compliance Alert, as the FASB and IASB work on a standard for insurance contracts, they are trying to determine how to account for policies that also act like investments.
The policies--often whole life insurance policies--direct part of a customer's premium into an interest-generating fund that the policyholder can withdraw or borrow against.
Meeting via videoconference March 21, the boards first had to decide how to define this type of contract. The research staffs recommended that there should be a separation of the amounts the insurer is obligated to pay regardless of whether an event has occurred to trigger a claim by the policyholder.
"I do believe investors seek to differentiate what liabilities are related to insurance coverage from liabilities related to the return on investment," FASB member Thomas Linsmeier said, explaining his support for the proposal. "I think that's a very important distinction we're seeking to achieve here."
3/26/12 -- FAF Publishes GAAP Codification Learning Guide
As discussed in the article entitled "GAAP Codification Learning Guide Is Published" in the March 23, 2012, issue of Accounting & Compliance Alert, the FASB's parent, the Financial Accounting Foundation, published the "Learning Guide for the Codification Research System" on March 21 to help accountants and other people research accounting standards.
The foundation said the 202-page guide uses "real-life scenarios and work-related tasks."
The lessons are organized around navigating and finding material in the Codification of U.S. GAAP and determining the accounting principles that apply to specific transactions.
3/23/12 -- FASB to Rework Guidance for Bank Repurchase Deals
As discussed in the article entitled "Guidance for Bank Repurchase Trades Will Get Another Look" in the March 22, 2012, issue of Accounting & Compliance Alert, the FASB is poised to rework its standard for short-term securities trading by large banks, asset managers, and hedge funds less than a year after issuing the last fix.
FASB Chairman Leslie Seidman said in a March 21 statement that the board will reconsider both the accounting and disclosure requirements to ensure that investors are getting useful information about repurchase arrangements.
In April 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements, to remove from U.S. GAAP the requirement that trading firms have contractual guarantees to buy back assets that have been transferred in repurchase agreements.
The amendment also said that a company would no longer need to hold enough collateral from its trading partner to cover its cost for replacing the asset in case its trading partner defaulted or went bankrupt.
3/22/12 -- FASB May Modify FIN No. 48 to Address Private Company Complaints
As discussed in the article entitled "FIN No. 48 May Be Modified to Address Private Company Complaints" in the March 20, 2012, issue of Accounting & Compliance Alert, the FASB is considering some changes to its standard for estimating tax liabilities to make it simpler for private companies to apply.
The accounting board's plan to reconsider FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, (FASB ASC 740-10), was included in a March 20 response to the FASB's oversight body, the Financial Accounting Foundation, regarding a FAF critique of how FIN No. 48 has been applied.
The standard-setter for U.S. GAAP said it's also looking at ways to reduce the differences between FIN No. 48 and IAS 12, Income Taxes.
Overall, the FAF gave the FASB good marks for FIN No. 48 and said the standard resulted in more consistent estimates of tax liabilities and more relevant information about the factors that could cause tax payments to deviate from the estimates.
3/21/12 -- FASB's EITF Puts a Hold on Proposed ASU No. EITF-11A
As discussed in the article entitled "EITF Puts a Hold on Proposed ASU No. EITF-11A" in the March 20, 2012, issue of Accounting & Compliance Alert, the FASB's Emerging Issues Task Force decided on March 15 to delay a plan that aims to resolve the inconsistent accounting practices for earnings adjustments related to sales or disposals of foreign businesses.
Instead, the task force asked the FASB's research staff to do more research and get additional feedback on Proposed Accounting Standards Update (ASU) No. EITF-11A, Consolidation (Topic 810): Parent's Accounting for the Cumulative Translation Adjustment upon the Sale or Transfer of a Group of Assets That Is a Nonprofit Activity or a Business within a Consolidated Foreign Entity (a consensus of the FASB Emerging Issues Task Force).
The task force voted 9-3 to put off a decision on approving the proposal until more research was completed.
The proposal was meant to streamline accounting practices because U.S. GAAP permits two approaches to recognizing the proceeds from the sale or divestiture of a foreign business when the transaction has be converted from a foreign currency into dollars.
The transaction can be recognized through Subtopic 810-10, Consolidation, formerly FASB Interpretation (FIN) No. 46(R), or FASB ASC 830-30-40-1, Foreign Currency Matters-Translation of Financial Statements-Derecognition, formerly SFAS No. 52.
The proposal would affect businesses that lose controlling interest in a group of assets that is a nonprofit activity or a business as long as the operation is not real estate or oil, gas, or mineral production rights.
3/20/12 -- FASB, IASB Are Asked to Allow More Use of Judgment in Consolidated Reporting Standard
As discussed in the article entitled "Accountants Want to Use More Judgment in Final Consolidated Reporting Standard" in the March 19, 2012, issue of Accounting & Compliance Alert, at a recent public forum, FASB and IASB members were told that the strict criteria for determining when a business is qualified to use investment company accounting does not leave enough room for judgment.
Echoing concerns in the comment letters sent to the FASB and IASB, participants in a March 16 public forum called upon the accounting boards to develop a more principles-based approach to determine when a business is qualified to use investment company accounting.
Meeting at the FASB headquarters in Norwalk, CT, the discussion was part of the boards' overall project to develop consistent, converged standards addressing when parent companies should include subsidiaries and investments in their consolidated financial reports.
The IASB's amendments are in Exposure Draft (ED) No. 2011-4, Investment Entities, which exempts hedge funds, pension funds, and other investment funds from requirements in IFRS 10, Consolidated Financial Statements. The idea behind the proposal is that investors in hedge funds want to know the value of their investments, not the individual components of the businesses in which the fund invests.
The FASB's approach is in three related draft standards-Proposed Accounting Standards Update (ASU) No. 2011-200, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements; Proposed ASU No. 2011-220, Consolidation (Topic 810): Principal versus Agent Analysis; and Proposed ASU No. 2011-210, Real Estate-Investment Property Entities (Topic 973).
3/19/12 -- FASB Gets Ready to Begin Private Company Project
As discussed in the article entitled "Private Company Project Is Ready
to Begin After Next Meeting with IASB" in the March 16, 2012, issue of
Accounting & Compliance Alert, the FASB is not scheduled to meet
by itself for a formal session during the week of March 19, but the board
has other discussions scheduled.
The most significant session is a joint videoconference with the IASB on March 21, for which boards plan to resume talks about the insurance contracts project. The boards want to address the unit of account to measure insurance contract liabilities and how to separate investment components from insurance contracts.
The board also scheduled an education session to start discussing its project to define a private company. The FASB added the effort to its agenda on March 7 with the hopes that it would help the standard-setter decide when to exempt private companies from certain requirements, allow for reduced disclosures, or scale back effective dates.
On March 23, the FASB is scheduled to meet with its chief advisory group, the Financial Accounting Standards Advisory Council. Staffers from the chief accountant's office at the SEC and chief auditor's office of the PCAOB are scheduled to take part.
3/16/12 -- FASB Schedules Webcast to Explain XBRL Tables
As discussed in the article entitled "Webcast Scheduled to Explain XBRL
Tables" in the March 15, 2012, issue of Accounting & Compliance Alert,
the FASB said it will sponsor an April 3 webcast on the eXtensible Business
Reporting Language, an interactive data format required by the SEC.
The webcast will describe changes in the 2012 U.S. GAAP taxonomy, which was issued in January, the FASB said. It will include three staffers from the FASB, Louis Matherne, the board's chief of XBRL development, Donna Johaneman, the XBRL project manager, and David Shaw, a research associate.
Susan Yount of the SEC's interactive data office is also scheduled to take part in the presentation.
The SEC updated its interpretive guidance for XBRL filings in January. In 2009, the SEC published Release No. 33-9002, Interactive Data to Improve Financial Reporting, which made the submission of financial statements tagged in interactive data a regulatory requirement.
The FASB released the final 2012 version of its XBRL taxonomy on January 18.
3/15/12 -- FASB and IASB to Debate Portfolios of Insurance Contracts
As discussed in the article entitled "Debate on Insurance to Focus on Portfolios of Contracts" in the March 13, 2012, issue of Accounting & Compliance Alert, the FASB and IASB are planning to deal with two of the more complicated aspects of their insurance contracts project during a videoconference meeting scheduled for March 21.
One issue, defining a portfolio of insurance contracts, was last debated in December, when the boards asked their research staffs to propose a definition they could discuss at a later date.
The staffs came up with a definition that calls for, among other things, defining portfolios as pools of contracts that have similar risks and are managed collectively.
The boards are also slated to discuss how to measure the investment component of some long-term insurance contracts, such as whole-life policies.
The boards last discussed the issue in November, when they decided that insurers would have to identify specific account balances in their financial statements, and they asked their research staffs to study other information that could be highlighted.
3/12/12 -- FASB's 2012 Accounting Support Fee Approved in SEC Release No. 33-9300
As discussed in the article entitled "2012 Accounting Support Fee Approved in Release No. 33-9300" in the March 9 issue of Accounting & Compliance Alert, the SEC issued Release No. 33-9300, Order Regarding Review of FASB Accounting Support Fee for 2012 under Section 109 of the Sarbanes-Oxley Act of 2002, to approve the FASB's funding for the next year.
The SEC order didn't say how much the FASB will get, although the White House's proposed budget for the fiscal year that begins October 1 allotted the standards board $40 million. The Office of Management and Budget said the FASB received $30 million in fiscal 2011 and estimated it will receive $39 million for fiscal 2012.
The accounting support fee is governed by Section 109 of the Sarbanes-Oxley Act of 2002.
Public companies pay the fees to support the PCAOB and FASB.
According to the 2010 annual report of the FASB's parent organization, the Financial Accounting Foundation (FAF), accounting support fees contributed $34.1 million, or 69%, of the board's total proceeds in 2010. The 2011 annual report has not been released.
3/09/12 -- FASB to Standardize Definition of a Private Company
As discussed in the article entitled "Search Is on for a Uniform Definition of Private Company" in the March 8 issue of Accounting & Compliance Alert, FASB Chairman Leslie Seidman said the FASB will add a project to its agenda to write a uniform definition of a private company to be used throughout U.S. GAAP.
The project will focus on defining what constitutes a private company and help standard-setters decide when to exempt private companies from certain requirements, allow for reduced disclosures, or deferred effective dates.
Participants in a special private company resource group as well as attendees at private company roundtable meetings asked for a clear definition, the FASB said.
FASB staff members are preparing for an educational meeting on the issue in three weeks, said Sue Cosper, the FASB's technical director.
3/08/12 -- FAF Asks Congress Not to Ease GAAP Rules for Start-up Companies
As discussed in the article entitled "FAF Asks Congress Not to Ease GAAP Rules for Start-up Companies" in the March 7 issue of Accounting & Compliance Alert, the effort in Washington to help companies go public by easing their regulatory reporting requirements has alarmed the leadership of the Financial Accounting Foundation, the body that oversees the FASB and GASB.
Sen. Charles Schumer's (D-NY) S. 1933, Reopening American Capital Markets to Emerging Growth Companies Act of 2011, "would effectively legislate accounting standards, jeopardizing the integrity of the high-quality accounting standards on which investors and other stakeholders rely," wrote FAF President and CEO Teresa Polley in a statement submitted for a March 6 Senate Banking Committee hearing.
The hearing was scheduled to consider several proposed pieces of legislation to make it easier for companies with less than $1 billion in sales to go public by relaxing some SEC and PCAOB requirements.
Polley criticized a provision in the bill to amend Section 19(b) of the Securities Act of 1933 and bar the FASB from requiring start-ups that have just gone public from following a new requirement in GAAP before private companies.
In requesting that the provision that deals with accounting standards be removed, Polley, who did not testify, argued that good financial reporting increases investor confidence, which leads to better investment decisions and economic growth.
3/05/12 -- FASB Plans to Focus on IFRS 4 Guarantee Provision
As discussed in the article entitled "Next Round of Talks on Insurance Project to Focus on IFRS 4 Guarantee Provision" in the March 2, 2012, issue of Accounting & Compliance Alert, the FASB said its March 7 weekly meeting will focus on a provision in IFRS 4, Insurance Contracts, which deals with contractual guarantees to investors called "discretionary participation features."
The guarantees are a common feature in some financial instruments that are hybrids of both investments and insurance policies and guarantee minimum payments to customers, according to a briefing paper prepared by the IASB. Generally, the contracts don't underwrite enough risk to be considered full insurance policies.
The accounting treatment for the instruments under IFRS 4 poses a problem in that the instruments can be structured differently from one jurisdiction to the next. Insurers often account for them as liabilities, but in some instances they can be treated as equity. The IASB wants to resolve any conflict between the existing practice and IFRS 9, Financial Instruments.
The IASB briefing paper said the contracts are a rarity in the U.S. and aren't addressed in the FASB's Codification, but many insurers based in the U.S. sell them through their foreign subsidiaries and want an accounting treatment for them.
3/01/12 -- FASB and IASB at Impasse on Insurance Standard
As discussed in the article entitled "Hopes Fade for a Converged Insurance Standard" in the February 28, 2012, issue of Accounting & Compliance Alert, the FASB and IASB agreed to disagree February 27 on the biggest question facing the insurance accounting project-whether there should be one model or two for different types of insurance contracts.
Meeting jointly in London, the accounting boards acknowledged their fundamental differences and agreed to move on so they could deal with other parts of the project to overhaul the way insurers account for their business activities. The FASB voted to have one model for long-term policies, such as life insurance, and another for short-term policies, such as theft or fire, while the IASB maintained its commitment to a single model, with an optional second method that would apply to some contracts.
"I think these are two different economic transactions, and we need the accounting to reflect those economics," FASB member Russell Golden said.
The entrenched positions of the two boards left them unable to resolve what
remains a sticking point after a series of debates in 2011 on the underlying
issue of whether there should be one accounting model or two for insurance
contracts. At the beginning of the latest joint meeting, FASB Chairman
Leslie Seidman and IASB Chairman Hans Hoogervorst said the boards had
debated the issue enough.
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