SEC/GAAP Watch - FASB Articles

1/09/12 -- FASB to Discuss Going Concern and Financial Instruments Projects
As discussed in the article entitled "Going Concern and Financial Instruments Projects Are up for Discussion" in the January 6, 2012, issue of Accounting & Compliance Alert, the FASB plans to discuss the risk and uncertainties disclosure project and the classification and measurement portion of the financial instruments project when it meets January 11.

The FASB is close to finishing its work on classification and measurement and plans to follow up on a recent educational session during which the board discussed the requests from banks for more guidance on applying fair value and amortized cost.

But the board appears to have much more remaining work with the risk and uncertainties disclosure project, which had been called the going concern project until last year.

The board first took up the project as it tried to devise a way to give better warnings before a business fails. The going concern assessment has for years been the auditor's responsibility, but investors have complained that by the time the auditor makes the assessment, the business is on the verge of bankruptcy or a delisting from its stock exchange.

The FASB wrestled with the idea of having a business's management make the assessment instead, but many investors doubt the objectivity of senior management. In 2011, the board redirected the project to focus on disclosures about risks and uncertainties and the liquidation basis of accounting.

1/06/11 -- FASB Proposed ASU No. 2011-250 Maps Draft Revenue Standard to Codification
As discussed in the article entitled "Proposed ASU No. 2011-250 Maps Draft Revenue Standard to Codification" in the January 5, 2012, issue of Accounting & Compliance Alert, the FASB issued proposed Accounting Standards Update (ASU) No. 2011-250, Revenue Recognition (Topic 605): Revenue from Contracts with Customers-Proposed Amendments to the FASB Accounting Standards Codification, on January 4, 2012, to help investors and accountants evaluate the changes from November's proposed ASU No. 2011-230.

The documents are essentially the same, with the major difference being that the more recent draft is mapped to the Codification of U.S. GAAP, the FASB said. The comment deadline is still March 13.

Proposed ASU No. 2011-250 "includes both the proposed amendments that codify the guidance in the proposed update on revenue recognition and the proposed amendments to subtopics that will be consequentially affected by this proposed update," the FASB said.

The draft also reflects the changes in ASU No. 2011-07, Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities.

The FASB said the changes in proposed ASU No. 2011-250 and proposed ASU No. 2011-230 will not affect the draft guidance in proposed ASU No. 2011-200, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, or proposed ASU No. 2011-210, Real Estate-Investment Property Entities (Topic 973).

1/05/11 -- Major FASB Standards Proposals Are Due in First Half of 2012
As discussed in the article entitled "Major Standards Proposals Are Due in First Half of 2012" in the January 3, 2012, issue of Accounting & Compliance Alert, the FASB's agenda for the first six months of the year includes publication of several major proposals.

The next exposure drafts for the convergence projects on lease accounting and insurance contracts are at the top of the list. The FASB has been working closely with the IASB to wrap up its discussions on both efforts and move them forward.

The FASB also wants to release another exposure draft for its going concern project, which was redirected to focus on risk disclosures and liquidation accounting in 2011. The effort has not progressed in more than three years partly because of the many doubts that have been raised about shifting responsibility for a going concern assessment to management and away from the auditor.

The FASB is also close to issuing a draft version of an amendment to the impairment test for long-lived intangible assets like patents and copyrights.

The other exposure draft the FASB is working on that will be closely watched involves a relaxation of the disclosure requirements for private companies of fair value measurements for hard-to-value assets and liabilities. The board added the project to the standard-setting agenda in November.

1/04/11 -- Five FASB Projects Have Comment Deadlines in Early 2012
As discussed in the article entitled "Five Projects Have Comment Deadlines in Early 2012" in the January 3, 2012, issue of Accounting & Compliance Alert, five FASB proposals have comment deadlines in the first three months of 2012.

Comments on the important revenue recognition proposal, a key convergence effort with the IASB, are due March 13.

The proposals were released by the FASB in proposed Accounting Standards Update (ASU) No. 2011-230, Revenue Recognition (Topic 605): Revenue from Contracts with Customers, and by the IASB as Exposure Draft (ED) No. 2011-6, Revenue from Contracts with Customers.

The public is being asked to weigh in on proposed 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), by February 6. The proposal was forwarded to the FASB by the board's Emerging Issues Task Force, which wants a uniform approach in U.S. GAAP for adjusting for the effects of asset sales and transfers transacted in foreign currencies.

Comments on three related consolidated reporting proposals are due on February 15.

Proposed ASU No. 2011-200, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, changes the definition of investment companies to include businesses that exist only to invest to generate income or raise capital.

The proposal ties into two other planned changes to U.S. GAAP-proposed ASU No. 2011-210, Real Estate-Investment Property Entities (Topic 973), and proposed ASU No. 2011-220, Consolidation (Topic 810): Principal versus Agent Analysis.

1/03/11 -- FASB Is Set to Begin Next Round of Deliberation on Financial Instruments Project
As discussed in the article entitled "Classification and Measurement of Financial Instruments Are up for Discussion" in the December 30, 2011, issue of Accounting & Compliance Alert, the FASB said it plans to discuss the classification and measurement portion of the financial instruments project during a January 4, 2012, education session.

No official decisions are made at educational sessions, but the discussions usually set the tone for future meetings.

Classification and measurement is one of three portions of the financial instruments project, a much-watched effort in the convergence of U.S. GAAP and IFRS. The FASB and IASB have been criticized for not moving on the same time line with the project, given that the IASB is farther along in its deliberations than the U.S. board.

FASB Chairman Leslie Seidman recently said, however, that the FASB is catching up and that its decisions on classification and measurement could be a turning point.

The FASB last discussed classification and measurement in September, when it made decisions about liquidity risk and interest rate disclosures. At that meeting, the board decided that proposed disclosures about liquidity risk would apply to all businesses, but only financial institutions would have to provide disclosures about interest rate risk.

12/30/11 — FASB Member Says Lease Standard May Call for Extra Disclosures
As discussed in the article entitled "Lease Standard May Call for Extra Disclosures" in the December 29, 2011, issue of Accounting & Compliance Alert, the FASB and IASB may consider adding some disclosure requirements to the lease standard to help clarify the expense reporting.

Speaking December 20, 2011, during a webcast on private company accounting concerns, FASB member Daryl Buck said the boards will consider disclosures related to rental expenses.

"We will be considering possible disclosures around straight-line rent expenses," Buck said. "We understand concerns persist, so we will continue to ponder the model."

Under the proposal being drafted by the U.S. and international boards, almost all businesses would have to report their outstanding obligations for rental expenses. The proposal calls for treating equipment or space gained via an operating lease as an asset and declaring the payments owed as a liability. Rental expenses would be replaced with implied interest cost and amortization of the capitalized asset.

The boards plan to issue a lease accounting proposal for a second round of public comments in the first half of 2012, Buck said.

12/28/11 -- FASB Delays Some Pending Changes to ASC 220-10-45
As discussed in the article entitled "ASU No. 2011-12 Delays Changes to ASC 220-10-45" in the December 27, 2011, issue of Accounting & Compliance Alert, the FASB published Accounting Standards Update (ASU) No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.

The standard was issued in response to complaints from businesses about the cost of implementing some pending changes to FASB ASC 220-10-45, Items within Other Comprehensive Income, formerly SFAS No. 130. The affected changes include the requirement to present items that are reclassified from accumulated other comprehensive income to net income with the components of net income and other comprehensive income.

The changes were originally in ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which was issued in June. They were scheduled to be used for first quarter 2012 filings.

The FASB said it is still considering the operational issues raised by the changes in ASU No. 2011-05 and whether it should institute them.

12/22/11 -- FASB and IASB Discuss Insurance Portfolio Definition
As discussed in the article entitled "Insurance Portfolio Definition Being Worked Out" in the December 20, 2011, issue of Accounting & Compliance Alert, the FASB and IASB spent much of their December 16 meeting debating an important part of the insurance project: the definition of a portfolio of insurance contracts.

Meeting jointly in London, the boards didn't settle on the definition but indicated that they wanted a portfolio to be defined as a group of contracts with similar risks and similar durations. The boards asked their research staffs to come back with a proposal for a future meeting.

This definition will likely play a key role in shaping the proposal the two boards are crafting to try to make insurer financial statements as transparent as possible. In February, the boards had decided that the insurance overhaul proposal should require insurers to measure insurance contracts at the portfolio level, but they didn't specify what that meant.

For the December joint meeting, the staff recommended that a portfolio be defined as a group of insurance contracts that are subject to similar risks, have similar expectations of profitability, and are managed together as a single pool.

Several board members poked holes in this idea, saying it was overly complex and could lead to insurers hiding losses by grouping "good" contracts with risky contracts.

12/21/11 -- FASB's Technical Correction Proposal Garners Support
As discussed in the article entitled "Technical Correction Proposal Garners Support" in the December 19, 2011, issue of Accounting & Compliance Alert, financial professionals generally agree with the FASB's suggested changes to the Codification of U.S. GAAP in proposed Accounting Standards Update (ASU) No. 2011-190, Technical Corrections, but they think the board should add some additional fixes before it finalizes the corrections.

The FASB issued proposed ASU No. 2011-190 on October 14, 2011, to make minor text changes and clarifications to address errors discovered after the Codification was launched in 2009.

In 2010, the FASB began a permanent project to regularly make technical corrections to its accounting literature and proposed ASU No. 2011-190 is the first document to be published as part of the project. The FASB said it doesn't expect any of the changes to significantly alter accounting practices.

The comment period ended on December 13.

12/20/11 -- FASB Issues ASU No. 2011-10 on Real Estate and Loan Defaults
As discussed in the article entitled "ASU No. 2011-10 Deals with Real Estate and Loan Defaults" in the December 19, 2011, issue of Accounting & Compliance Alert, the FASB issued Accounting Standards Update (ASU) No. 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification (a consensus of the FASB Emerging Issues Task Force), on December 14 to clarify the guidance real estate companies should apply when a subsidiary loses control of a property after defaulting on a loan.

With the change to U.S. GAAP, a real estate company will use FASB ASC 360-20-15, Property, Plant, and Equipment-Real Estate Sales-Scope and Scope Exceptions, formerly SFAS No. 66, to determine whether the subsidiary and its outstanding loans should no longer be reported on the parent company's balance sheet.

The amendments will be effective for fiscal years and quarters that start June 15, 2012, or later. Nonpublic businesses will apply the changes for fiscal years that end after December 15, 2013.

The FASB said companies can adopt the change before it's effective.

Subtopic 360-20 normally applies to real estate sales, but with the amendments, the accounting standard also will be used for foreclosed properties.

12/19/11 -- FASB to Review Going Concern Project
As discussed in the article entitled "Former Going Concern Project to Get Another Review" in the December 16, 2011, issue of Accounting & Compliance Alert, the FASB is scheduled to hold an education session December 21 to discuss the former going concern project.

The project was reoriented to focus on risk disclosures and the liquidation basis of accounting this year. It's an effort by the board to give investors better warning signals before a business fails.

No decisions are made at education sessions, but the discussions usually set the stage for future formal meetings.

The FASB has been taking a cautious approach to the risk disclosure project and is coordinating its actions with the SEC and PCAOB. In October, the board asked its research staff to come up with more information on the topic as well as a potential definition for "substantial doubt" in the context of an accounting standard.

12/15/11 -- FASB's Second Revenue Recognition Proposal Tweaks Guidance for Seller Commitments
As discussed in the article entitled "Second Revenue Draft Tweaks Guidance for Seller Commitments" in the December 12, 2011, issue of Accounting & Compliance Alert, one of the biggest changes the FASB made when it revised its proposed revenue recognition standard may have had to do with the process sellers use to identify the separate performance obligations in a contract.

The assessment is applicable to industries as diverse as construction and computer software, said IASB member Prabhakar Kalavacherla during a December 8 webcast in which representatives from the standards boards explained the revenue proposal.

"A construction contract will include generally many different goods and services," Kalavacherla said. "It could include design service, qualified professional services, or construction. Depending on the circumstance, these services could be capable of being individually distinct according to the criteria we've laid out."

Kalavacherla said that in a contract, each good and service is part of a bundle provided to a customer. The customer is not asking just for design service but the entire bundle.

Kalavacherla said that as a result, the proposal considers each part integral to the contract as a whole.

12/14/11- FASB Issues Proposed ASU No. EITF-11A on Currency Adjustments

As discussed in the article entitled "Proposed ASU No. EITF-11A Deals with Currency Adjustments" in the December 12, 2011, issue of Accounting & Compliance Alert, the FASB issued 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), on December 8 to resolve some inconsistent accounting practices related to earnings adjustments from translating foreign currencies into dollars.

Comments are due February 6.

The proposed revision to FASB ASC 810-10, Consolidation, formerly FASB Interpretation (FIN) No. 46(R), and FASB ASC 830-30, Foreign Currency Matters-Translation of Financial Statements-Derecognition, formerly SFAS No. 52, deals with earnings adjustments that reflect the sale or liquidation of an overseas nonprofit operation.

The proposed amendment doesn't cover transactions involving real-estate businesses, the FASB said.

Proposed ASU No. EITF-11A follows from a decision reached by the EITF and endorsed by the FASB in November. The EITF wants to make the change because when the FASB in January 2010 issued ASU No. 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary-A Scope Clarification, it meant to include some foreign activities that met the definition of a business.

12/13/11 -- FASB Extends Comment Deadlines For Consolidation Proposals
As discussed in the article entitled "Comment Deadlines Are Extended For Consolidation Proposals" in the December 12, 2011, issue of Accounting & Compliance Alert, the FASB said December 8 that it is extending the comment period to February 15, 2012, on three related proposals to give businesses more time to review the changes.

The comment deadline for proposed Accounting Standards Update (ASU) No. 2011-200, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, and proposed ASU No. 2011-210, Real Estate-Investment Property Entities (Topic 973), had been set for January 5. Comments on proposed ASU No. 2011-220, Consolidation (Topic 810): Principal versus Agent Analysis, were due January 17.

Several groups wrote to the board in recent weeks asking for more time.

Proposed ASU No. 2011-220 aims to give consolidated reporting guidance for partnerships and other complex business arrangements where multiple parties share control.

Proposed ASU No. 2011-200 alters the definition of investment companies in FASB ASC 946-10-15, Financial Services-Investment Companies, formerly the AICPA's Statement of Position (SOP) No. 07-1 to include businesses that exist only to invest to generate income or raise capital.

Proposed ASU No. 2011-210 was issued to require real estate investment trusts and other investment property businesses to recognize their holdings at fair value. The draft guidance has to be coordinated with the changes the FASB and IASB will propose to lease accounting.

12/12/11 -- FASB and IASB Continue to Refine Asset Impairment Model
As discussed in the article entitled "Impairment Model Debate Begins to Focus on Cash Flow Forecasts" in the December 9, 2011, issue of Accounting & Compliance Alert, the FASB and the IASB are slated to refine the "three-bucket" expected loss approach for the impairment of financial assets during their next joint meeting December 14-16.

The expected-loss model for asset impairments is among the most important pieces of the financial instrument standard the boards are trying to write together, said IASB member John Smith December 7 at the AICPA's National Conference on Current SEC and PCAOB Developments in Washington.

With the other two portions of the project-classification and measurement and hedging-the boards have made less progress. But with the impairment model, the boards agree on the general outline of an approach that deals with the general pattern of deterioration in the credit quality of financial assets.

In June, the accounting standard-setters laid out an approach that uses three buckets, or stages, for monitoring deterioration in credit quality. Now the boards want to add details to the method for recognizing losses caused by deterioration in credit quality and determine how the deterioration in quality should be recorded in the financial statements.

12/09/11 -- FASB to Delay Part of Other Comprehensive Income Amendment
As discussed in the article entitled "Part of OCI Amendment Will Be Delayed" in the December 8, 2011, issue of Accounting & Compliance Alert, the FASB said it will delay the effective date of some provisions in Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.

The board did not commit to a time frame for the deferral, but four of the seven FASB members emphasized that the delay did not mean businesses would never have to provide the information.

ASU No. 2011-05, which was issued in June, required separate presentation of items reclassified from the statement of other comprehensive income to the net income statement. Public companies were supposed to start applying the amendments for fiscal quarters and years that start after December 15.

Although the change may have seemed like a simple requirement to move information from the footnotes to the face of the financial statement, several line items could be affected by the adjustment, business groups told the FASB.

In November, the FASB offered to delay this aspect of the amendment to U.S. GAAP in proposed ASU No. 2011-240, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.

12/08/11 -- FASB, IASB Leaders Say International Convergence Is Winding Down
As discussed in the article entitled "Seidman, Hoogervorst See an End to Convergence" in the December 7, 2011, issue of Accounting & Compliance Alert, the FASB and IASB are ready to end the international convergence effort they pursued for the past decade.

The decision to bow to the inevitable comes six months after a self-imposed deadline expired without the boards completing the projects in their Memorandum of Understanding, the document that outlined the standards in U.S. GAAP and IFRS that would be merged into a single set of accounting principles.

By 2010, the boards jettisoned most of the MOU projects to focus on three-financial instruments, revenue recognition, and lease contracts. A fourth project on insurance accounting that had been begun by the IASB was rolled into the convergence effort after the FASB signed on.

The U.S. board is committed to finishing the four remaining projects, but going beyond them is not viable, "politically or practically," said FASB Chairman Leslie Seidman, who added she was speaking for herself, not the board.

IASB Chairman Hans Hoogervorst, who took the helm of the international board saying convergence was his number one priority, backtracked from that position in November and reiterated those sentiments with Seidman.

12/06/11 -- FASB to Review Proposed Delay of Topic 220 Amendments
As discussed in the article entitled "Proposed Delay of Topic 220 Amendments Set for Review" in the December 5, 2011, issue of Accounting & Compliance Alert, the FASB is planning to hold a relatively brief discussion on December 7 on requests to delay the effective date of the pending amendments to the reclassification adjustments in FASB ASC 220-10-45, Items within Other Comprehensive Income, formerly SFAS No. 130.

The adjustments were finalized in June in Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.

On December 8, the board plans to hold a brief session to extend the comment periods for three proposals on consolidated reporting.

The comment deadline for proposed Accounting Standards Update (ASU) No. 2011-200, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, and proposed ASU No. 2011-210, Real Estate-Investment Property Entities (Topic 973) is January 5, 2012. Comments on proposed ASU No. 2011-220, Consolidation (Topic 810): Principal versus Agent Analysis, are due January 17.

12/05/11 -- FASB Decides to Measure Mutual Insurer Rebates as Liabilities
As As discussed in the article entitled "Mutual Insurer Rebates to Be Measured as Liabilities" in the December 1, 2011, issue of Accounting & Compliance Alert, the FASB on November 30 tentatively decided on a method for measuring the rebates some insurers pay policyholders when the investments supporting the policy produce above-average returns.

The rebates-which would be considered liabilities-would be measured based on the amounts insurers owe to policyholders. A liability's measurement would be adjusted to eliminate accounting mismatches that reflect the timing differences of when the liabilities are reported.

"If those adjustments are not reflected in the IFRS/U.S. GAAP financial statements, the equity amount will be over- or possibly understated," according to a handout from the FASB's research staff.

The decision applies only to contracts that provide a return to policyholders based on the insurer's profits on the investments that support the policy, which are typically offered by mutual insurers owned by customers and not shareholders.

12/02/11 -- FASB Approves Two EITF Decisions
As discussed in the article entitled "Two EITF Decisions Are Approved" in the December 1, 2011, issue of Accounting & Compliance Alert, the FASB on November 30 ratified two issues from its Emerging Issues Task Force.

The FASB approved a recommendation that real estate companies use the specific real estate guidance in FASB ASC 360-20-15, Property, Plant, and Equipment-Real Estate Sales-Scope and Scope Exceptions, formerly SFAS No. 66, to determine whether a subsidiary and its outstanding loans should no longer be reported on the parent company's balance sheet.

Subtopic 360-20 normally applies to real estate sales, but proposed Accounting Standards Update (ASU) No. EITF100E, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification (a consensus of the FASB Emerging Issues Task Force), calls for applying the guidance to foreclosed properties.

The FASB also approved for public comment an EITF proposal meant to clear up confusion about a parent company's treatment of fluctuations in exchange rates when it sells or transfers a group of assets from an overseas subsidiary.

Under the recommendation, parent companies will be asked to apply Subtopic 810-10, Consolidation, formerly FIN No. 46(R), and recognize the currency adjustment in their financial results.

11/30/11 -- FASB to Discuss Cash Flows for Mutual Insurance Companies
As discussed in the article entitled "Cash Flows for Mutual Insurance Companies to Be Discussed" in the November 29, 2011, issue of Accounting & Compliance Alert, the FASB is trying to determine how to measure the cash flows of insurance contracts where profits may be rebated to policyholders.

This scenario typically applies to mutual insurance, which contractually depends wholly or partly on the performance of the insurer's other assets or liabilities. Unlike insurance companies owned by shareholders, mutual insurers are owned by their policyholders, who may vote for members of the boards of directors and may receive dividend payments or reduced premiums if the company is successful.

The FASB is expected to discuss the topic at its November 30 meeting. To prepare for the meeting, the board held a November 22 education session where it talked specifically about the timing of the measurement of a mutual insurer's assets and liabilities. Although no decisions are made at education sessions, the board seemed to want more details from the staff on the best way to move forward.

In May, the FASB tentatively decided that the measurement of a liability-a potential payout to policyholders-should reflect the expected present value of cash flows discounted at current rates using a contractual measurement based on the underlying items in which the policyholder participates.

11/29/11 -- FASB's Plan to Delay Topic 220 Amendments Gains Support
As discussed in the article entitled "Delay of Topic 220 Amendments Gains Support" in the November 28, 2011, issue of Accounting & Compliance Alert, the comment letters submitted to the FASB support a proposed deferral of some pending amendments to the guidance for the presentation of other comprehensive income.

Proposed Accounting Standards Update (ASU) No. 2011-240, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, was published November 8 with a short 15-day comment period.

The document was sparked by a complaint from Financial Executives International (FEI) that pending amendments to the reclassification adjustments in FASB ASC 220-10-45, Items within Other Comprehensive Income, formerly SFAS No. 130, would be too difficult to implement in time for 2011 year-end financial statements.

The reclassification adjustments are part of ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which was issued in June and dealt mainly with the location of the statement of other comprehensive income. But the update also revised some requirements in FASB ASC 220-10-45 to avoid double-counting of items from comprehensive income in the net income statement.

11/28/11 -- FASB May Ease Fair Value Disclosure Rules for Private Companies
As discussed in the article entitled "Private Companies May Get Break on Fair Value Disclosures" in the November 23, 2011, issue of Accounting & Compliance Alert, the FASB is considering whether to reduce the fair value disclosure requirements for private companies for hard-to-value assets and liabilities.

The fair value disclosure question was the only item on the agenda for a short board meeting on November 22.

The FASB staff said they would start outreach on the topic in December and bring a proposal to the board in the first quarter of 2012.

FASB Chairman Leslie Seidman raised the issue with the rest of the board after hearing at two public roundtables that some fair value disclosure requirements are irrelevant to private company investors and costly for them to prepare.

Roundtable participants complained about requirements to disclose reconciliation of the opening and closing balances for recurring fair value measurements within Level 3 of the fair value hierarchy in FASB ASC 820, Fair Value Measurements and Disclosures, formerly SFAS No. 157.

11/23/11 -- FASB Webcast to Address Proposed Amendments to Consolidated Reporting
As discussed in the article entitled "Webcast Slated to Address Proposed Amendments to Consolidated Reporting" in the November 22, 2011, issue of Accounting & Compliance Alert, the FASB said it will host a webcast on November 28 to explain proposed changes to the consolidated reporting guidance in U.S. GAAP.

The standard-setting body issued proposed Accounting Standards Update (ASU) No. 2011-200, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements; and proposed ASU No. 2011-210, Real Estate-Investment Property Entities (Topic 973); on October 21. Comments are due January 5, 2012.

Proposed ASU No. 2011-220, Consolidation (Topic 810): Principal versus Agent Analysis, was issued November 4 with a January 17 comment deadline.

The FASB published the three documents close together because they include some overlapping provisions dealing with the consolidated reporting rules for investment companies and the fair value guidance as it applies to investment properties.

In addition, the FASB wants to coordinate the changes in proposed ASU No. 2011-210 with the work it is doing with the IASB on a second proposal to follow the 2010 publication of the FASB's proposed ASU No. 1850-100, Leases (Topic 450), and the IASB's Exposure Draft (ED) No. 2010-9, Lease.

11/22/11 -- FASB, IASB Want Lease Commitments Recognized in Mergers and Acquisitions
As discussed in the article entitled "Buyers Will Recognize A Seller's Lease Commitments" in the November 18, 2011, issue of Accounting & Compliance Alert, the FASB and IASB concluded their discussions of some remaining details on their pending standard on lease accounting during a November 16 videoconference meeting.

The boards decided to support the staffs' recommendation that when one company buys a second that holds some lease contracts, the buyer should recognize the acquired commitments on its balance sheet as liabilities. The contracts should be measured at the present value of future lease payments as if the contract is a new lease.

When the company being acquired is a lessee, the asset side of the balance sheet would show the right to use the property or equipment as an asset equal in value to the liability.

The staff said its method would achieve the benefits of fair value measurement without the related costs. The staff also called its approach consistent with the lessee model in the proposed lease standard and relatively simple to apply.

However, the boards decided to go with FASB member Russell Golden's suggestion to exclude short-term leases of less than a year from the proposed change.

11/21/11 -- FASB to Review Two EITF Decisions
As discussed in the article entitled "Two EITF Decisions Are Slated for Review" in the November 18, 2011, issue of Accounting & Compliance Alert, the FASB plans to meet November 22 to review two decisions the Emerging Issues Task Force reached earlier in the month.

The task force approved a requirement that real estate companies will use the specific real estate guidance in FASB ASC 360-20-15, Property, Plant, and Equipment-Real Estate Sales-Scope and Scope Exceptions, formerly SFAS No. 66, to determine whether a subsidiary and its outstanding loans should no longer be reported on the parent company's balance sheet.

A draft version of the change was issued in July as proposed Accounting Standards Update (ASU) No. EITF100E, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification (a consensus of the FASB Emerging Issues Task Force). The comment period ended October 3.

The EITF also agreed to issue a proposal meant to clear up the confusion about how a parent company should handle fluctuations in exchange rates when it sells or transfers a group of assets from an overseas subsidiary.

If the proposal is agreed to by the FASB, parent companies will be asked to apply Subtopic 810-10, Consolidation, formerly FIN No. 46(R), and recognize the currency adjustment in their financial results.

11/18/11 -- FAF Pitches SEC on Its Plan for FASB's Role with IFRS
As discussed in the article entitled "FAF Pitches SEC on Its Plan for FASB's Role with IFRS" in the November 16, 2011, issue of Accounting & Compliance Alert, the parent organization of the FASB is the latest party to support an SEC plan for adopting IFRS-with an important difference.

In a November 15 comment letter, Financial Accounting Foundation Chairman John Brennan called a single set of global accounting standards a "worthy objective" but stressed the importance of maintaining a strong U.S. voice in accounting standard-setting.

Most significantly, the FAF wants the FASB to be free to set its own agenda when the IASB is not addressing an issue that is important for U.S. investors and markets. The FASB would refrain from working on projects that are on the IASB agenda.

A "more practical goal for the foreseeable future is to pursue highly comparable (but not necessarily identical) financial reporting standards among the most developed capital markets that are based on a common set of international standards," Brennan wrote.

Brennan's tone was mostly supportive of the so-called "condorsement" proposal floated in a May progress report from the SEC staff.

11/17/11 -- FAF Reappoints Smith and Golden to Second Terms on FASB
As discussed in the article entitled "Smith and Golden Appointed to Second Terms on Board" in the November 16, 2011, issue of Accounting & Compliance Alert, the Financial Accounting Foundation said that FASB members Lawrence Smith and Russell Golden have been given second terms of five-years, beginning July 1, 2012.

The FAF oversees the FASB's activities.

"Both Russ and Larry have deep expertise in technical accounting and emerging issues and have been tremendous assets to the FASB," said FAF Chairman John Brennan.

"Both of them are deeply committed to improving financial reporting in the U.S by developing practical standards that provide useful information for investors, lenders, donors, and other users of financial statements," FASB Chairman Leslie Seidman said.

11/16/11 -- FASB Issues Second Draft of Revenue Standard in Proposed ASU No. 2011-230
As discussed in the article entitled "Second Draft of Revenue Standard Issued in Proposed ASU No. 2011-230" in the November 15, 2011, issue of Accounting & Compliance Alert, the FASB issued proposed Accounting Standards Update (ASU) No. 2011-230, Revenue Recognition (Topic 605): Revenue from Contracts with Customers, on November 14.

The proposal is a revision of the June 2010 exposure draft and will be out for comment until March 13, 2012.

At the same time, the IASB issued a matching proposal, Exposure Draft (ED) No. 2011-6, Revenue from Contracts with Customers.

The proposals use the same underlying principle as the original June 2010 drafts-a business recognizes revenue in the amount a customer agrees to pay when it transfers a good or a service to the customer.

But in response to almost 1,000 comment letters, the revised drafts change the principle used to identify when a contract includes separate obligations for the seller; adds criteria for contracts that are fulfilled and paid for over time, such as service agreements or construction projects; and aligns the guidance for warranties with existing U.S. GAAP and IFRS, said the FASB and IASB.

11/15/11 -- Lease Accounting Project Nears Completion
As discussed in the article entitled "Lease Project Nears Completion" in the November 14, 2011, issue of Accounting & Compliance Alert, the FASB and IASB have resolved most of the main aspects of their pending standard on lease accounting, but must still address how the guidance will overlap with the principles for business combinations in U.S. GAAP and IFRS.

The boards must also decide whether to publish transition guidance for secured borrowings.

In a videoconference meeting scheduled for November 16, the boards are expected to first address what happens when one business buys another that has lease obligations.

The boards are also expected to discuss whether there should be transition guidance for the sale of lease receivables or lease payments. In October, the boards asked the staff to research the matter because under some conditions, the transactions are considered secured borrowings given that they often include guarantees of future lease payments.

The boards expect to wrap up decisions on the leases project by December and hope to release a second exposure draft for comment in the first quarter of 2012.

11/14/11 -- FASB and IASB to Discuss Leases and Insurance at Next Joint Meeting
As discussed in the article entitled "Leases, Insurance on Joint Meeting Agenda" in the November 11, 2011, issue of Accounting & Compliance Alert, the FASB and IASB are scheduled to meet via videoconference November 16 to discuss two of the big convergence projects: lease accounting and insurance contracts.

The leases project aims to end the long-standing practice in U.S. GAAP of leaving lease obligations off company balance sheets, a practice investors and creditors have complained does not give a financial statement reader a true picture of a company's obligations. The effort to overhaul lease accounting has been several years in the making, and the standard-setters expect to release a proposal for a second round of public comments in the first quarter of 2012.

At the last joint meeting, the boards tentatively agreed to a new model for lessor accounting and several disclosure and presentation requirements. The upcoming discussion is to address the issues companies will face in making the transition to the revised standard and what aspects of the standard will overlap with other accounting principles, according to the FASB's agenda.

11/11/11 -- FASB's FASB May Ask Insurers to Separate Investment and Policy Information
As discussed in the article entitled "Insurers May Be Asked to Separate Investment and Policy Information" in the November 10, 2011, issue of Accounting & Compliance Alert, the FASB spent most of a November 9 education session on insurance contracts searching for ways to measure and present account balances and related income and expenses.

The discussion was part of the FASB and IASB's effort to help creditors and investors more clearly determine an insurer's liabilities, what drives the financial performance of insurance contracts, and the risks and uncertainties that result from them.

Decisions are not made during education sessions, but the discussion served as a preview of the joint IASB and FASB meeting scheduled for November 16.

The IASB Exposure Draft (ED) No. 2010-8, Insurance Contracts, and the FASB Discussion Paper (DP) No. 1870-100, Preliminary Views on Insurance Contracts, both proposed that some investment components of insurance contracts should be separated from the contracts' policy components.

11/10/11 -- FASB's Proposed ASU No. 2011-240 May Delay Some Topic 220 Amendments
As discussed in the article entitled "Proposed ASU No. 2011-240 Offers Delay of Topic 220 Amendments" in the November 9, 2011, issue of Accounting & Compliance Alert, the FASB released proposed Accounting Standards Update (ASU) No. 2011-240, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, on November 8 to delay some amendments to U.S. GAAP issued earlier this year.

If the proposal is finalized, some requirements for the presentation and disclosure of reclassification adjustments in other comprehensive income and net income will not be effective at year end as had been previously scheduled.

The document is out for an abbreviated comment period, ending November 23. The FASB will sometimes use an accelerated process when it is offering changes that the board believes are minor or need to be implemented quickly.

The proposed delay is intended as a temporary fix to give the FASB time to decide how to handle the reclassification adjustments in the income statements.

11/09/11 -- FAF to hold Webcast, Roundtables on Private Company Plan
As discussed in the article entitled "Foundation Set to Hold Webcast, Roundtables on Private Company Plan" in the November 8, 2011, issue of Accounting & Compliance Alert, the Financial Accounting Foundation said it will sponsor a November 18 webcast and three roundtables in early 2012 on the Request for Comment, Plan to Establish the Private Company Standards Improvement Council.

The plan was published in early October and is out for comment until January 14, 2012.

The FAF is proposing to create a Private Company Standards Improvement Council (PCSIC) to replace the Private Company Financial Reporting Committee, which is jointly sponsored by the FASB and AICPA.

The group would be chaired by a member of the FASB, and all seven FASB members would attend its meetings at FASB headquarters in Norwalk, CT, under the FAF proposal. The group would propose modifications to U.S. GAAP for the FASB to consider.

11/08/11 -- FASB to Review Not-For-Profit Recommendations
As As discussed in the article entitled "Not-for-Profit Panel Recommendations May Spark Standards Projects" in the November 7, 2011, issue of Accounting & Compliance Alert, the FASB is set to hold a brief meeting November 9 to review the recommendations submitted in early October by its Not-for-Profit Advisory Committee.

The recommendations include modifying or relabeling the net asset classifications to give a clearer picture of a not-for-profit's cash position and funding in its statement of financial position and the related notes; creating a narrative disclosure format modeled on the public company management discussion and analysis section of SEC filings; and modifying other disclosure rules to make them clearer.

The recommendation to revisit how net assets are classified is intended to clarify terms that commonly cause confusion, including the definition of an unrestricted net asset, the FASB said.

11/07/11 -- FAF Trustees Plan Next Meeting for Mid-November
As discussed in the article entitled "FAF Trustees Plan Next Meeting for Mid-November" in the November 3, 2011, issue of Accounting & Compliance Alert, the Financial Accounting Foundation, the body that oversees the FASB and GASB, has scheduled its next meeting for November 15 at its office in Norwalk, CT.

As is normally the case with FAF trustee meetings, the panel will hear reports from FASB Chairman Leslie Seidman, GASB Chairman Robert Attmore, Financial Accounting Standards Advisory Committee Chairman Dennis Chookaszian, and Governmental Accounting Standards Advisory Council Chairman Martin Benison.

The FAF's chair, John Brennan, and its president, Teresa Polley, are also scheduled to speak.

The foundation is also scheduled to hear a report from its standard-setting process oversight committee that was set up two years ago. The panel is co-chaired by Jeffrey Diermeier and John Radford.

11/03/11- FASB and IASB Close to Completing Lease Accounting Project
As discussed in the article entitled "Major Lessor Issues for Proposed Lease Standard Seem Resolved" in the November 2, 2011, issue of Accounting & Compliance Alert, the FASB and IASB moved closer to wrapping up the lease accounting project when they tentatively agreed that lessors would have to disclose their total lease income during a joint videoconference meeting.

The boards want lessors to separately identify the profit produced by their leases, the interest income, the appreciation in value of the item being leased, the variable lease income, and the proceeds from short-term contracts. The profit would be recognized at the outset of the contract.

The decisions were part of the boards' project to bring more transparency to lease accounting standards, which have long been criticized for providing too little information about a business's assets and liabilities. Most of the criticism has focused on lessee accounting because under U.S. GAAP, businesses that lease a storefront or a fleet of trucks do not have to report the related financial liabilities on their financial statements.

In contrast, businesses with mortgages or equipment financing plans must reveal the information to investors.

Under the proposed overhaul, businesses would have to say how much they pay each month for leasing equipment or real estate.

11/02/11 -- FAF President Says Structure of Private Company Group Will Aid Change
As discussed in the article entitled "Structure of Private Company Group Will Aid Change, Polley Says" in the October 28, 2011, issue of Accounting & Compliance Alert, Financial Accounting Foundation officials do not want a separate U.S. GAAP for private companies.

The foundation, the parent organization of the FASB and GASB, dismissed an AICPA-backed plan for a separate accounting standards board for nonpublic businesses, FAF President Teresa Polley said October 27.

The meeting between the AICPA Auditing Standards Board's Audit Issues Task Force and the FASB at the AICPA's New York headquarters was the first time Polley and all seven members of the FASB met publicly with AICPA members since the issuance of the FAF proposal.

The AICPA is leading a campaign for a separate private company board and has criticized the FAF for not agreeing to its demands.

"We've learned over history it's better to have one standard-setter keep the standards the same as much as possible," Polley said.

11/1/11 -- FASB and IASB to Discuss Lease Accounting at Next Joint Meeting
As discussed in the article entitled "Leases on Agenda for Joint Meeting" in the October 28, 2011, issue of Accounting & Compliance Alert, the FASB and its international counterpart will meet via videoconference on November 1 to tackle what is expected to be some of the last remaining issues in the lease accounting project.

The FASB and IASB had a lengthy discussion about the leases project at its last joint meeting on October 19, but time restraints meant they did not get to discuss all of the items on their agenda. The November 1 meeting is expected to discuss lessor disclosures and additional transition guidance.

The project aims to make businesses more transparent about their assets and liabilities when it comes to lease obligations. Under U.S. GAAP, leases stay off balance sheets, a practice critics say misleads investors about a business's liabilities.

The FASB is holding its own regular meeting on November 2 to discuss how to impair indefinite-lived assets such as patents, copyrights, and trademarks. During an educational meeting held on October 26, members of the FASB staff told the board that they could have an exposure draft to amend FASB ASC 350-30, General Intangibles Other than Goodwill, by December.