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US Week in Review - Week ending 10 May 2012

The US Week in Review highlights this week’s developments and emerging issues in the financial reporting world and gives you direct access to relevant technical accounting guidance and thought leadership produced by Ernst & Young.

Ernst & Young publications


Updated FRD on transfers and servicing of financial assets

We have updated our Financial reporting developments publication, Transfers and servicing of financial assets. This updated edition incorporates recent standard-setting activities, such as ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements, which became effective 1 January 2012, for calendar year-end entities.

Practical matters for the c-suite - Would the redefinition of investment companies affect you?

Our new edition of Practical matters for the c-suite, Would the redefinition of investment companies affect you?, complements our Technical Line and To the Point publications on the FASB's exposure draft on investment companies and explores in more detail how the proposal would affect an organization's finance, tax and business processes. The Practical matters for the c-suite series is produced by our Financial Accounting Advisory Services (FAAS) group and is intended to help companies assess the potential effects of accounting proposals on their organizations.

Printed copies of Ernst & Young's FRD on fair value measurement can be ordered

We have updated our Financial Reporting Developments (FRD) publication, Fair Value Measurements, and prepared printed copies that you can now order from AccountingLink. Please fill out the order form to obtain a printed copy of the FRD.

Standard Setter updates


Financial Accounting Standards Board (FASB

9 May 2012 FASB meeting

Accounting for financial instruments: impairment - The FASB tentatively decided that the impairment allowance for a debt instrument modified due to the borrower's financial difficulties (a troubled debt restructuring under current US GAAP) should capture lifetime expected credit losses. The Board decided that a modified debt instrument is a continuation of the existing instrument and should be evaluated for credit deterioration in accordance with the instrument's original terms.

Disclosures about liquidity risk and interest rate risk - The Board clarified that all entities would supplement the proposed tabular disclosures with a narrative discussion of significant period-to-period changes in the timing and amounts disclosed within the tables. This discussion would also include any actions taken during the current period to manage liquidity and interest rate risk.

In determining whether an entity or reportable segment would provide the financial or nonfinancial institution disclosures, the FASB tentatively decided an entity or reportable segment that earns its primary source of income through managing the difference between returns received on financial assets and returns paid on financial liabilities (e.g., banks, insurance companies) would be considered a financial institution. Entities that hold substantially all of their financial assets at fair value through net income (e.g., investment companies, brokers and dealers in securities) would not be considered a financial institution for purposes of these disclosures.

For additional details of the Board's discussions, see the FASB's Action Alert.

Upcoming meetings and webcasts

See the FASB calendar for upcoming meetings.

Education sessions

See the FASB calendar for upcoming education sessions. No decisions are made at these sessions.

Securities and Exchange Commission (SEC)

Retrospective application of comprehensive income standard in a new registration statement

Public companies with calendar year-ends were required to adopt the new standard on comprehensive income (ASU 2011-05, as amended by ASU 2011-12) in their 2012 first-quarter Form 10-Q with retrospective application. Thereafter, when those companies file a new or amended registration statement (except Form S-8), they have three options with respect to their historical annual financial statements (if the change is material):

  1. Incorporate by reference the historical annual financial statements from their 2011 Form 10-K if they early adopted the new comprehensive income standard
  2. File revised historical annual financial statements reflecting the retrospective application of the new comprehensive income standard (including via a Form 8-K that is incorporated by reference)
  3. Incorporate by reference the historical annual financial statements from their 2011 Form 10-K and provide the following information in a selected financial data type table (either in the prospectus or a Form 8-K that is incorporated by reference):
    1. Net income
    2. Components of other comprehensive income that would be on the face of the financial statements under ASU No. 2011-05, as amended
    3. Total other comprehensive income
    4. Total comprehensive income

The staff of the SEC's Division of Corporation Finance would not object to the third alternative if the registrant concludes and its auditor agrees that there is no need to retrospectively revise previously issued annual financial statements that are incorporated by reference into the registration statement.

Similar considerations apply to fiscal year public companies once they adopt the new comprehensive income standard.

International Accounting Standards Board (IASB)

IFRS Trustees' review of IFRS Interpretations Committee (IASB)

The Trustees of the IFRS Foundation have published their findings following a review of the efficiency and effectiveness of the IFRS Interpretations Committee (IFRIC). The primary recommendations of the review include:

  • Employing a broader range of "tools" enabling IFRIC to be more responsive to requests for assistance
  • Revising the criteria used to determine which issues IFRIC should address
  • Improving IFRIC's communications regarding issues that it decides not to address
  • Expanding IFRIC's outreach and improving the transparency regarding its agenda decisions

Other

CAQ publishes report on role of the auditor workshop

The Center for Audit Quality (CAQ) recently published a report summarizing its March 12 workshop on the evolving role of the auditor. The workshop was built on a series of CAQ roundtables held with a range of stakeholders during 2011. Workshop participants explored key questions discussed at the roundtables, including the benefits of auditor involvement with financial information disclosed by management outside of the audited financial statements including Management's Discussion and Analysis, earnings releases and key performance indicators.

Updated Internal Control - Integrated Framework to be issued early in 2013

In a recent press release, the Committee on Sponsoring Organizations (COSO) announced that the updated Internal Control - Integrated Framework (ICIF or Framework) is expected to be released during the first quarter of 2013. The framework originally was scheduled for release in the fall of 2012, but COSO has delayed the release until early 2013 due to the volume of comments received on the proposal.

Upcoming Thought center webcasts and podcasts


The Ernst & Young Q2 2012 financial reporting update
Co-sponsored by Financial Executives International (FEI)
7 June 2012, 1:00 p.m. Eastern time

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