US Week in Review - Week ending 17 April 2014
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 EY.
What’s new from EY
After backing away from its proposal to overhaul the accounting for insurance contracts and deciding to focus on making targeted improvements, the FASB laid out the topics it will consider in redeliberations. The Board decided to divide the project into two components: short-term contracts (i.e., property-casualty and short-term health contracts) and long-duration contracts (i.e., life insurance and long-duration health contracts). Both components will be worked on concurrently. For more details, see our To the Point publication.
The FASB issued final guidance that raises the threshold for disposals to qualify as discontinued operations and requires new disclosures for discontinued operations and for individually material disposal transactions that do not meet the definition of a discontinued operation. Our To the Point publication tells you what you need to know about the standard.
Standard Setter updates
Financial Accounting Standards Board (FASB)
16 April 2014 FASB meeting
Insurance contracts - See our To the Point above.
The FASB also discussed its project on Consolidation: principal versus agent analysis. For details, see the FASB's Tentative Board Decisions.
Upcoming meetings and webcasts
23 April 2014 joint FASB-IASB meeting
The Boards are scheduled to discuss their project on Leases.
For additional details, see the FASB's calendar.
23 April 2014 FASB meeting
The FASB is scheduled to discuss its project on Accounting for financial instruments: classification and measurement.
The FASB also will discuss pre-agenda research on classification in the statement of cash flows. The Board is not planning to make an agenda decision at this meeting.
For additional details, see the FASB's calendar.
See the FASB's calendar for upcoming education sessions. No decisions are made at these sessions.
Securities and Exchange Commission (SEC)
Appeals Court says parts of conflict minerals rule violate First Amendment
The US Court of Appeals for the DC Circuit held that the disclosure requirements of the SEC's conflict minerals rule violate the First Amendment by requiring issuers to report to the Commission and to state on their website that any of their products have "not been found to be 'DRC conflict free.'" The court found that such a requirement interferes with the exercise of freedom of speech by compelling a company "to confess blood on its hands," reversing a previous decision by the US District Court for the District of Columbia. The appellate court upheld other aspects of the rule and rejected the petitioners' claims under the Administrative Procedures Act and Exchange Act.
Although the court issued its opinion, the formal mandate that would send the case back to the District Court for further proceedings may not occur until the court disposes of any petition that the SEC could request for rehearing by the full Court of Appeals, which might not occur before June.
The SEC has not yet made any announcement in response to the decision. In light of the upcoming 2 June 2014 Form SD filing deadline covering calendar-year 2013, affected companies should closely monitor further developments from the U.S. Court of Appeals and the SEC and may wish to consult with legal counsel.
SEC Division Director outlines next steps in reconsidering SEC disclosure regime
In a recent speech, SEC Division of Corporation Finance Director Keith Higgins outlined the next steps in the SEC staff's disclosure effectiveness project. The SEC staff will review the requirements of Regulation S-K and Regulation S-X to identify opportunities to reduce the costs and burdens on companies while still providing material information to investors. However, reducing disclosure volume is not the sole objective of the project. The staff also will consider whether there are potential gaps in disclosures and look for opportunities to increase their transparency. The SEC staff's review will include:
- Focusing on business and financial disclosures in periodic and current reports (i.e., Form 10-K, Form 10-Q, Form 8-K)
- Reviewing Industry Guides and form-specific disclosure requirements and consider whether they should be codified in Regulation S-K
- Reviewing the requirements and the cost of filing separate financial statements of acquired businesses, equity method investees and guarantors (i.e., Regulation S-X)
- Considering further scaling disclosure requirements for certain categories of issuers (e.g., smaller reporting companies, emerging growth companies)
- Working with the FASB to explore the overlap of disclosures between US GAAP and SEC requirements
- Exploring the use of technology to improve the focus and navigability of disclosure documents
- Considering ways to update and modernize disclosures in proxy statements
In the meantime, Mr. Higgins urged companies to improve the focus and navigability of their disclosure documents by eliminating duplicative disclosures, focusing on matters that are material to investors and eliminating outdated information. He also said that the staff needs to be judicious in the filing review process when issuing comments and encouraged companies to continue the dialogue with the staff when they believe the requested disclosure is immaterial.
Mr. Higgins also announced a new page on the SEC's website where companies and investors can submit comments about how to make disclosures more effective. The website also will provide information about planned roundtables and other news. The project was recommended in a study required by the JOBS Act. See our To the Point publication for an overview of the study and its recommendations.
Government Accounting Standards Board (GASB)
Concepts Statement issued on measurement of assets and liabilities
The GASB issued a Concepts Statement that will guide it when setting standards for how state and local governments determine the dollar amount at which to report assets and liabilities. The Concepts Statement establishes two approaches to measuring assets and liabilities: initial amounts are determined at the time an asset is acquired or a liability is incurred, and remeasured amounts are determined as of the date of each year's financial statements. The Concepts Statement also establishes four measurement attributes (i.e., the characteristics of an asset or liability that is being measured): historical cost, fair value, replacement cost and settlement amount.
Upcoming Thought Center webcasts and podcasts
Let's talk: sustainability Q2 2014
A new point of view for business leaders
23 April 2014, 12 p.m. Eastern time
CFO: need to know quarterly webcast series
25 June 2013, 12 p.m. Eastern time