US Week in Review - Week ending 17 November 2011
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.
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Ernst & Young publications
The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued a revised joint proposal to create a single, global revenue recognition model. While the overall framework is the same as in the 2010 exposure draft (ED), key parts of the proposal have changed. Some changes move the proposal closer to US GAAP than the 2010 ED. Others would significantly change current practice for some companies. Our To the Point publication highlights changes from the 2010 ED and current practice.
Regulators at the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) are increasing their focus on the valuation of investments, especially the use of information from third-party pricing sources for securities for which there is no active market. The SEC staff has made a number of comments about management's responsibilities for those measurements. The PCAOB also has been emphasizing these measurements in its standard setting and inspections.
Our Technical Line publication highlights some of the recent regulatory initiatives in this area and tells you what you need to know about issuers' use of third-party pricing sources to support valuations of investments.
Accounting Standard Update (ASU) 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment, introduced an optional qualitative assessment for testing goodwill for impairment that may allow companies to skip the annual two-step test. Our Technical Line publication provides a framework for companies to consider when determining whether and how to apply the qualitative screen.
Standard Setter updates
Financial Accounting Standards Board (FASB)
FAF comment letter on SEC Staff Paper
The FAF Board of Trustees submitted a comment letter to the SEC on its SEC Staff Paper, Exploring a Possible Method of Incorporation. The Trustees express support for the incorporation of IFRS into US GAAP and recommend modifications to the IFRS incorporation approach discussed in the SEC Staff Paper. For additional details, see the comment letter.
Two FASB members reappointed to second terms
The FAF Board of Trustees reappointed Russell G. Golden and Lawrence W. Smith to five-year terms on the FASB beginning 1 July 2012. For additional details, see the FAF's news release.
FAF appoints three new members to its Board of Trustees
The FAF appointed Paul G. Camell, W. Daniel Ebersole, and Michelle R. Seitz to its Board of Trustees for five-year terms that begin 1 January 2012. For additional details, see the FAF's news release.
16 November 2011 joint FASB/IASB videoconference Board meeting
Insurance contracts - The Boards discussed unbundling (i.e., disaggregation), considering whether explicit account balances and related services should be separately presented from the insurance contracts liability on the statement of financial position and whether they should be measured together with other components of insurance contracts. The Boards also discussed which components should be recognized in the statement of comprehensive income.
Leases - The Boards tentatively decided to provide an exception to the fair value measurement premise in business combination accounting for leases. Lessees and lessors applying the right-of-use model would measure leases in accordance with the proposed leases guidance as if the lease is a new lease at the acquisition date. The lessee's right-of-use asset would be adjusted for any off-market terms in the contract. Lessors would measure the residual asset as the difference between the fair value of the underlying asset and the lease receivable.
Upcoming meetings and webcasts
22 November 2011 FASB Board meeting
The Board will decide whether to ratify a final consensus and a consensus-for-exposure reached at the 3 November 2011 EITF meeting. Also, the Chairman in consultation with FASB members will consider whether to add a project to the agenda to exempt nonpublic entities from providing certain fair value measurement disclosures.
See the FASB calendar for upcoming education sessions. No decisions are made at these sessions.
Securities and Exchange Commission (SEC)
SEC issues two staff papers on IFRS adoption by US issuers
As part of its Work Plan to consider whether, and if so, when and how IFRS should be incorporated into the US financial reporting system, the SEC staff has released two papers: "An Analysis of IFRS in Practice" and "A Comparison of US GAAP and IFRS".
In the first paper, the staff observed that the financial statements of the 183 companies it reviewed "generally appeared to comply with IFRS requirements." However, the staff also noted that transparency and clarity could be enhanced and observed that diversity in application of IFRS" presented challenges to the comparability of financial statements." The second paper summarized the results of the staff's analysis of IFRS compared with US GAAP. This paper includes an inventory and analysis of areas in which IFRS does not provide guidance or provides less guidance than US GAAP.
American Institute of CPAs (AICPA)
ASB issues proposed SAS on going concern
The AICPA has issued a proposed Statement on Auditing Standards (SAS), The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern (Redrafted). This proposed SAS would supersede SAS No. 59, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern, as amended, and represents the redrafting of SAS No. 59 to apply the Auditing Standards Board's clarity drafting conventions. Comments are due 31 January 2012.
International Accounting Standards Board (IASB)
November 2011 IFRIC update
The November 2011 IFRIC Update summarizes the IFRS Interpretations Committee meeting held in London on 3 - 4 November 2011. At the meeting, IFRIC discussed:
- Current agenda topics, including IAS 37, Provisions, Contingent Liabilities and Contingent Assets - levies charged for participation in a market on a specified date and IAS 32 Financial Instruments: Presentation - NCI put options
- IFRS Interpretations Committee agenda decisions
- IFRS Interpretations Committee tentative agenda decisions
- Issues considered for Annual Improvements
- IFRS Interpretations Committee work in progress
Summary of conclusions of IFRS Foundation Trustees' meeting
The Trustees of the IFRS Foundation, responsible for the governance and oversight of the IASB, have prepared a summary of their 13 October 2011 meeting. The summary includes regional outreach activity, the report of the Chair of the IASB, the report of the Chair of the IFRS Advisory Council, completion of the strategy review, and the appointment process for Chair of the IFRS Foundation Trustees.
Upcoming Thought center webcasts and podcasts
A revised proposal for revenue recognition (IFRS perspective)
29 November 2011, 4:00 a.m. Eastern time
A revised proposal for revenue recognition (IFRS perspective) REPLAY
29 November 2011, 3:00 p.m. Eastern time
IFRS 2011: Implications for real estate
6 December 2011, 11:00 a.m. Eastern time
IFRS 2011: Implications for real estate REPLAY
6 December 2011, 7:00 p.m. Eastern time
Ernst & Young Q4 2011 financial reporting update
15 December 2011, 1:00 p.m. Eastern time