US Week in Review - Week ending 18 July 2013
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
The Private Company Council (PCC) and the FASB voted to finalize the private company decision-making framework, and the PCC approved exposure of an alternative for private companies related to the consolidation of common control leasing arrangements. Our To the Point publication summarizes these items and other matters discussed at the recent PCC meeting.
The FASB today issued final guidance on the presentation of certain unrecognized tax benefits in the financial statements. Our To the Point publication tells you what you need to know about the new guidance.
The FASB issued final guidance allowing companies to designate the Federal Funds Effective Swap Rate (which is the Overnight Index Swap rate, or OIS, in the US) as a benchmark interest rate for hedge accounting purposes, effective immediately. Our To the Point publication tells you what you need to know about the new guidance.
Our Second Quarter 2013 Standard Setter Update - Financial reporting and accounting developments publication highlights significant developments in financial accounting and reporting between 1 April 2013 and 30 June 2013 and summarizes certain proposals presently under consideration by the FASB, EITF, PCC, SEC, PCAOB, ASB and GASB.
Our June 2013 edition is designed to help you identify changes in tax law and other events when they occur so the accounting can be reflected in the appropriate period. This edition includes enacted and effective tax legislation, global tax treaties and other items through 30 June 2013 to consider as you prepare your tax provision. We've also listed our tax and other publications that provide more detail on the topics we discuss.
Whitepaper highlights Dodd-Frank regulations impacting inter-affiliate derivatives and centralized treasury entities
Regulators implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act have issued final rules and "no action" letters in recent months on the treatment of inter-affiliate derivatives and centralized treasury entities that enter into derivatives. The rules could affect hundreds of companies in all industries, including many principally located outside of the US. This whitepaper summarizes these recent developments.
We have updated our Financial reporting developments publication, Foreign currency matters, for the issuance of ASU 2013-05, Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, and to clarify and enhance our interpretive guidance.
We have updated our Financial reporting developments publication on fair value measurement for recent standard-setting activities and to provide clarifications and enhancements to our interpretative guidance. Chapters 3, 6, 18 and 19 of our FRD have been updated to address amendments made to ASC 820 by ASU 2012-02, ASU 2012-04, ASU 2013-03, ASU 2013-08 and ASU 2013-09. In addition, Industry Appendix IA.2 dealing with fair value considerations for the private equity industry has been updated to discuss TIS Sections 6910.34 and 6910.35 of the AICPA Technical Practice Aids for Investment Companies. Additional interpretive guidance on the fair value disclosure requirements in ASC 820, including clarification of the requirements for cash equivalents, is also included.
Standard Setter updates
Financial Accounting Standards Board (FASB)
16 July 2013 meeting with the Private Company Council
See our To the Point publication above.
17 July 2013 FASB meeting
The FASB added one issue to the EITF agenda: Determining whether the host contract in a hybrid financial instrument is more akin to debt or equity.
For details, see the FASB's Summary of Board Decisions.
Upcoming meetings and webcasts
23-24 July 2013 joint FASB/IASB meetings
The Boards are scheduled to discuss their projects on:
- Accounting for financial instruments: classification and measurement
- Accounting for financial instruments: impairment
- Revenue recognition
25 July 2013 FASB meeting
The FASB is scheduled to discuss its project, Disclosure framework: Board's decision process.
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)
Staff revamps guidance on real estate acquisitions, adds disclosure guidance
The SEC staff in the Division of Corporation Finance updated the Financial Reporting Manual (FRM) to revise its guidance on the financial statement requirements related to acquisitions of real estate operations (S-X Rule 3-14) and make other changes. Significant revisions to the FRM include:
- The staff said it will require S-X 3-14 financial statements if a real estate acquisition is significant at the 10% level for an acquired entity with operations other than leasing when the acquired property has a rental history.
- For purposes of testing whether individually insignificant acquisitions are significant in the aggregate, registrants need to consider only acquisitions since the prior year-end, not individually insignificant acquisitions made during the last full year.
- Consistent with Rule 3-05 for a business combination, the staff will permit the use of pro forma financial information to calculate significance for an acquisition made after the filing of a Form 8-K that included historical audited S-X 3-14 financial statements for a prior significant acquisition.
- The staff revised the significance test for property acquired during the distribution period of a blind pool offering to allow the registrant to use total assets as of the date of the acquisition plus the proceeds (net of commissions) it expects to raise in the registered offering over the next 12 months as the denominator.
- Rather than requiring formal preclearance, the staff will accept unaudited financial statements when a registrant acquires an operating property with a rental history of more than three months but less than nine months, and the staff will not require S-X 3-14 financial statements when the leasing history is less than three months.
- The staff clarified its guidance on the financial statement requirements for properties subject to triple net lease arrangements and added guidance to require S-X 3-14 financial statements when a registrant acquires a significant property with a rental history that is subject to a triple net lease and the lessee's financial statements are not required (e.g. when the acquired property's significance is between 10% and 20%).
The FRM, which is updated quarterly, is designed to provide general guidance only to Division of Corporation Finance staff. Because the information is useful to registrants and their auditors, the SEC staff posts it on the SEC website.
The SEC staff also released Disclosure Guidance: Topic No. 6 that includes various staff observations from its reviews of non-traded real estate investment trusts (REITs). While the guidance focuses on disclosures by non-traded REITs, it may also apply to disclosures in connection with offerings by traded REITs or other registrants that apply Securities Act Industry Guide 5.
NYSE proposes giving new public companies a year to comply with its internal audit requirement
The New York Stock Exchange (NYSE) has proposed a new rule that would give companies listing their securities on the exchange for the first time in connection with an initial public offering or an initial Exchange Act registration statement (e.g., a spin-off) a year to comply with its requirement that listed companies have an internal audit function. The exchange already provides this relief to companies that transfer to the NYSE from another national exchange that does not have an internal audit requirement.
The NYSE said the proposal would benefit investors by reducing costs to a company in its first year as a public company. It would also make the company's implementation of its internal audit function more effective by giving newly appointed audit committees time to understand the company's internal control system and risk management process and determine the appropriate internal audit function.
The proposal is subject to approval by the SEC. Comments are due 21 days after publication in the Federal Register.
New XBRL US GAAP certificate program launched
The AICPA and XBRL US have launched an XBRL US GAAP Certificate Program designed to help SEC registrants gain in-depth knowledge of the US GAAP taxonomy and available tools to produce high-quality XBRL financial statements. The program will cover:
- Understanding XBRL and the US GAAP taxonomy
- Accurately applying tags from the US GAAP taxonomy to financial statements, including creating company-specific tags
- Using simulation to tag disclosures in the notes to the financial statements with software applications available on the market
- Transitioning to the 2013 US GAAP taxonomy
Investor Advisory Committee to meet next week
The SEC said its Investor Advisory Committee will meet on 25 July 2013 to discuss subcommittee reports and consider recommendations about data tagging and the use of universal proxy ballots. The meeting will be webcast on the SEC's website.
Government Accounting Standards Board (GASB)
Post-Implementation Review of GASB standard on impairment of capital assets and insurance recoveries
The Financial Accounting Foundation (FAF) said it will conduct a Post-Implementation Review (PIR) of GASB Statement Number 42, Accounting and Financial Reporting for Impairments of Capital Assets and Insurance Recoveries. The PIR process, which is independent of the standard-setting process, is intended to help the FAF evaluate the effectiveness of the standard-setting process of the FASB and the GASB.
The GASB Report - June 2013
The June 2013 edition of the GASB Report is now available.
Upcoming Thought Center webcasts and podcasts
CFOs reveal hidden trends from earnings season
A quarterly webcast series, "CFO: need to know"
30 September 2013, 12:00 p.m. Eastern time