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US Week in Review - Week ending 2 August 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


To the Point: Qualitative impairment test added for indefinite-lived intangibles

The FASB issued final guidance giving companies the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. Our To the Point publication summarizes what you need to know about the Accounting Standards Update.


Standard Setter updates


Financial Accounting Standards Board (FASB)

FASB to explore single measurement approach for impairment of financial assets

The FASB instructed its staff to explore a single measurement approach for estimating expected losses for financial assets that are not accounted for at fair value. The FASB has been jointly deliberating with the IASB on a three-bucket impairment model that contains different measurement objectives, but expressed concern about moving forward with this model given constituents' concerns about the understandability, operability and auditability of the three-bucket model.

Because the alternative approach would still be based on the notion of expected losses, the FASB urged the staff to build on the decisions reached by both boards on this principle. The FASB expects to meet over the next several weeks to address detailed aspects of the alternative approach.

FASB requests input on a private company decision-making framework

The FASB issued an Invitation to Comment on its staff's initial recommendations for a private company decision-making framework that would help the FASB and the new Private Company Council (PCC) decide whether and when to change US GAAP financial reporting requirements for private companies. The Board and the PCC haven't yet reached any tentative decisions about the framework. The staff paper identifies six factors that most distinguish financial reporting considerations of private companies from those of public companies and their implications. It also describes the areas in which financial reporting might be different for private companies (i.e., recognition and measurement, disclosures, display, effective dates and transition methods), and the criteria to consider in deciding whether different requirements are appropriate.

The Board is also seeking input on its tentative decisions so far on its definition of a nonpublic entity project, which would be used to determine the types of companies that should be included in the scope of this framework.

Comments are due by 31 October 2012.

1 August 2012 FASB meeting

The Boards discussed the following:

  • Accounting for financial instruments: impairment (see article above)
  • Accounting for financial instruments: classification and measurement
  • Transfers and servicing: repurchase agreements and similar transactions
  • Insurance contracts

For additional details, see the FASB Action Alert.

Upcoming meetings and webcasts

8 August 2012 FASB meeting

The Board is scheduled to discuss the following projects:

  • Investment property entities
  • Investment companies
  • Accounting for financial instruments: classification and measurement

For additional details of the planned discussion, see the FASB calendar.

Education sessions

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

Securities and Exchange Commission (SEC)

The SEC recommends greater regulation of municipal securities

The SEC called on Congress to give it the power to require more disclosures to protect investors in municipal securities.

In its Report on the Municipal Securities Market, the Commission also described steps that it could take on its own and market initiatives that it said would improve disclosures. The most significant legislative recommendations include authorizing the Commission to eliminate Securities and Exchange Act exemptions for conduit borrowers that are not municipal entities and to require timely issuance of financial information for municipal issuers in a form and content established by the SEC. The report's market structure suggestions include improving pricing transparency and buttressing dealer pricing obligations for the municipal securities market.

International Accounting Standards Board (IASB)

IFRS Foundation Trustees publish drafting review

The Trustees of the IFRS Foundation have published for public comment a drafting review of the IFRS Foundation Constitution. The drafting review incorporates changes to the Constitution to reflect the separation of the role of Chairman of the IASB and Chief Executive Officer of the IFRS Foundation. Comments are due by 23 October 2012. (See the IASB website for a pdf of the drafting review.)

IFRS for SMEs July 2012 fact sheet (IASB)

The IASB has issued a fact sheet summarizing all IFRS for SMEs activities since the standard was issued. The fact sheet includes information about adoptions, translations, training, Q&As, publications, and the comprehensive review currently under way.

Public Company Accounting Oversight Board (PCAOB)

PCAOB issues information for audit committees about its inspection process

The PCAOB (Board) issued a release to help public company audit committees understand its inspections of registered public accounting firms and help them gather useful information about those inspections from their independent auditors. The release was motivated, in part, by feedback the Board received from audit committee members who said that they would welcome more dialogue about the inspection process and the results of inspections and a view that, in some instances, audit firms were reluctant to discuss inspection results or deemphasized the importance of any adverse findings.

The release encourages audit committees to consider asking their auditors a number of questions, including

  • Was the company's audit selected for PCAOB inspection?
  • If so, has anything come to the firm's attention suggesting the possibility that its audit opinion is not sufficiently supported or that its independence or the fairness of the company's financial statements and disclosures are being questioned?
  • Has the PCAOB identified deficiencies in the company's audit, or in other audits that involved auditing or accounting issues similar to issues presented in the company's audit?
  • What were the audit firm's responses to PCAOB findings?
  • What topics are included in the audit firm's Part II findings, what steps is the firm taking to address them, and has the PCAOB determined that such findings have been addressed to its satisfaction?

We recognize that robust and transparent dialogue with audit committees with respect to inspection matters contributes significantly to effective audit committee oversight. As such, we encourage public company audit committee members, as well as management of those companies, to read and consider the information in the PCAOB release in discussions with their auditors.

International Federation of Accountants/International Auditing and Assurance Standards Board (IFAC/IAASB)

IAESB exposure draft on (IES) 4: Initial Professional Development

The International Accounting Education Standards Board (IAESB) has issued a proposed revision of International Education Standard (IES) 4, Initial Professional Development-Professional Values, Ethics, and Attitudes. IES 4, part of the IAESB's project to improve the clarity of its standards, is aimed at educational organizations, employers, regulators, government authorities, and other stakeholders who support the learning and development of professional accountants. Comments are due by 11 October 2012.

Upcoming Thought center webcasts and podcasts


The Ernst & Young Q3 2012 financial reporting update
Co-sponsored by Financial Executives International (FEI)
6 September 2012, 1:00 p.m. Eastern time

Evolving role of today's CFO
Featured in FEI's CFO Community of Interest
Hosted by Ernst & Young LLP
16 October 2012, 2:00 p.m. Eastern time

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