US Week in Review - Week ending 23 May 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 Ernst & Young.
Ernst & Young publications
The FASB and the IASB have issued new exposure drafts that would require lessees to recognize assets and liabilities arising from their involvement in most leases. Entities would still classify leases, but they would use different criteria for a different purpose. Lease classification would determine how entities recognize lease-related revenue and expense, as well as what lessors record on the balance sheet. Comments are due by 13 September 2013. Our Technical Line publication tells you what you need to know about the proposed changes.
Standard Setter updates
Financial Accounting Standards Board (FASB)
FAF issues 2012 annual report
The Financial Accounting Foundation (FAF), which oversees the FASB and the Governmental Accounting Standards Board, issued its 2012 Annual Report.
FAF appoints new Trustee
The FAF appointed Dr. Terry D. Warfield to its Board of Trustees. Dr. Warfield is a professor in accounting and chair of the Department of Accounting and Information Systems at the University of Wisconsin, Madison.
FAF issues PIR report on business combinations
The FAF’s post-implementation review (PIR) team concluded in a review of Statement 141R that the standard resolved some practice issues in accounting for business combinations and that investors generally believe the information provided is more relevant and complete. However, the PIR team found that preparers had difficulty measuring certain assets and liabilities at fair value in accordance with Statement 157; some financial statement users also questioned the reliability or decision usefulness of information about these measurements. The PIR team also concluded that Statement 141R introduced more costs and complexity than the FASB anticipated, particularly for small and medium-sized entities. As a result, the PIR team recommended that the FASB improve its standard setting by taking steps such as documenting the needs a project will address, conducting research earlier in the process and fully describing the research in the bases for conclusions for new standards. The next PIR review will focus on Statement 157, Fair Value Measurements.
23 May 2013 FASB meeting
Revenue recognition - The FASB discussed the application of the new revenue standard to in substance assets for real estate transactions. The FASB reconfirmed that the standard should apply to all contracts with customers, regardless of whether the item transferred to the customer is real estate or non-real estate, is held directly or in a subsidiary, or is a business or an asset, provided it doesn’t meet one of the specific scope exceptions. For transactions with noncustomers, the FASB also clarified that the standard should apply to transfers of nonfinancial assets and “in substance” assets, even if the nonfinancial item is held in a subsidiary. If the nonfinancial asset sold or transferred to a noncustomer is a business and is not an “in substance” asset, the guidance in ASC 810-10-40, Consolidation, Derecognition would apply.
The FASB also discussed its projects on:
- Insurance contracts
- Transfers and servicing: repurchase agreements and similar transactions
For additional details, please see the Summary of Board Decisions.
Upcoming meetings and webcasts
24 May 2013 joint FASB-IASB videoconference meeting
The Boards are scheduled to discuss their projects on:
- Revenue recognition
- Accounting for financial instruments: classification and measurement
29 May 2013 FASB meeting
The FASB is scheduled to discuss:
- An agenda decision on the application of asset- or entity-based guidance to nonfinancial assets held in an entity
- Its project on the financial statement presentation of not-for-profit entities
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)
SEC approves the 2013 US GAAP XBRL Taxonomy
The SEC has updated EDGAR to support the 2013 US GAAP XBRL Taxonomy and has made the 2011 taxonomy unavailable for use. Companies that use the 2012 taxonomy are not required to start using the 2013 taxonomy, but the SEC staff strongly encourages companies to adopt the latest version of the US GAAP taxonomy.
New Compliance and Disclosure Interpretations
The SEC staff in the Division of Corporation Finance has issued new interpretations on various topics including (1) Item 2.06 of Form 8-K, (2) various Securities Act rules, including Rule 144, (3) instructions to certain forms under the Securities Act (e.g., Forms S-3 and S-4), (4) executive compensation disclosures, (5) disclosures required about the range of maximum offering price in an initial public offering (IPO) prospectus and (6) oil and gas disclosure rules.
The new interpretations contain the following staff views that could affect financial reporting:
- Registrants are not required to report an impairment under Item 2.06 of Form 8-K that "coincides with" the preparation, review or audit of financial statements to be included in their next periodic report, even if the conclusion was not reached "in connection with" those processes as stated in the form instructions.
- The disclosure within the Compensation Discussion and Analysis of non-GAAP measures used to assess actual performance relative to target levels is not subject to Regulation G and Item 10(e) of Regulation S-K if their use is limited to the discussion of performance against non-GAAP targets.
- Registrants that are subject to the SEC's disclosure rules for oil- and gas-producing activities using enhanced recovery techniques can classify reserves as proved developed before receiving a production response if they have made all of the required expenditures and the reserves meet the proved and developed criteria in Rules 4-10(a)(22) and 4-10(a)(6) of Regulation S-X respectively.
The C&DIs are available on the SEC website.
Webcast on FASB's leases proposal on 5 June 2013
In our webcast on the FASB's leases proposal on 5 June 2013 from 1 p.m. to 2 p.m. Eastern time, we’ll summarize the Board's lease accounting proposal, which could significantly affect financial statement users and preparers. In this webcast, Ernst & Young panelists and a public company preparer will highlight some of the key ways in which the proposal differs from today's accounting guidance.
In this webcast we will discuss:
- The application of the proposed lease model
- The impact on balance sheets and the patterns of lease revenue and expense recognition
To register for this event, go to Leases exposure draft: understanding the proposal. Participants will be eligible to receive 1 hour of CPE credit.
Upcoming Thought center webcasts and podcasts
Hosted by Ernst & Young’s Global IFRS Services
6 June 2013, 9:00 a.m. Eastern time
The Ernst & Young Q2 2013 financial reporting update
Co-sponsored by Financial Executives International
6 June 2013, 1:00 p.m. Eastern time
CFO's reveal hidden trends from earnings season
A quarterly webcast series, "CFO: need to know"
12 June 2013, 12:00 p.m. Eastern time