US Week in Review - Week ending 29 August 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
In our comment letter, we supported the FASB's objective to improve the usefulness of financial statements by highlighting significant strategic shifts in an entity's business operations. However, we recommended that the FASB consider reporting discontinued operations in pro forma disclosure rather than on the face of the financial statements. We disagreed with the Board's decision to exclude from the definition of a discontinued operation the existing consideration of significant continuing operations and cash flows with the disposed component. We also expressed concerns about the proposed disclosures for material disposals that do not meet the definition of discontinued operations.
EY comment letter on Accounting for identifiable intangible assets in a business combination, a proposal of the Private Company Council
Our comment letter acknowledges the PCC's observation that some users of private company financial statements believe that distinguishing certain intangible assets from goodwill may not provide decision-useful information. However, we challenge whether this is sufficient justification for amending the model for accounting for the acquisition of intangible assets in a business combination.
Our comment letter acknowledges the PCC's observation that certain users of private company financial statements may ignore goodwill and goodwill impairment losses in their analysis of a private company's financial condition and operating performance. However, we challenge whether this is sufficient justification for amending the goodwill accounting model for private companies. We believe that any change to the goodwill accounting model should be fundamentally consistent with the conceptual underpinnings in US GAAP in addition to being convenient to apply.
EY comment letter on Accounting for certain receive-variable, pay-fixed interest rate swaps, a proposal of the Private Company Council
Our comment letter supports the Board's overall objective of simplifying hedge accounting for interest rate swaps that allow companies to economically convert variable-rate borrowings to fixed-rate borrowings. Although we believe both of the approaches described in the proposed Update would support the Board's overall objective, we support the simplified hedge accounting approach because it is more aligned with existing GAAP and has more widespread application.
Register now for the Q3 2013 financial reporting update webcast, scheduled for 19 September from 1 p.m. to 2:30 p.m. Eastern time. This 90-minute webcast will feature EY panelists discussing recently issued exposure drafts, Private Company Council and SEC updates and other current financial reporting matters. To register, go to Q3 2013 financial reporting update.
Standard Setter updates
Financial Accounting Standards Board (FASB)
Upcoming meetings and webcasts
4 September 2013 FASB meeting
The FASB is scheduled to meet on 4 September 2013. For additional details, see the FASB's calendar.
10 September 2013 FASB webcast
The FASB will host its webcast, IN FOCUS: Proposed 2014 U.S. GAAP Financial Reporting Taxonomy, ASU Taxonomy Changes, XBRL Implementation Guides, and Revised Calculation Hierarchy, at 1:00 p.m. Eastern time. For details and registration, see the FASB site.
See the FASB's calendar for upcoming education sessions. No decisions are made at these sessions.
Securities and Exchange Commission (SEC)
Federal agencies re-propose risk retention rule
The SEC, along with five other federal agencies, jointly re-proposed a rule required by Section 941(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act that requires sponsors of securitizations of certain asset-backed securities to retain at least 5% credit risk in the underlying assets of such securities.
The revised proposal attempts to address concerns raised about a 2011 proposal. For example, the new proposal provides more flexibility for sponsors to meet the 5% risk retention threshold, including, among other options, using fair value instead of par value to measure certain retained interests and conforming the definition of a qualified residential mortgage in the rule to the Consumer Financial Protection Bureau's definition of a qualified mortgage. Comments are due by 30 October 2013.
SEC allows NYSE to give new public companies a year to comply with internal audit listing standard
The SEC approved a new New York Stock Exchange (NYSE) rule that gives companies listing their securities for the first time in connection with an initial public offering or an initial Exchange Act registration (e.g., a spin-off) a year to comply with its requirement to have an internal audit function.
To qualify for this relief, the audit committee must state in its charter that it will assist the board of directors in overseeing the design and implementation of the internal audit function during the transition period. The audit committee also must meet periodically with management to discuss implementation plans, budgets and staffing of the internal audit function and review those plans with the board. The NYSE listing standards continue to allow companies to outsource their internal audit function.
Government Accounting Standards Board (GASB)
PIR finds GASB standards on risk financing and insurance activity achieve their purposes
A Financial Accounting Foundation (FAF) Post-Implementation Review (PIR) of GASB Statements No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, and No. 30, Risk Financing Omnibus, an amendment of GASB Statement No. 10, concluded that the standards are achieving their purpose of improving the consistency and comparability of state and local governments reporting on insurance activities, including public entity risk pools. The review was conducted by an independent team of the FAF.
Upcoming Thought Center webcasts and podcasts
EY Q3 2013 financial reporting update
In co-operation with Financial Executives International (FEI)
19 September 2013, 1:00 p.m. Eastern time
Are you ready for conflict minerals reporting?
26 September 2013, 7:00 a.m. Eastern time
CFOs reveal hidden trends from earnings season
30 September 2013, 12:00 p.m. Eastern time