US Week in Review - Week ending 3 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.
Certain materials referenced below are available exclusively in AccountingLink. The site is available free of charge, but requires a one-time registration.
Ernst & Young publications
Practical matters for the c-suite: Financial instruments convergence project moves forward in fits and starts
Our latest issue of Practical matters for the c-suite, Financial instruments convergence project moves forward in fits and starts, explores in more detail how the deliberations regarding last year's exposure draft on financial instruments would affect an organization's finance, tax, IT systems and business processes. The Practical matters for the c-suite series is produced by our Financial Accounting Advisory Services (FAAS) group and is intended to help companies assess the potential effect of proposals on their organizations. This issue complements other recent Ernst & Young publications on the potential changes to financial instruments accounting standards including:
- To the Point, New credit impairment approach takes shape (21 July 2011)
- Technical Line, Hedge accounting: Is convergence possible (28 April 2011)
- Technical Line, Financial instruments - a new classification and measurement model on the horizon (14 July 2011)
We have updated our Master limited partnership accounting and reporting guide, which covers a variety of common accounting and reporting considerations associated with the formation and ongoing operations of a Master Limited Partnership (MLP).
The MLP structure has grown in popularity, and companies continue to pursue opportunities to capitalize on it. The total market capitalization of MLPs reached $200 billion in 2011, up from $25 billion in 2008.
From an accounting and reporting perspective, each MLP involves complexities that, without careful consideration, could impede the company's go-to-market strategy or impair its marketability. Our guide is designed to help readers understand the issues associated with an MLP and the related authoritative financial accounting and reporting guidance.
Standard Setter updates
Financial Accounting Standards Board (FASB)
1 November 2011 Joint FASB-IASB Videoconference Board meeting
Leases - The Boards reached tentative decisions about required disclosures for lessors applying the receivable and residual approach. Required disclosures would include balance sheet rollforward information for the lease receivable and residual asset, a maturity analysis of the lease receivable, a table of all lease income items recognized in the reporting period disaggregated into its various components (e.g., profit at commencement, interest income on the lease receivable, interest income on the residual asset, etc.) and information about how the lessor manages its exposure to residual asset risk.
For additional details of the Boards' discussion, see the FASB's Action Alert.
2 November 2011 FASB Board meeting
Impairment of indefinite-lived intangible assets - The Board decided to give companies the option to perform a qualitative assessment when testing indefinite-lived intangible assets for impairment, similar to the one added for goodwill impairment tests. The qualitative assessment would involve determining whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. The Board expects to issue an exposure draft in December 2011, with a comment period of 120 days.
For additional details of the Board's discussion, see the FASB's Action Alert.
3 November 2011 EITF meeting
See our upcoming EITF Update publication for details of the discussion.
Upcoming meetings and webcasts
Roundtables and webcast on private company financial reporting
The Financial Accounting Foundation (FAF) will sponsor three public roundtables early next year and a webcast on 18 November 2011 about its proposal to improve accounting standard setting for private companies.
See the FAF site for more detail.
See the FASB calendar for upcoming education sessions. No decisions are made at these sessions.
Securities and Exchange Commission (SEC)
SEC staff views on management's responsibility for Level 2 inputs from pricing services
The Center for Audit Quality SEC Regulations Committee published Highlights from its 27 September 2011 meeting at which the SEC staff discussed its views on, among other things, management's responsibility for validating quotes from pricing services in determining fair value of Level 2 assets and liabilities. The SEC staff indicated that management should understand the valuation models and assumptions used by pricing services and that this understanding is critical to compliance with financial statement and MD&A disclosure requirements.
At the meeting, the SEC staff also discussed loss contingency disclosures and cautioned that it may request supplemental information about how a registrant concluded that it could not provide an estimate of loss. The staff also discussed disclosing ranges of loss in the aggregate, expected recoveries from third parties (e.g., insurance and indemnification arrangements) and the accounting policy for legal costs. Other topics discussed included the definition of "full and unconditional" related to guaranteed securities, whether companies should recast prior-year financial statements when filing a registration statement after adopting ASU 2011-5 and MD&A disclosures about foreign operating results and income taxes.
SEC Advisory Committee on Small and Emerging Businesses holds inaugural meeting
The SEC Advisory Committee on Small and Emerging Businesses (the Committee) met for the first time Monday and discussed the current triggers for SEC registration and public reporting (i.e., assets exceeding $10 million and 500 record holders) and whether the triggers continue to be reasonable. Committee members shared views on the proper shareholders (e.g., employees) to include or exclude in a record holder count if the SEC modifies its rules.
The Committee also debated the clarity and appropriateness of scaled disclosures for smaller reporting companies, investor protection in "crowdfunding" (e.g., raising funds by pooling small sums of money over the internet) and restrictions on general solicitation and advertising in an offering exempt from SEC registration.
The Committee, comprised of representatives of smaller companies and their investors, investment banks, private venture firms, auditors and legal counsel, will provide recommendations to the SEC. Many of the topics discussed are the focus of various legislative proposals to reduce the regulatory burden on small businesses.
A webcast of the meeting will be available soon on the Committee's website.
International Accounting Standards Board (IASB)
IFRS for SMEs
The October edition of IFRS for SMEs Update provides the latest news on IFRS for Small and Medium-sized Entities (SMEs). This edition includes information about:
- Q&As about the IFRS for SMEs: Status report
- New training module - Section 7 Statement of Cash Flows
- Recent and upcoming "train the trainers" workshops
American Institute of CPAs (AICPA)
AICPA issues a working draft of an Accounting and Valuation Guide on testing goodwill for impairment
The AICPA's Financial Reporting Executive Committee (FinREC) has issued a working draft of an AICPA Accounting and Valuation Guide on testing goodwill for impairment. This guide, which was developed by the AICPA Impairment Task Force, provides nonauthoritative guidance and illustrations for valuation specialists, preparers of financial statements, and independent auditors regarding goodwill impairment testing.
Interested parties are encouraged to review the working draft and submit their informal feedback on the guide as well as share their thoughts regarding the need for additional implementation guidance on FASB ASU 2011-08. The deadline for submitting comments is 15 March 2012.
International Federation of Accountants/International Auditing and Assurance Standards Board (IFAC/IAASB)
IAASB plan for a post-implementation review of clarified ISAs
The IAASB has issued its plan for a post-implementation review of the clarified International Standards on Auditing (ISAs). The post-implementation review is the second phase of the IAASB's efforts to monitor the implementation of the standards. The review is focused on whether the clarified ISAs are being consistently understood and implemented in a way that achieves the IAASB's goals in revising and redrafting them. For purposes of the post-implementation review, input will be accepted up to 31 October 2012.
Upcoming Thought center webcasts and podcasts
Double-exposure: the revised revenue recognition proposal (US GAAP perspective)
15 November 2011, 2:30 p.m. Eastern time
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
Don't just spin it: financial and operational lessons learned in spin-offs
30 November 2011, 12:00 p.m. Eastern time