US Week in Review - Week ending 31 January 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 continue to make progress on their joint proposal on revenue recognition. At their meeting this week, the Boards addressed the application of the proposed guidance to certain transfers of assets, the scope of the proposed standard, including for financial services contracts and collaborative arrangements, accounting for contracts with customers that contain repurchase agreements and the effect of the proposed standard on asset managers.
Our To the Point publication summarizes the decisions and provides an update on the Boards' redeliberation plan.
The FASB limited the scope of disclosures about offsetting assets and liabilities. Our To the Point describes this development and the required disclosures.
Highly inflationary economies
At the most recent meeting of the Center for Audit Quality SEC Regulations Committee's International Practices Task Force (Task Force), the SEC staff indicated that Venezuela and Belarus should continue to be considered highly inflationary economies, as defined under US GAAP. Also, South Sudan was added to the list of countries the SEC expects to be treated as highly inflationary. Additionally, the Task Force noted that the three-year cumulative inflation rate for the Democratic Republic of the Congo (DRC) was 95% for 2011 and was projected to drop to less than 40% by the end of 2012. As a result, the SEC staff expects that highly inflationary accounting should cease for DRC and begin for South Sudan no later than the first reporting period beginning on or after 1 January 2013.
The Task Force also highlighted several countries that either (a) have projected three-year cumulative inflation rates between 70% and 100%, (b) previously reported three-year cumulative inflation rates that exceeded 100% and current actual inflation data has not been obtained or (c) have experienced a significant increase in inflation during the current period. They include Ethiopia, Iran, Sudan, Guinea and Yemen.
Although Argentina does not appear in any of the lists above, the International Monetary Fund (IMF) has requested that the country adopt remedial measures to address the quality of the economic data provided (namely, the country's gross domestic product (GDP) and consumer price index (CPI) data). However, given the apparent lack of any other objectively verifiable data, and the relatively low level of reported three-year cumulative inflation (33% projected for 2012), the SEC staff noted they have not observed any economic data to date that would support Argentina being considered highly inflationary in 2012.
As always, the Task Force said there may be other countries with cumulative inflation rates of 100% or more that should be monitored that are not mentioned in the highlights because the sources used by the Task Force do not include inflation data for all countries. Accordingly, companies should closely monitor the inflation rates in economies in which they operate. Additionally, developments resulting from the IMF's efforts to address the quality of the official GDP and CPI data provided by Argentina should also be monitored.
For further information see the Task Force Highlights.
Standard Setter updates
Financial Accounting Standards Board (FASB)
30 January 2013 joint FASB-IASB videoconference meeting
The Boards discussed their projects on:
- Revenue recognition (see our To the Point publication above)
- Insurance contracts
For details, see the FASB Action Alert.
31 January 2013 FASB meeting
The FASB discussed its projects on:
- Going concern
- Nonpublic entities: clarification of a fair value disclosure requirement
The FASB also approved the two consensuses and two consensuses-for-exposure reached at the 17 January 2013 EITF meeting.
For details, see the FASB Action Alert.
Upcoming meetings and webcasts
6 February 2013 FASB meeting
The Board is scheduled to discuss its project on Insurance contracts.
For additional details, see the FASB calendar.
See the FASB calendar for upcoming education sessions. No decisions are made at these sessions.