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US Week in Review - Week ending 31 October 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


To the Point: Boards conclude redeliberations on revenue recognition proposal

In response to concerns raised by constituents during drafting of their joint revenue recognition standard, the FASB and the IASB this week decided to set thresholds for collectibility and the constraint on variable consideration and to clarify the accounting for revenue from licenses of intellectual property. The Boards will now work to finalize the standard. Our To the Point publication summarizes these decisions.

EY comment letter on SEC credit risk retention proposal

In our comment letter to the SEC on the credit risk retention reproposal it issued jointly with other agencies, we focus on the consolidation accounting ramifications. The proposal would require sponsors of certain asset-backed securitizations to retain at least 5% of the credit risk. The rule was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

EY comment letter on FASB proposal on insurance contracts

In our comment letter, we encouraged the FASB and the IASB to work together to make their proposals more comparable. We also said the FASB needs to address certain issues before finalizing the guidance. Our most significant concerns relate to the proposed scope, discount rates and how changes in these rates would be recognized, recognition of changes in expected cash flows, revenue recognition, presentation and transition. We also encourage the Board to consider simplifying certain areas of the proposal to make it less costly to apply.


Standard Setter updates


Financial Accounting Standards Board (FASB)

30 October 2013 FASB meeting

Definition of a public business entity: The Board voted to finalize a definition of a public business entity that it will use in future standard setting, including determining which entities generally will be eligible to use alternatives that the FASB provides for private companies under US GAAP. The Board expects to issue an Accounting Standards Update (ASU) by the end of the fourth quarter. The effective date will be the same as that of the first ASU that uses the definition.

For additional details, see the FASB's Summary of Board Decisions.

30 October 2013 joint FASB-IASB meeting

The Boards discussed their project on revenue recognition - see our To the Point publication above.

For additional details, see the FASB's Summary of Board Decisions.

Upcoming meetings and webcasts

6 November 2013 FASB meeting

The FASB is scheduled to discuss its projects on:

  • Revenue recognition
  • Going concern
  • Disclosure framework: Board's decision process

For additional details, see the FASB's calendar.

Education sessions

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

Securities and Exchange Commission (SEC)

Staff updates Financial Reporting Manual

The staff of the Division of Corporation Finance updated its Financial Reporting Manual to incorporate the financial reporting and disclosure requirements for emerging growth companies (EGCs) under Title I of the Jumpstart Our Business Startups Act and the frequently asked questions the staff previously issued for EGCs.

The SEC staff also included new guidance that registrants acquiring oil and gas properties don't have to request relief from the staff to present abbreviated financial statements, rather than full financial statements under S-X Rule 3-05, if certain conditions are met.

The staff also included clarifications regarding (1) the form and content of abbreviated financial statements for acquired oil and gas properties, (2) the presentation of pro forma financial information and forward-looking disclosures after the acquisition of selected parts of another entity, and (3) deferring the recalculation of the significance of equity method investees pursuant to S-X Rule 3-09 after a retrospectively applied change in accounting principle until the registrant files its next Form 10-K (i.e., significance does not have to be recalculated for any registration statements filed before that time).

Other


CFTC adopts rules to protect customers of futures commission merchants

The Commodity Futures Trading Commission (CFTC) adopted rules to enhance protections for customers of futures commission merchants (FCMs) and derivatives clearing organizations (DCOs). The rules also set standards for self-regulatory organizations' examinations of FCMs.

The new requirements for FCMs include:

  • Adopt robust risk management programs
  • Maintain a residual interest in customer accounts related to certain futures transactions
  • Provide disclosures to existing and prospective customers and make certain financial information available to the public on their websites
  • Update standard depository acknowledgement letters related to segregated and secured accounts

The rules require auditors of FCMs to be registered with the Public Company Accounting Oversight Board (PCAOB), to have undergone a PCAOB inspection and to audit FCMs' annual financial statements (due to regulators within 60 days of year-end) in accordance with PCAOB standards.

The rules generally will be effective 60 days after publication in the Federal Register, but several provisions have different effective dates. The rules related to annual audits are effective 1 June 2014. The CFTC also published a Q&A document.

Upcoming Thought Center webcasts and podcasts


News from the street: capital markets outlook for 2014 and beyond
Live from the EY Strategic Growth Forum
13 November 2013, 4:30 p.m. Eastern time

Insurance contracts: exposure draft comment letters
18 November 2013, 11:00 a.m. Eastern time

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