US Week in Review - Week ending 7 February 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.
Standard Setter updates
Financial Accounting Standards Board (FASB)
FASB issues ASU to clarify disclosure requirement for nonpublic entities
The FASB today issued Accounting Standards Update 2013-03, Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities (the ASU), to clarify that nonpublic entities as defined in ASC 820 are not required to disclose the fair value hierarchy level for financial instruments that are not measured at fair value on the statement of financial position but for which fair value is disclosed. The ASU is effective immediately and therefore applies to 2012 financial statements.
The FASB issued the ASU in response to concerns raised by constituents that the conforming amendments to ASC 825 resulting from ASU 2011-04 were confusing and could be interpreted to be inconsistent with the disclosure requirements in ASC 820 and the Board's intent. While ASC 820-10-50-2F clearly excludes nonpublic entities from the requirement to disclose the fair value hierarchy levels of items disclosed at fair value but not measured at fair value in the statement of financial position, ASC 825 could be read to indicate that only nonpublic entities with total assets of less than $100 million on the date of the financial statements that held no instruments accounted for as derivatives other than mortgage commitments are excluded from providing this information for financial instruments whose fair value is required to be disclosed.
As amended, ASC 825 now clearly excludes all nonpublic entities from the disclosure requirement in ASC 825-10-50-10(d).
FASB issues final guidance on reclassifications out of accumulated other comprehensive income
The FASB issued ASU 2013-02 to require preparers to report, in one place, information about reclassifications out of accumulated other comprehensive income (AOCI). The ASU also requires companies to report changes in AOCI balances.
For significant items reclassified out of AOCI to net income in their entirety in the same reporting period, reporting (either on the face of the statement where net income is presented or in the notes) is required about the effect of the reclassifications on the respective line items in the statement where net income is presented. For items that are not reclassified to net income in their entirety in the same reporting period, a cross reference to other disclosures currently required under US GAAP (e.g., pension amounts that are included in inventory) is required in the notes. The above information must be presented in one place (parenthetically on the face of the financial statements by income statement line item or in a note).
Public companies must provide the information required by the ASU (e.g., changes in AOCI balances and reclassifications out of AOCI) in interim and annual periods. Nonpublic companies must disclose changes in AOCI balances in both interim and annual periods, and report about reclassifications out of AOCI in annual periods.
For public companies, the ASU is effective for fiscal years and interim periods within those years beginning after 15 December 2012, or the first quarter of 2013 for calendar-year companies. For nonpublic companies, the ASU is effective for fiscal years beginning after 15 December 2013 and interim and annual periods thereafter. The ASU should be applied prospectively and early adoption is permitted.
Post-implementation review of FAS 109
The Financial Accounting Foundation (FAF) announced plans to conduct a post-implementation review (PIR) of FASB Statement No. 109, Accounting for Income Taxes (codified in ASC 740). See the FAF website for details.
6 February 2013 FASB meeting
The FASB discussed its project on Insurance contracts.
For details, see the FASB Action Alert.
Upcoming meetings and webcasts
12 February 2013 Meeting with the Private Company Council
FASB members and Private Company Council (PCC) members are scheduled to discuss:
- Private company decision making framework and definition of a nonpublic entity
- PCC pre-agenda issues
- Agenda direction for other potential look-back projects
- Selected FASB projects
12 February 2013 FASB meeting
The Board is scheduled to discuss its project on Leases.
13 February 2013 FASB meeting
The Board is scheduled to discuss its projects on:
- Insurance contracts
- Liquidation basis of accounting
- Disclosure framework
For additional details, see the FASB calendar.
See the FASB calendar for upcoming education sessions. No decisions are made at these sessions.
Securities and Exchange Commission (SEC)
Small Business Advisory Committee recommends changing smaller reporting company definition and expanding disclosure relief
The SEC Advisory Committee on Small and Emerging Companies (the Committee) last week approved several actions, including a recommendation that the SEC increase the public float threshold for smaller reporting companies (SRC) to $250 million from $75 million. The committee also recommended that the SEC expand the financial reporting and disclosure relief for SRCs. This relief would (1) permanently extend to SRCs some of the temporary relief provided to emerging growth companies by the JOBS Act (i.e., Section 404(b) auditor attestation to internal control over financial reporting, shareholder say-on-pay, private company accounting standards transition, any new PCAOB rules requiring mandatory audit firm rotation or auditor discussion and analysis), (2) exempt all SRCs from some of the executive compensation disclosures required by the Dodd-Frank Act (i.e., CEO pay ratio, relationship of executive compensation to financial performance), (3) exempt SRCs from the requirement to file their financial information in XBRL format and (4) limit the Item 601(b)(10) of Regulation S-K exhibit filing requirement to material contracts.
In addition, the Committee recommended that the SEC (1) permit increased tick sizes for smaller exchange-listed companies and (2) promote the creation of a new US equity market limited to sophisticated investors and small and emerging companies without retail shareholders. The Committee also approved a statement to Congress that SRCs should be exempt from the conflict minerals disclosure requirements recently adopted by the SEC as required by Section 1502 of the Dodd-Frank Act. The Committee's draft recommendations are available on the SEC's website.
Canellos named Acting Director of Division of Enforcement
George Canellos was named Acting Director of the SEC's Division of Enforcement, succeeding Robert Khuzami, who is leaving the agency on 8 February. Since June 2012, Mr. Canellos has served as the Division's Deputy Director, after serving as the Director of the SEC's New York Regional Office for three years. From 1994 to 2003, Mr. Canellos was a federal prosecutor in the Southern District of New York.
International Accounting Standards Board (IASB)
Proposal to establish an Accounting Standards Advisory Forum
The IASB has published a Feedback Statement analyzing the comments received in response to the IFRS Foundation's public consultation paper Invitation to Comment: Proposal to Establish an Accounting Standards Advisory Forum, issued in November 2012. This Feedback Statement includes the IFRS Foundation responses to the comments made.
January 2013 IFRIC Update
The January 2013 IFRIC Update summarizes the IFRS Interpretations Committee meeting held in London on 22-23 January 2013.
January 2013 IFRS for SMEs
The January 2013 IFRS for SMEs Update contains the latest news for small and medium-sized entities.