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Ernst & Young publications
Our Second Quarter 2012 Standard Setter Update - Financial reporting and accounting developments publication highlights significant developments in financial accounting and reporting between 1 April 2012 and 30 June 2012 and summarizes certain proposals presently under consideration by the Financial Accounting Standards Board, the Emerging Issues Task Force, the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Auditing Standards Board, and the Governmental Accounting Standards Board.
Our publication, Four key trends of the 2012 proxy season: engagement drives change, highlights the following trends in corporate governance:
- The impact of "say on pay" goes beyond compensation
- Shareholder proposal topics are shifting and agreements for withdrawals are being reached
- Board accountability measures continue to strengthen
- Director opposition votes show change in voting practices
Standard Setter updates
Financial Accounting Standards Board (FASB)
FASB issues guidance for continuing care retirement communities
The FASB issued guidance clarifying that a continuing care retirement community should classify an advance fee as deferred revenue only when its resident contract provides for repayment of the fee upon reoccupancy and the repayment is limited to the proceeds it receives from the new occupant. Otherwise, the advance fee is classified as a liability.
The guidance is effective for fiscal periods beginning after 15 December 2012 for public entities (including conduit bond obligors) and for fiscal periods beginning after 15 December 2013 for nonpublic entities. It should be applied retrospectively by recording a cumulative-effect adjustment to opening retained earnings (or unrestricted net assets) as of the beginning of the earliest period presented. Early adoption is permitted.
Final June EITF minutes
The final minutes of the June EITF meeting are now available. At this meeting, the EITF reached two consensuses-for-exposure on services received by a not-for-profit entity from employees of an affiliated entity and the accounting for obligations with joint and several liability (see above). The EITF also discussed Issue 11-A, "Parent's Accounting for the Cumulative Translation Adjustment upon the Loss of a Controlling Financial Interest in a Subsidiary or Group of Assets That Is a Nonprofit Activity or a Business within a Consolidated Foreign Entity," but didn't reach a final consensus.
FASB issues two proposals
The FASB issued two Proposed Accounting Standards Updates on EITF consensuses-for-exposure it ratified at its 11 July 2012 meeting.
- Not-for-Profit Entities (Topic 958): Personnel Services Received from an Affiliate for Which the Affiliate Does Not Seek Compensation
- Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements
Comments are due by 20 September 2012. For more details, see our June 2012 EITF Update publication.
25 July 2012 FASB meeting
The Boards discussed the following projects:
- Technical corrections and improvements
- Insurance contracts
For additional details, see the FASB Action Alert.
Upcoming meetings and webcasts
1 August 2012 FASB meeting
The Board is scheduled to discuss the following projects:
- Accounting for financial instruments: impairment
- Accounting for financial instruments: classification and measurement
- Transfers and servicing: repurchase agreements and similar transactions
- Insurance contracts
For additional details of the planned discussion, see the FASB calendar.
See the FASB calendar for upcoming education sessions. No decisions are made at these sessions.
Securities and Exchange Commission (SEC)
SEC staff issues JOBS Act study on stock pricing increment
TheSEC staff concluded in its Report to Congress on Decimalization that the SEC should not immediately propose to increase the penny pricing increment for securities of small and middle capitalization companies. Instead, the staff recommended the SEC consider additional steps to determine whether future rulemaking is warranted.
The report was required by Section 106 of the Jumpstart Our Business Startups Act (JOBS Act). The staff was unable to fully ascertain the effect of decimalization on the liquidity of these securities and the number of IPOs since April 2001, when stocks started trading in penny increments.
The SEC staff recommended the Commission seek the opinions (e.g., hold a roundtable) of key stakeholders, including companies, investors, market makers and academics, on the broad topic of decimalization, how best to study its effects on IPOs, trading and liquidity for small and middle capitalization companies, and potential policy alternatives.
Public Company Accounting Oversight Board (PCAOB)
PCAOB enters into cooperative agreement with Spanish audit regulator
The PCAOB has entered into a cooperative arrangement with the Accounting and Auditing Institute of Spain relating to the oversight of audit firms subject to the regulatory jurisdictions of both regulators. The agreement takes effect immediately and allows joint inspections to commence this year.
In addition to providing a framework for conducting joint inspections, the arrangement with the Spanish regulator provides for the exchange of confidential information between the Institute and the PCAOB, consistent with certain provisions of the Dodd-Frank Act. Those provisions amended the Sarbanes-Oxley Act to permit the PCAOB to share confidential information with its non-US counterpart regulators under certain circumstances. The cooperative arrangement with Spain also includes an agreement on data protection.
International Accounting Standards Board (IASB)
IFRIC Update for July 2012
The July 2012 IFRIC Update summarizes the IFRS Interpretations Committee meeting held in London on 10 July 2012, when it discussed:
- Current agenda:
- IFRS 10 Consolidated Financial Statements, IAS 28 Investments in Associates and Joint Ventures - Accounting for the loss of control of a group of assets or a subsidiary between an investor and its associate or joint venture
- IAS 19 Employee Benefits - Accounting for contribution-based promises - Reconsideration of Draft Interpretation D9 Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions
- IFRS Interpretations Committee agenda decisions
IASB Request for Information: Post-implementation review of IFRS 8
As part of the IASB's review of IFRS 8, Operating Segments, the board has issued a Request for Information seeking public views on whether the standard is functioning as intended, as well as the challenges and costs that have arisen in implementing the standard. Comments are due by 16 November 2012.
International Federation of Accountants/International Auditing and Assurance Standards Board (IFAC/IAASB)
IESBA exposure draft: "Those Charged with Governance"
The International Ethics Standards Board for Accountants (IESBA) has issued for public comment a proposed change to the definition of "Those Charged with Governance" in the IESBA Code of Ethics for Professional Accountants.
The proposal intends to closely align and simplify the definition in the Code with that in the IAASB's International Standard on Auditing (ISA) 260 Communication with Those Charged with Governance. Comments on the exposure draft are due by 31 October 2012.
UK reductions in corporate income tax rate
The United Kingdom recently enacted reductions in its main corporate income tax rate. US multinationals with UK subsidiaries should include the accounting effects of these income tax rate changes in their financial statements in the interim or annual period that includes the 17 July 2012 enactment date. For additional details, see our Tax Alert 2012-1243.