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Our latest newsletter summarizes developments relating to Securities and Exchange Commission (SEC) matters, including items we have not previously reported in the Week in Review. This issue highlights the SEC's final rule on conflict minerals and the SEC staff's Final Report on the IFRS Work Plan.
Our September edition is designed to help you identify changes in tax law and other events when they occur so the accounting can be reflected in the appropriate period. This edition includes enacted and effective tax legislation, global tax treaties, regulatory developments and other items through 30 September 2012 to consider as you prepare your tax provision. We've also listed our Tax Alerts and other publications that provide more detail on the topics we discuss.
In our comment letter, we generally support the FASB's proposal to provide guidance on how and when to apply the liquidation basis of accounting, but we recommend clarifications to make the proposal operational and promote consistent application. We also express our concern that the proposed guidance is described as incremental to the guidance for an entity that is a going concern, and we discuss the potential ramifications of that view. With respect to its going concern project, we urge the Board to require management to take responsibility for evaluating an entity's ability to continue as a going concern, and to clarify the required disclosures regarding this evaluation.
To address growing concern about the volume of required disclosures, EY recommended to the SEC that it expand its review of registration requirements for emerging growth companies (EGCs), as required by the Jumpstart Our Business Startups Act (JOBS Act), to include disclosures required for all public companies. Our To the Point publication summarizes our comment letter to the SEC in which we recommend qualitative criteria the SEC could use to alter or eliminate Regulation S-K disclosure requirements for all public companies. We also suggest an overhaul of the method in which information required by Regulation S-K is filed by public companies and distributed to investors.
Accounting pronouncements effective for the third quarter of 2012
All entities should carefully evaluate which accounting requirements apply to them for the first time in the third quarter of 2012. Our upcoming Third Quarter 2012 Standard Setter Update publication will include a list of recent accounting standards and effective dates that may be relevant to non-calendar-year entities. No new Accounting Standards Updates become effective for the third quarter of 2012 for calendar-year entities, but other standard-setter and regulatory requirements may apply for the first time.
Standard Setter updates
Financial Accounting Standards Board (FASB)
FASB issues ASU for technical corrections and improvements
The FASB issued ASU 2012-04, Technical Corrections and Improvements, which includes source literature amendments, guidance clarification, reference corrections and relocated guidance affecting a variety of topics in the Codification. The ASU also includes conforming amendments to the Codification to reflect ASC 820’s fair value measurement and disclosure requirements.
Most of the amendments are not expected to have a significant effect on current practice, but certain amendments could result in a change. Transition guidance and a delayed effective date are provided for amendments that the Board deemed more substantive. All other amendments are effective immediately.
3 October 2012 FASB meeting
The Board discussed its projects on:
- Accounting for financial instruments: impairment
- Accounting for financial instruments: classification and measurement
- Transfers and servicing: repurchase agreements and similar transactions
- Insurance contracts
For details, see the FASB Action Alert.
Upcoming meetings and webcasts
10 October 2012 FASB meeting
The FASB is scheduled to discuss its project on accounting for financial instruments: impairment.
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)
SEC staff issues more FAQs about emerging growth companies under JOBS Act
The staff of the SEC's Division of Corporation Finance issued another set of Frequently Asked Questions (FAQs) to provide implementation guidance about the JOBS Act. These FAQs continue to focus on Title I of the JOBS Act concerning EGCs.
The FAQs cover a range of topics, including the applicability of the confidential submission process to an exchange offer or merger, assessing EGC eligibility in a spin-off or after a significant acquisition accounted for as a forward acquisition or reverse merger, and an issuer's disclosure obligations with respect to selected financial data and the ratio of earnings to fixed charges after it ceases to qualify as an EGC.
Division of Corporation Finance updates Financial Reporting Manual
The SEC staff released an update of its Financial Reporting Manual (FRM), which includes a clarification to the guidance on reporting a disposition of a significant business (including through a spin-off) in a proxy or information statement. Registrants should provide the most recent two years of audited financial statements for the disposed business, if audited financial statements are available. Before this clarification, the FRM stated that only unaudited financial information needed to be provided.
The SEC staff acknowledged that the update does not reflect financial reporting requirements for EGCs under the JOBS Act and referred users to the SEC staff guidance and FAQs for EGCs.
Other revisions clarify (1) the Form 8-K reporting requirements for reverse acquisitions with a domestic registrant that is not a shell company, (2) the application of PCAOB audit requirements to predecessor financial statements (pre- and post-acquisition) of a reverse merger that are included in SEC filings and (3) audit report references to unaudited inception-to-date financial information for development stage company registrants or their development stage predecessors.
The FRM, which is updated quarterly, is designed to provide general guidance only to Division of Corporation Finance staff. Because the information is useful to registrants and their auditors, the SEC staff posts it on the SEC web site.
International Accounting Standards Board (IASB)
IASB insurance contracts project
At the September 2012 IASB meeting, the IASB continued its discussions on proposals for insurance contracts accounting and concluded that the proposals should be re-exposed, with feedback being sought only on a limited range of questions. See the IASB website for the press release and further information on the project.
September 2012 IFRIC Update
The September 2012 IFRIC Update summarizes the IFRS Interpretations Committee meeting held in London on 18-19 September 2012.
September 2012 IFRS for SMEs Update
The September 2012 IFRS for SMEs Update contains the latest news for small and medium-sized entities.
International Federation of Accountants/International Auditing and Assurance Standards Board (IFAC/IAASB)
Engagements to Review Historical Financial Statements
The IAASB has issued International Standard on Review Engagements 2400 (Revised): Engagements to Review Historical Financial Statements. The rule discusses the practitioner's responsibilities when engaged to perform a review of historical financial statements, when the practitioner is not the auditor of the entity's financial statements. It also addresses the form and content of the practitioner's report on the financial statements. The revised standard is effective for reviews of financial statements for periods ending on or after 31 December 2013.