US Week in Review - Week ending 12 July 2012
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 discontinued its project to expand loss contingencies disclosure but could revisit the issue as part of its disclosure framework project. In the meantime, we expect the SEC staff to continue to focus on compliance with existing requirements. Our To the Point publication describes the Board's decision and summarizes the SEC staff's recent comments on companies' disclosures.
In accordance with ASU 2011-04, public companies were required to provide several new fair value measurement disclosures in their quarterly filings for periods ended 31 March 2012. Ernst & Young reviewed the fair value disclosures provided by 60 public companies across various industries in order to gain insights into how companies adopted the new requirements. The results of our analysis are presented in our publication, The new fair value disclosures: A snapshot of how public companies adopted the requirements of ASU 2011-04.
Standard Setter updates
Financial Accounting Standards Board (FASB)
Invitation to Comment on Disclosure Framework issued
Additional details, including the Invitation to Comment document, are available on the FASB site.
9 July 2012 FASB meeting
Disclosures of certain loss contingencies - See our To the Point publication above.For additional details, see the FASB Action Alert.
11 July 2012 FASB meeting
The Board approved the consensuses-for-exposure reached at the 21 June 2012 EITF meeting.
For details, see the FASB Action Alert.
Upcoming meetings and webcasts
16-19 July 2012 joint FASB-IASB videoconference meeting
The Boards are scheduled to discuss the following projects:
- Investment companies
- Accounting for financial instruments: classification and measurement
- Accounting for financial instruments: impairment
- Revenue recognition
For additional details of the planned discussions, see the FASB calendar.
19 July 2012 joint webcast on leases
The Boards will hold a joint webcast to provide an update on their leases project, focusing on decisions reached at the June 2012 joint meeting. For more details and to register, see the FASB site.
See the FASB calendar for upcoming education sessions. No decisions are made at these sessions.
Securities and Exchange Commission (SEC)
Division of Corporation Finance updates Financial Reporting Manual
The SEC staff released its quarterly update of its Financial Reporting Manual (FRM). The most significant change was to the guidance on the age of acquired company interim financial statements included in a Form 8-K. The revision links the period for which interim financial statements of the target company are required to the date the original Form 8-K that reported the acquisition was filed rather than the date that the initial Form 8-K was required to be filed. This provides registrants with the ability to file their initial Form 8-K early to avoid having to update the target's interim financial statements.
The other revisions provide clarifications related to (1) the periods for which a registrant can provide pro forma MD&A, (2) the number of financial statement periods required in a Form 40-F and (3) the "smaller reporting company" determination by an operating company merging with a public shell.
The FRM, updated quarterly by the Division of Corporation Finance (Corp Fin) staff, is designed to provide general guidance only to Corp Fin staff. However, because the information is useful to registrants and their auditors, the SEC staff posts it on the SEC website.
American Institute of CPAs (AICPA)
Exposure draft of three clarified SSARSs issued
The Accounting and Review Services Committee (ARSC) has exposed for public comment a trio of proposed Statements on Standards for Accounting and Review Services (SSARSs) that, if issued as final standards, would change the nature of a compilation engagement from a prepare and present (submission) service to a read and report service. The proposed SSARSs would also require legends, notations or disclaimer language be placed on or with the financial statements when the accountant prepares financial statements but is not engaged to compile.
The three proposed SSARSs have been issued in the clarity format as part of the ARSC's Clarity Project. The comment period on the exposure drafts ends 31 August.
Government Accounting Standards Board (GASB)
June 2012 GASB Report
The June 2012 edition of the GASB Report has been issued. The publication discusses the GASB's priority projects and future plans.
Public Company Accounting Oversight Board (PCAOB)
PCAOB reopens comment period on mandatory firm rotation and holds another public meeting
The PCAOB reopened the comment period on its concept release on auditor independence and mandatory firm rotation until 28 July 2012 and held another public meeting late last month in San Francisco.
More than 30 participants at the meeting on 28 June 2012 expressed views that were generally consistent with those expressed at the March 2012 PCAOB public meeting in Washington, DC, The panelists, including institutional investors, audit committee chairs, senior executives, academics and other parties based primarily on the West Coast and in Asia, expressed support for efforts to improve audit quality and enhance auditor independence, but views continued to be mixed on the costs and benefits of mandatory audit firm rotation.
Panelists also discussed alternatives to enhance audit committee oversight and improve auditor independence, objectivity and professional skepticism, including the following:
- Require mandatory training for audit committee members
- Enhance communications between the PCAOB and audit committees about its inspection activities and observations to help committee members evaluate auditor performance
- Require audit committees to periodically evaluate and publicly disclose their findings on auditor independence, using guidelines developed by the SEC and the PCAOB
- Require the audit committee to periodically retender the audit
- Modify PCAOB standards and reporting to (1) require additional procedures and disclosures in areas where management representations provide a significant source of audit evidence, (2) require lead audit partners and engagement quality reviewers to sign their names to the audit report and (3) increase partner rotation to seven years from five years to better take advantage of the knowledge gained with respect to an entity
- Consider further limits on non-audit services
The webcast and panelists' written testimonies are available on the PCAOB website.
International Accounting Standards Board (IASB)
June 2012 edition of IFRS for SMEs Update
The IFRS for SMEs Update is a staff update on the latest news surrounding IFRS for Small and Medium-sized Entities (SMEs).
Upcoming Thought center webcasts and podcasts
Supreme Court Ruling on the Health Care Law: what companies need to consider
17 July 2012, 1:00 p.m. Eastern time
Evolving role of the CFO: the inaugural launch of FEI's CFO Community of Interest
Hosted by Ernst & Young LLP
18 July 2012, 2:00 p.m. Eastern time