US Week in Review - Week ending 12 June 2014

    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

    June 2014 Financial reporting briefs issued

    We have issued the general and industry-specific June 2014 editions of Financial reporting briefs. These publications provide you with a snapshot of the major accounting and regulatory developments during the quarter. The Reference library at the end of each document lists the publications we issued during the quarter, along with the links to them on our AccountingLink website.

    The general Financial reporting briefs, and the industry-specific editions are available on AccountingLink.

    Accounting pronouncements effective for the second quarter of 2014

    All entities should carefully evaluate which accounting requirements apply to them for the first time in the second quarter of 2014. Our upcoming Second Quarter 2014 Standard Setter Update publication will include a list of recent accounting standards and effective dates. No new Accounting Standards Updates become effective for the second quarter of 2014 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 changes accounting for repo-to-maturity transactions and repurchase financings

    The FASB issued an Accounting Standards Update (ASU) that requires repurchase-to-maturity transactions to be accounted for as secured borrowings rather than as sales with a forward purchase agreement, as they generally are today. The ASU also eliminates current guidance on "repurchase financings." As a result, entities will evaluate the initial transfer of a financial asset and a related repurchase agreement between the same counterparties separately for derecognition. Under current guidance, the two parts of the repurchase financing are often accounted for as a linked transaction. The ASU also requires new disclosures for transactions accounted for as secured borrowings and transactions accounted for as sales when the transferor retains substantially all of the exposure to the return on the transferred financial assets.

    Our upcoming Technical Line will analyze the new requirements.

    FASB changes financial reporting for development stage entities

    The FASB issued an ASU that simplifies financial reporting for development stage entities by eliminating requirements specific to development stage entities. As a result, entities in a development stage will no longer need to present inception-to-date information about income statement line items, cash flows and equity transactions. Instead, the ASU clarifies how these entities should tailor existing disclosures to explain the risks and uncertainties related to their activities. The ASU also eliminates certain consolidation guidance, which may cause companies with interests in entities in a development stage to identify more of them as variable interest entities and may change prior consolidation decisions.

    11 June 2014 FASB meeting

    Accounting for financial instruments - impairment: The FASB decided that an entity that makes a decision to sell loans it hasn’t previously classified as held-for-sale would measure them at the lower of cost or fair value. That is, an entity would be able to recognize increases in fair value up to a loan’s amortized cost basis after transferring it into held-for-sale classification. Similarly, an entity would recognize an allowance for the difference between a debt security’s fair value and amortized cost basis on both held-to-maturity and available-for-sale debt securities it decides to sell when the fair value is less than amortized cost. The FASB also decided that purchased or retained beneficial interests for which there is a significant difference between contractual and expected cash flows upon initial recognition would follow the approach proposed for purchased credit impaired assets.

    The Board also discussed disclosures related to its project on Accounting for financial instruments: classification and measurement as well as its project on the Disclosure framework. For more details, see the FASB’s Tentative Board Decisions.

    12 June 2014 Emerging Issues Task Force meeting

    For details of the Task Force discussion, see our upcoming June 2014 EITF Update.

    Upcoming meetings

    18 June 2014 FASB meeting

    The Board is scheduled to discuss its projects on Conceptual framework, Customer’s accounting for fees in a cloud computing arrangement and Financial statements of not-for-profit entities.

    18 June 2014 joint FASB-IASB videoconference meeting

    The Boards are scheduled to discuss their joint project on Leases.

    For more details, see the FASB’s calendar.

    Education sessions

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

    Public Company Accounting Oversight Board (PCAOB)

    New auditing standard adopted on related parties

    The PCAOB adopted Auditing Standard No. 18, Related Parties, and amendments to other standards to strengthen auditor performance requirements for related-party transactions, significant unusual transactions, and financial relationships and transactions with executive officers. The standard requires auditors to perform additional procedures to understand the business purpose for each transaction, test the accuracy and completeness of management’s identification of related parties, and understand the financial relationships and transactions with executive officers. The standard will be effective, subject to SEC approval, for audits of financial statements for fiscal years beginning on or after 15 December 2014, including reviews of interim financial information within these fiscal years. The PCAOB has recommended that the standard also be applicable for audits of emerging growth companies and broker dealers.

    Upcoming Thought Center webcasts and podcasts

    Accounting for income taxes: a quarterly perspective
    27 June 2014, 1 p.m. Eastern time

    CFO: need to know quarterly webcast series
    18 September 2014, 12 p.m. Eastern time


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