US Week in Review - Week ending 16 May 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.
Ernst & Young publications
The FASB and the IASB today issued an exposure draft that proposes requiring lessees to recognize assets and liabilities arising from their involvement in most leases. All entities would classify leases to determine how to recognize lease-related revenue and expense. Classification would also affect what lessors record on the balance sheet. Our To the Point publication tells you what you need to know about the proposal.
Although the overall volume of merger and acquisitions activity has decreased slightly in recent years, we are seeing an increase in the complexity of deal structures, particularly those using call or put options or forward contracts (collectively referred to as equity contracts) that allow the buyer and seller to share the economic risks of an acquired business for a period of time. This Technical Line publication - the second in a series - addresses the accounting for equity contracts issued in a business combination. In December 2012, we issued a companion publication, which addressed the accounting and valuation considerations for contingent consideration issued in a business combination.
In our comment letter, we say that while the FASB proposal on classification and measurement of financial instruments would represent a big step toward convergence, we do not support finalizing it in its current form. We believe the proposal may inappropriately require too many financial instruments, including certain common debt instruments, to be measured at fair value with changes in fair value recognized in net income. We are also concerned that certain provisions of the proposal could be interpreted in different ways and lead to diversity in practice. However, we believe the FASB can make specific changes and clarifications that will improve the proposal's operability.
Standard Setter updates
Financial Accounting Standards Board (FASB)
Upcoming meetings and webcasts
23 May 2013 FASB meeting
The FASB is scheduled to discuss its projects on:
- Revenue recognition
- Insurance contracts
- Transfers and servicing: repurchase agreements and similar transactions
24 May 2013 joint FASB-IASB videoconference meeting
The Boards are scheduled to discuss their projects on:
- Revenue recognition
- Accounting for financial instruments: classification and measurement
For additional details, see the FASB's calendar.
See the FASB's calendar for upcoming education sessions. No decisions are made at these sessions.
Securities and Exchange Commission (SEC)
Higgins named Director of the Division of Corporation Finance; Nallengara named SEC Chief of Staff
Keith Higgins was named Director of the Division of Corporation Finance of the SEC. He has been a partner in the law firm of Ropes & Gray LLP in Boston, where he has advised public companies about securities offerings, mergers and acquisitions, compliance and corporate governance for more than 30 years. Lona Nallengara, Acting Director of the Division since December 2012, was named Chief of Staff of the SEC. Mr. Nallengara previously served as the Division's Deputy Director for Legal and Regulatory Policy, where he led many initiatives required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Jumpstart Our Business Startups Act.
International Accounting Standards Board (IASB)
IFRS for SMEs
The April edition of this document is available on the IASB's website.
Committee of Sponsoring Organizations of the Treadway Commission (COSO)
COSO issues its updated Internal Control - Integrated Framework
COSO issued its updated Internal Control – Integrated Framework to address changes in the operating and business environments since the original framework was issued in 1992. The updated framework is intended to help organizations design and implement systems of internal control, broaden the application of control to address operations and reporting objectives and to clarify the requirements for evaluating whether a system of internal control is effective.
COSO also issued two companion documents, Illustrative Tools for Assessing Effectiveness of a System of Internal Control (Illustrative Tools) and Internal Control over External Financial Reporting (ICEFR): A Compendium of Approaches and Examples (ICEFR Compendium).
COSO's original framework will be available for use until 15 December 2014, when COSO will consider it superseded by the 2013 version. While the COSO Board has said it believes that the continued use of the original framework during the transition period is appropriate, COSO is encouraging users to make the transition as quickly as is feasible. COSO said the impact of adopting the updated framework will vary by organization, depending on how each organization interpreted and implemented the original framework.
Copies of the updated framework and related documents can be purchased at www.coso.org.
NASDAQ withdraws proposed rule on internal audit function for listed companies
NASDAQ withdrew a proposal to require its listed companies to have an internal audit function so it can consider comments from stakeholders, including company officials who cited concerns about the additional costs of complying with such a requirement and the relatively short implementation period. NASDAQ intends to revise the proposal and resubmit it to the SEC for approval.
Upcoming Thought center webcasts and podcasts
Risk accounting challenges in wholesale banking22 May 2013, 9:00 a.m. Eastern time
Risk accounting challenges in wholesale banking
22 May 2013, 9:00 a.m. Eastern time
The Ernst & Young Q2 2013 financial reporting update
Co-sponsored by Financial Executives International
6 June 2013, 1:00 p.m. Eastern time
CFO's reveal hidden trends from earnings season
A quarterly webcast series, "CFO: need to know"
12 June 2013, 12:00 p.m. Eastern time