US Week in Review - Week ending 17 May 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

    Technical Line: Implementing the JOBS Act

    The Jumpstart Our Business Startups Act (JOBS Act) gives private companies greater access to capital and makes it easier for certain companies to go public. The law created a new category of issuer called an emerging growth company that can phase in certain SEC regulatory requirements during a five-year period. The law also modified triggers for public registration and reporting and encourages capital formation by requiring the SEC to conduct rulemaking to create a new category of exempt offerings of up to $50 million raised over a 12-month period and to allow the use of crowdfunding. Our Technical Line publication discusses key matters to consider about the JOBS Act.

    Updated Financial Reporting Developments (FRD): Insurance contract modifications or exchanges

    We have updated our FRD on the accounting for deferred acquisition costs in connection with modifications or exchanges of insurance contracts. Most of the changes reflect the adoption of the Accounting Standards Codification.

    Standard Setter updates

    Financial Accounting Standards Board (FASB)

    Upcoming meetings and webcasts

    21-22 and 24 May 2012 FASB-IASB joint meeting

    The Boards are scheduled to discuss the following projects:

    • Financial instruments: classification and measurement
    • Financial instruments: impairment
    • Investment companies
    • Insurance contracts
    • Revenue recognition
    • Leases

    For additional detail of the planned discussions, see the FASB calendar.

    Education sessions

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

    Securities and Exchange Commission (SEC)

    Updated process for confidential submissions under the JOBS Act

    The SEC has implemented a secure email system for confidential submissions of registration statements under the JOBS Act that replaces the SEC staff's interim protocol announced in April. The SEC staff has released explicit instructions on how to submit these registration statements, which are required to be in text-searchable PDF format and should include a transmittal letter identifying the issuer and the type of submission.

    Companies also should consider the staff's Frequently Asked Questions addressing questions about the confidential submission process.

    SEC staff clarifies accounting for derivatives when counterparties are replaced due to Dodd-Frank

    The SEC's Chief Accountant stated in a letter to the International Swaps and Derivatives Association (ISDA) that the staff wouldn't object to a conclusion that replacing or "novating" a counterparty to a derivative contract to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act would not trigger a termination of the contract and thus an associated hedge relationship can continue, as long as other terms of the contract don't change.

    In his 11 May 2012 letter, the SEC's Chief Accountant responded to ISDA's request for the staff's view on accounting for the replacement of counterparties to derivative contracts designated as hedging instruments due to rules mandated by the Dodd-Frank Act. ISDA had asked for the staff's views because terminating a derivative contract and dedesignating a hedge relationship could have significant hedge accounting implications. Later this year, parties to certain over-the-counter derivatives will be required to replace their counterparties with central clearing organizations.

    The letter indicated that after mandatory clearing requirements go into effect, new hedging documentation must state that the contract will be novated to the central clearing organization. The letter also noted that changes to the terms of a contract that result directly from replacing a counterparty as a result of the Dodd-Frank Act requirements (e.g., a clearing organization may require more collateral than the original counterparty) would not preclude the continuation of hedge accounting.

    In addition, the SEC staff asked the FASB to consider the accounting for a change in counterparties for derivative contracts designated as hedging instruments as a part of the FASB's financial instruments project.

    International Accounting Standards Board (IASB)

    Summary of IFRS Foundation Trustees' meeting

    The Trustees of the IFRS Foundation, responsible for the governance and oversight of the IASB, have released a summary of their 13 April 2012 meeting held in London. The Trustees discussed their Strategy Review, the appointment of three new Trustees and the development of the Due Process Handbook.

    Government Accounting Standards Board (GASB)

    April 2012 GASB Report

    The April 2012 edition of the GASB Report has been issued. This edition includes the GASB's Technical Plan.

    Upcoming Thought center webcasts and podcasts

    The Ernst & Young Q2 2012 financial reporting update
    Co-sponsored by Financial Executives International (FEI)
    7 June 2012, 1:00 p.m. Eastern time


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