US Week in Review - Week ending 20 December 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

    To the Point: FASB proposes new credit impairment model

    The FASB proposed today a single, principles-based model to account for credit losses on financial assets. All companies would be affected by the proposal, which would change the accounting for credit losses on loans, debt securities and trade and other receivables. Our To the Point publication tells you what you need to know about the proposal.

    To the Point: Boards check a few more items off their list in revenue redeliberations

    The FASB and the IASB continue to make progress on their joint proposal on revenue recognition. At a meeting this week, the Boards addressed accounting for contract acquisition costs, constraining the cumulative amount of revenue recognized for licensed intellectual property and allocating the transaction price (including the effect of the allocation on some bundled arrangements). Our To the Point publication summarizes the decisions and provides an update on the Boards' redeliberation plan.

    Technical Line: Complex deal structures can affect future earnings and other metrics

    We are seeing an increase in the complexity of deal structures, particularly those using contingent consideration or call or put options or forward 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 first in a two-part series - addresses the accounting and valuation considerations for contingent consideration issued in a business combination. A companion publication that we will issue soon will address the accounting for equity contracts entered into between a buyer and a noncontrolling interest holder when the buyer acquires a controlling interest in an acquiree.

    Technical Line: Accounting for income from the sale of patents

    Many technology companies seek to monetize their intangible intellectual property assets by selling a patent or a portfolio of patents. Because these arrangements can be complex, determining when and how to account for the proceeds can require significant judgment. Our Technical Line publication highlights various factors that should be considered when accounting for the sale of patents.

    Comment letter: Proposal to limit the scope of disclosures about offsetting assets and liabilities

    In our comment letter to the FASB, we agree with its proposal to limit the scope of ASU-2011-11 to derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. We also challenge whether ASU-2011-11's collateral disclosures are needed for instruments in the Proposed Update's scope that are not offset on the balance sheet.

    NAIC Bulletin

    The National Association of Insurance Commissioners (NAIC) Fall National Meeting was held in Washington, DC, 29 November through 2 December 2012. Our NAIC Bulletin highlights important issues addressed by various NAIC committees, working groups and task forces since the Summer National Meeting.

    Updated FRD on intangibles - Goodwill and other

    We have updated our Financial Reporting Developments, Intangibles - Goodwill and other, to incorporate recent standard-setting activities and further clarifications and enhancements to our interpretive guidance.

    Practical matters for the c-suite

    Our two new editions of Practical matters for the c-suite, New accounting standard for lessees: Are we there yet? and Boards re-examine lessor accounting, explore how the Boards' revised proposal would affect an organization's finance, tax, IT systems and business processes. These publications complement our September 2012 Technical Line publication on the Boards' revised proposal. The Practical matters for the c-suite series is produced by our Financial Accounting Advisory Services group and is intended to help companies assess the potential effects of accounting proposals on their organizations.

    Women join boards at higher rates, though progress comes slowly

    In our new report, Getting on board: women join boards at higher rates, though progress comes slowly, we discuss the changes in gender diversity on US corporate boards. Among our findings:

    • The rate at which women are joining boards as a percentage of new board members is increasing.
    • Boards that already have at least one female director are most likely to add more.
    • Companies are diversifying board members' professional backgrounds.
    • Female representation in leadership positions and on key board committees remains lower overall.

    Ernst & Young LLP's Corporate Governance Group publishes content on leading trends and emerging corporate governance topics. For additional insights on governance topics, please visit, and if you know anyone who may be interested, you may 'refer a colleague' to receive these corporate governance publications.

    Standard Setter updates

    Financial Accounting Standards Board (FASB)

    17 December 2012 joint FASB-IASB videoconference meeting

    The Boards discussed the revenue recognition project. See our To the Point publication above.

    For details, see the FASB Action Alert.

    19 December 2012 FASB meeting

    The Board discussed its project on presentation of comprehensive income: reclassification out of accumulated other comprehensive income.

    The Board also decided to clarify that nonpublic entities are not required to provide certain fair value disclosures and directed the staff to draft a proposal.

    For details, see the FASB Action Alert.

    Upcoming meetings and webcasts

    No meetings are scheduled for the week of 24 December 2012. For additional details, 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)

    Nallengara named acting director of the SEC's Division of Corporation Finance

    Lona Nallengara was named acting director of the Division of Corporation Finance of the SEC, succeeding Meredith Cross, who plans to leave the SEC at the end of the year. Since March 2011, Mr. Nallengara has served as the Division's Deputy Director for Legal and Regulatory Policy, where he has led many rulemaking initiatives required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementation of the Jumpstart Our Business Startups Act (JOBS Act).

    SEC approves PCAOB Auditing Standard No. 16

    The SEC issued an order granting approval of the proposed rules of Auditing Standard No. 16, Communications with Audit Committees, and amendments to other PCAOB standards. The order also approves the PCAOB's request to have Auditing Standard No. 16 apply to emerging growth companies, as defined by the JOBS Act.

    The standard and the amendments are effective for public company audits of fiscal periods beginning after 15 December 2012 and will be effective for the audits of brokers and dealers upon the SEC making all PCAOB standards applicable to those entities.

    International Accounting Standards Board (IASB)

    Feedback Statement on its Agenda Consultation 2011

    This report summarizes the IASB's proposed strategy for developing the future agenda. The Feedback Statement is based on comment letters received by the IASB on the formal agenda consultation, as well as the Board's roundtable discussions with constituents in 2012.The next steps for the IASB will include developing a research program that will initially focus on a number of key areas highlighted in the agenda consultation. Proposals for the IASB's research capability will be presented to the Trustees of the IFRS Foundation in early 2013.


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