US Week in Review - Week ending 20 February 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

    To the Point: FASB scales back scope of insurance contracts project

    The FASB scaled back the scope of its insurance contracts project and said it will focus on targeted improvements to the current guidance for long-duration contracts and disclosures for short-duration contracts. Contracts written by noninsurance entities will not be subject to the guidance for insurance. Our To the Point publication tells you what you need to know about the Board's decisions.

    Register now for the Q1 2014 financial reporting update webcast

    The Q1 2014 financial reporting update webcast is scheduled for 27 March from 1 p.m. to 2:30 p.m. Eastern time. EY panelists will discuss recent FASB and PCC activity, SEC developments and other current financial reporting matters during this 90-minute webcast.

    To register, go to Q1 2014 financial reporting update.

    Standard Setter updates

    Financial Accounting Standards Board (FASB)

    19 February 2014 FASB meeting

    FASB endorsement of Private Company Council (PCC) consensus: The FASB endorsed an accounting alternative proposed by the PCC that allows private companies to elect not to evaluate certain lessor entities in common control leasing arrangements for consolidation under the variable interest entities guidance. The final Accounting Standards Update will include examples on how to apply the alternative. It also will remove an example on identifying implicit variable interests in common control leasing arrangements from Accounting Standards Codification (ASC) 810. We do not believe the FASB intends for this to change practice for those not eligible for or that do not elect to apply the alternative. Private companies will be able to elect the alternative for any financial reporting period for which their financial statements have not yet been made available for issuance.

    Insurance contracts: The FASB decided that the overall scope of its project will no longer include insurance contracts issued by noninsurance companies. The project will focus on targeted improvements to the accounting for long-duration contracts (i.e., life insurance and health contracts) and disclosures for short-duration contracts (i.e., property-casualty contracts). For more details, see our To the Point above.

    Consolidation - principal versus agent analysis: The FASB tentatively decided that fees paid to a decision maker that are at market and commensurate with the services it provided would be excluded from consideration in the benefits criterion for determining the primary beneficiary of a variable interest entity (VIE). The Board also tentatively decided to retain the existing description of the benefits criterion. That is, an enterprise with power over a VIE, including a decision maker whose power comes through a fee arrangement, would be the primary beneficiary if its economic interests (excluding any fees that are at market and commensurate with the services provided) absorb losses and/or receive benefits that could potentially be significant to the VIE.

    These tentative decisions came during the Board's ongoing discussion on how to integrate into ASC 810's existing consolidation models the factors it originally proposed in December 2011 on evaluating whether a decision maker uses its power as a principal or an agent. The Board will address how to evaluate interests held by related parties in a future meeting. Once completed, this project will rescind the current Statements of Financial Accounting Standards (FAS) 167 deferral for certain investment companies.

    The Board also discussed its project on Accounting for financial instruments - impairment. For more details, see the FASB's Tentative Board Decisions.

    Upcoming meetings

    26 February 2014 FASB meeting

    The FASB is scheduled to discuss its projects on Accounting for financial instruments: classification and measurement, Development stage entities and Not-for-profit financial reporting: financial statements.

    For additional details, see the FASB's calendar.

    Education sessions

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

    Securities and Exchange Commission (SEC)

    SEC to host cybersecurity roundtable on 26 March

    The SEC will host a roundtable on 26 March 2014 to discuss how market participants and public companies are addressing and disclosing cybersecurity threats and incidents. The roundtable will be open to the public, and the live webcast will be available on the SEC's website. The SEC expects to publish the agenda and list of participants in the next few weeks.


    The Council on Financial Assistance Reform releases FAQs on federal grant guidance

    The Council on Financial Assistance Reform (COFAR) released the first set of frequently asked questions on the recently issued federal grants reform guidance in 2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.

    We note that the document clarifies in Question III-4 that non-federal entities must have effective internal controls over federal awards, and the guidance refers those entities to the documents listed below. However, non-federal entities are not expected or required to document or evaluate internal controls prescriptively in accordance with these documents, which are provided solely to alert non-federal entities to source documents for best practices.

    • Standards for Internal Control in the Federal Government (Green Book) issued by the US Comptroller General
    • Internal Control Framework issued by the Committee on Sponsoring Organizations (COSO)
    • Appendix XI, Compliance Supplement - Part 6 Internal Control


    Upcoming Thought Center webcasts and podcasts

    CFO: need to know
    A quarterly webcast series
    5 March 2014, 12:00 p.m. Eastern time

    Considerations for a US IPO listing
    6 March 2014, 11:00 a.m. Eastern time

    EY Q1 2014 financial reporting update
    In co-operation with Financial Executives International (FEI)
    27 March 2014, 1:00 p.m. Eastern time



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