US Week in Review - Week ending 22 March 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

    March 2012 Financial reporting briefs issued

    We have issued the general and industry-specific March 2012 editions of Financial reporting briefs. These publications provide you with a snapshot of the major accounting and regulatory developments that have occurred during the quarter. The Reference library at the end of each document lists the publications we issued during the quarter, along with links to the publications on our AccountingLink website.

    The general Financial reporting briefs and the industry-specific editions are available online.

    To the Point: PCAOB proposals on related parties and significant unusual transactions

    The Public Company Accounting Oversight Board (PCAOB) has proposed an auditing standard on auditing transactions with related parties and amendments to its standards regarding auditing significant unusual transactions. Our To the Point publication tells you what you need to know about the proposal.

    Technical Line: Recognizing revenue on the sale of virtual goods

    Many publishers of social games, virtual worlds and popular multiplayer online role playing games offer games free of charge and give players the opportunity to purchase virtual goods to enhance their game-playing experience.

    Our Technical Line publication describes the revenue recognition methods available to account for the sale of virtual goods and updates our April 2010 publication. It also addresses the factors to consider when selecting an accounting policy for revenue recognition on the sale of virtual goods, as well as gross versus net recognition considerations.

    EITF Update: March 2012

    The Emerging Issues Task Force (EITF) reached three consensuses-for-exposure on not-for-profit entities' sales of donated securities that are unrestricted and readily convertible into cash, measuring indemnification assets and fair value measurements used for the impairment test for unamortized film costs. The EITF also discussed three other issues, but didn't reach conclusions. Our EITF Update publication explains what you need to know about these issues.

    NAIC Bulletin

    The National Association of Insurance Commissioners (NAIC) Spring National Meeting was held in New Orleans, Louisiana 3 March through 6 March 2012. Our NAIC Bulletin publication highlights important issues addressed by various NAIC committees, working groups and task forces since the Fall National Meeting.

    Standard Setter updates

    Financial Accounting Standards Board (FASB)

    Roundtable on FASB and IASB proposals on investment companies and FASB proposal on investment property entities

    The discussions at the joint public roundtable on 16 March 2012 in Norwalk, Conn., were consistent with the comment letters the FASB and the IASB received. Participants generally disagreed with the proposed rules-based definition of an investment company and instead supported a more principles-based definition. Participants also generally disagreed with the proposed FASB requirement for an investment company to consolidate another investment company when it has a controlling financial interest. In addition, most disagreed with having a separate standard for investment property entities and encouraged the FASB to develop a single investment company standard that would encompass entities that invest in real estate.

    FASB responds to FAF's report on FIN 48

    In January 2012, the Financial Accounting Foundation (FAF) issued its Post-Implementation Review (PIR) Report on FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). In response to the FAF, the FASB said that a separate project to review FIN 48 is not necessary based on the criteria established in the FASB Rules of Procedure. However, the FASB indicated it will consider the technical findings of the report as part of its broader reviews of whether modifications are needed for private companies and in its analysis of the remaining differences between US GAAP and IFRS. The FASB added that it will give serious consideration to the PIR team's recommendations for improving the standard-setting process. For additional detail, see the FASB's response.

    21 March 2012 joint FASB-IASB videoconference meeting

    Insurance contracts - The Boards discussed whether there should be one definition of a portfolio or multiple definitions. The Boards also discussed principles to identify the investment components that should be separated from insurance contracts as well as the presentation and disclosure for those separated components. For additional details, see the FASB's Action Alert.

    21 March 2012 FASB meeting

    Agenda decision - The FASB added a project to its agenda to reconsider the accounting and disclosure requirements for transfers of financial assets subject to repurchase agreements. The Board's reconsideration may further limit the circumstances when sale accounting is appropriate for such transactions. For additional details, see the FASB site.

    Upcoming meetings and webcasts

    No Board meetings are scheduled for the week of 26 March 2012.

    Education sessions

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

    Government Accounting Standards Board (GASB)

    GASB proposal addresses government combinations and disposals of government operations

    The Governmental Accounting Standards Board (GASB) issued for public comment a proposal that would provide state and local governments with standards for financial reporting on government combinations (mergers, acquisitions and transfers of operations) and disposals (sales and transfers) of government operations.

    The proposal would be effective for periods beginning after 15 December 2013, and would be applied on a prospective basis. Early application would be encouraged. The comment period ends 15 June 2012.

    International Federation of Accountants/International Auditing and Assurance Standards Board (IFAC/IAASB)

    ISRS on Compilation Engagements

    The IAASB has issued International Standard on Related Services (ISRS) 4410 (Revised), Compilation Engagement. The document clarifies the practitioner's role and responsibilities in a compilation engagement and matters that need to be considered when accepting such engagements, It also expands the traditional compilation engagement report to make clear to users the practitioner's contribution to the compiled financial information presented by management, and the key features of a compilation engagement.

    Center for Audit Quality (CAQ)

    CAQ Alert: Audit reports on IFRS financial statements

    As a result of a recent communication by the SEC staff to its International Practices Task Force, the Center for Audit Quality issued Alert 2012-05 reminding issuers and their auditors of the SEC's requirements to avoid a US GAAP reconciliation of financial statements prepared in accordance with international financial reporting standards (IFRS). The SEC staff communication comes after the recent transition of Canadian issuers to IFRS.

    Foreign private issuers that file IFRS financial statements must disclose in the notes that those financial statements were prepared in accordance with IFRS as issued by the IASB and file an audit report that explicitly states an opinion on whether the financial statements comply with IFRS as issued by the IASB. Absent such disclosure and an auditor's report, a reconciliation to US GAAP must be provided.

    Upcoming Thought center webcasts and podcasts

    Accounting for income taxes: a quarterly perspective
    27 March 2012, 11:00 a.m. Eastern time


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