US Week in Review - Week ending 23 August 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: Most governments will soon record costs of their pension plans earlier

    The Governmental Accounting Standards Board (GASB) issued a new standard that will significantly change how government employers account for the cost of defined benefit pension plans. Our Technical Line publication tells you what you need to know about the standard.

    Technical Line: New principles and criteria for assessing the quality of XBRL files

    The AICPA issued Principles and Criteria for XBRL - Formatted Information, which can help companies improve the quality of the financial information they format in computer-readable XBRL and submit to the SEC and other regulators. The document is especially useful now that the SEC staff has indicated it will begin issuing comment letters on XBRL exhibits shortly. Our Technical Line publication summarizes what you need to know about the AICPA document.

    To the Point: Sustainability reporting gets a boost from stock exchanges

    The NASDAQ Stock Market became one of the latest stock exchanges to urge listed companies to measure and report on environmental and social issues. Our To the Point publication tells you what you need to know about the trend.

    To the Point: FASB proposes more AOCI reclassification disclosures

    The FASB issued an exposure draft that proposes new tabular disclosures about items reclassified out of accumulated other comprehensive income (AOCI). The proposal would also increase disclosures about changes in the balances of AOCI components and require new interim reporting disclosures. Our To the Point publication summarizes what you need to know about the proposal.

    New audit committee ViewPoints

    Two new documents from Tapestry Networks summarize a recent meeting of the North American Audit Committee Leadership Network.

    In Evaluating the audit and the external auditor, audit committee members discuss the current scrutiny of the auditing profession by policymakers and regulators – and whether and how audit committees can use evaluations of their companies' external auditors to improve the audit.

    A dialogue with SEC chief accountant James Kroeker provides insight from the former chief accountant of the SEC about the commission's current agenda.

    Standard Setter updates

    Financial Accounting Standards Board (FASB)

    22 August 2012 FASB meeting

    The Board discussed the following project:

    • Accounting for financial instruments: impairment

    For additional details, see the FASB Action Alert.

    Upcoming meetings and webcasts

    29 August 2012 FASB meeting

    The Board is scheduled to discuss the following projects:

    • Accounting for financial instruments: classification and measurement
    • Investment companies
    • Consolidation: policy and procedures

    For additional details of the planned discussion, 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)

    SEC approves disclosure rules on payments by resource extraction issuers

    The SEC approved final disclosure rules related to payments by resource extraction issuers, as required by Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC approved the rules in a 2-1 vote (Chairman Mary Schapiro and Commissioner Troy Paredes recused themselves). The rules require resource extraction issuers to disclose payments in excess of $100,000 made to either the US or a foreign government related to the commercial development of oil, natural gas or minerals. Companies will be required to use XBRL to begin reporting the payments by filing a newly created annual report on Form SD within 150 days of their year-end. The first report for an issuer's fiscal year that ends after 30 September 2013 requires disclosure only of payments made after 30 September 2013.

    SEC approves disclosure rules on conflict minerals

    The SEC approved final disclosure rules related to conflict minerals, as required by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC voted 3-2 to require disclosures by a registrant that uses specified "conflict" minerals (gold, tin, tungsten and tantalum) because they are necessary to the functionality or production of a product that it either manufactures or contracts to be manufactured. Companies have until 31 May 2014 to make their first filings on a newly created annual report on Form SD to disclose whether their products were "conflict free" during calendar year 2013. For the first two years (four years for smaller reporting companies), companies are permitted to disclose that their products were "conflict undeterminable" if they are unable to ascertain whether the minerals their products contain helped finance fighting in the Democratic Republic of the Congo and neighboring countries.

    SEC staff posts more FAQs about the JOBS Act

    The staff of the SEC's Division of Trading and Markets issued another set of Frequently Asked Questions (FAQs) to provide implementation guidance about the Jumpstart Our Business Startups Act (JOBS Act). These FAQs provide the staff's views on Section 105 of the JOBS Act, which addresses analyst, investor (i.e., "testing the waters") and post-offering communications (i.e., research reports) for securities offerings of emerging growth companies.

    SEC pushes consideration of general solicitation rules to next week

    The SEC has delayed its consideration of rules to allow general solicitation and advertising in securities offerings under Rule 506 of Regulation D and resales under Rule 144A of the Securities Act until an open meeting on 29 August 2012. The Commission also indicated it will issue a rule proposal for public comment rather than any interim final rules.

    The elimination of the ban on general solicitation and advertising in exempt offerings limited to accredited investors is required by Section 201(a) of the Jumpstart Our Business Startups Act.

    Public Company Accounting Oversight Board (PCAOB)

    Interim inspection program related to audits of brokers and dealers

    The PCAOB released its first report on its interim inspection program for the audits of brokers and dealers, which was implemented last year.

    The report, which covers inspections performed from October 2011 through February 2012, summarized observations from the inspections of 10 registered public accounting firms covering 23 audits of brokers and dealers registered with the SEC. The PCAOB noted that deficiencies were identified in all of the audits inspected and were observed in areas related to the customer protection and net capital rules, audits of financial statements and auditor independence. Given the limited scope of the program thus far, the report cautions that readers should not use the results to generalize about all audits of brokers and dealers.

    The interim inspection program is expected to extend through the end of 2013 and encompass approximately 100 firms, covering portions of 170 audits. During this time, the Board will issue additional progress reports on their observations and findings. Observations from the interim inspection program will be used by the PCAOB to inform both the scope and elements of its permanent inspection program, as well as any future standards-setting activities related to the audits of brokers and dealers, assuming the SEC mandates that auditors comply with PCAOB standards in the future.

    American Institute of CPAs (AICPA)

    Working draft of not-for-profit accounting and auditing guide

    The Financial Reporting Executive Committee (FinREC) of the AICPA has issued a working draft of the accounting content of a proposed audit and accounting guide, Not-for-Profit Entities. The proposed guide addresses many new accounting issues that have emerged over the years. Comments are due by 15 October 2012.

    Exposure draft of three clarified SSARSs issued, including proposed revised compilation service objective

    The AICPA Professional Ethics Executive Committee (PEEC) is seeking comment on a proposed revision to Interpretation 101-3, "Performance of Nonattest Services," that clarifies, among other things, that the preparation of financial statements would be considered a nonattest service, regardless of whether such service was performed as part of an attest (audit, review or compilation) engagement.

    The Accounting and Review Services Committee (ARSC) is seeking comment on a trio of proposed Statements on Standards for Accounting and Review Services (SSARSs) that, if issued as final standards, would change the nature of a compilation engagement from a prepare and present (submission) service to a read and report service. The proposed SSARSs would also require that legends, notations or disclaimer language be placed on or with the financial statements when the accountant prepares financial statements but is not engaged to compile them.

    The proposed SSARSs have been issued in the clarity format as part of the ARSC's Clarity Project. Comments are due by 31 August 2012.

    Draft new chapter of Accounting and Valuation Guide released for comments

    The AICPA's Financial Reporting Executive Committee has issued a working draft of a new chapter of the accounting and valuation guide, Valuation of Privately Held Company Equity Securities Issued as Compensation, along with the latest version of the guide. The new chapter, Inferring Value from Transactions in a Private Company's Securities, provides a framework on how to evaluate private transactions and secondary market transactions and their relevance for estimating the fair value of the other securities within an enterprise. Comments on the working draft of the new chapter and Q&As 12.1-12.15 of the guide are due 1 October 2012.

    AICPA issues ethics exposure draft

    The Professional Ethics Executive Committee of the AICPA has issued an exposure draft, Omnibus Proposal - AICPA Professional Ethics Division - Interpretations and Rulings, in which it proposes to reestablish certain affiliate-related ethics rulings and interpretations for individuals who have not implemented Interpretation No. 101-18, Application of the Independence Rules to Affiliates, early. Comments on this proposal are due 14 September 2012.

    Upcoming Thought center webcasts and podcasts

    The Ernst & Young Q3 2012 financial reporting update
    Co-sponsored by Financial Executives International (FEI)
    6 September 2012, 1:00 p.m. Eastern time

    Evolving role of today's CFO
    Featured in FEI's CFO Community of Interest
    Hosted by Ernst & Young LLP
    16 October 2012, 12:00 p.m. Eastern time


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