US Week in Review - Week ending 27 June 2013

    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: Accounting for insurance contracts could change significantly

    The FASB today issued an exposure draft on a principles-based model for accounting for insurance contracts. The proposal would apply to any entity that issues a contract that meets the definition of an insurance contract and would result in the measurement of many contract liabilities based on current assumptions, adjusted to reflect the time value of money.

    Our To the Point publication tells you what you need to know about the proposal.

    Comment letter on a private company decision-making framework

    In our comment letter, we support the use of a framework to help the Private Company Council (PCC) and the FASB make decisions about whether and when to provide alternatives for private companies under US GAAP. We believe that providing relief to private companies by using practical expedients for recognition and measurement alternatives, reducing disclosures and modifying transition requirements could help the PCC and the Board meet their objective of providing relevant information in private company financial statements in a more cost-effective manner while preserving the same fundamental basis of accounting for public and private companies.

    Review of 2013 proxy season identifies top 10 governance trends

    Ernst & Young's Corporate Governance Center has issued a new report, Key developments of the 2013 proxy season: engagement expands - investors push for more, that alerts directors and management teams to governance developments, investor priorities and engagement practices that may affect company decisions and communications.

    Top 10 governance trends of the 2013 proxy season

    1. Shareholder proposal submissions increase
    2. Board leadership structure debate continues
    3. Board diversity remains a priority - board turnover comes under scrutiny
    4. Directors receive increasing support
    5. Environmental and social topics continue to dominate shareholder proposal landscape
    6. Shareholders press for transparency of political and lobbying spending
    7. Say-on-pay (SOP) support increases, targeted compensation shareholder proposals return
    8. Companies with staggered boards targeted for change
    9. Proxy access fizzles
    10. Proxy disclosures enhanced to tell governance story

    This data-rich report is based on the Corporate Governance Center's proprietary database and ongoing conversations with issuers and investors and may support clients in evaluating governance practices.

    Standard Setter updates

    Financial Accounting Standards Board (FASB)

    FASB issues exposure draft on going concern

    The FASB proposed guidance requiring management to evaluate a company's going concern uncertainties and to make related disclosures. See the proposal and our upcoming To the Point publication for further information.

    26 June 2013 FASB meeting

    The FASB ratified two consensuses and three consensuses-for-exposure reached at the 11 June 2013 EITF meeting.

    For additional details, see the Summary of Board Decisions.

    Upcoming meetings and webcasts

    No meetings are scheduled for the week of 1 July 2013. 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.

    Government Accounting Standards Board (GASB)

    The GASB Report

    The May 2013 newsletter that summarizes recent developments on GASB projects has been issued.

    GASB issues Preliminary Views on fair value measurement and application

    In a Preliminary Views document, the GASB describes how fair value should be defined and measured, which assets and liabilities should be measured at fair value and what information about fair value should be disclosed in the notes to the financial statements.

    It is the GASB's preliminary view that investments generally should be measured at fair value. An investment would be defined as a security or other asset that a government holds primarily for the purpose of income or profit and the present service capacity of which is based solely on its ability to generate cash, to be sold to generate cash or to procure services for the citizenry.

    Certain investments would be excluded from measurement at fair value and should continue to be measured according to existing GASB standards, such as investments in money market instruments with remaining maturity at time of purchase of one year or less.

    In the Preliminary Views document, the GASB proposes expanding current fair value disclosures to include the levels of inputs a government uses to measure fair value and the judgments made to arrive at those inputs.

    GASB proposes concepts statement on measurement of elements of financial statements

    The GASB issued an exposure draft that proposes concepts to inform the GASB's decisions when establishing future standards for how state and local governments would determine the dollar amount at which to report assets and liabilities.

    The GASB is proposing two approaches to measuring assets and liabilities - initial amounts and remeasured amounts. Initial amounts would be determined at the time an asset is acquired or a liability is incurred. Remeasured amounts would be determined as of the date of each year's financial statements.

    The GASB also is proposing four measurement attributes (the characteristic of an asset or liability that is being measured):

    • Historical cost: the price paid to acquire an asset or the amount received when a liability is incurred in a transaction
    • Fair value: the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
    • Replacement cost: the price that would be paid to acquire an asset with equivalent service potential in an orderly market transaction at the measurement date
    • Settlement amount: the amount at which an asset could be realized or a liability could be liquidated with the counterparty, other than in an active market

    Upcoming Thought center webcasts and podcasts

    Environmental sustainability in financial services
    5 July 2013, 6:00 a.m. Eastern time

    IASBs revised ED on Insurance Contracts
    Hosted by the EY Global Insurance Center
    10 July 2013, 10:00 a.m. Eastern time


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