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January 29, 2008
The PCAOB adopted Auditing Standard No. 6, Evaluating Consistency of Financial Statements.
The PCAOB adopted the standard in light of the
Financial Accounting Standards Board's (FASB) issuance of Statement of
Financial Accounting Standards No. 154, Accounting
Changes and Error Corrections.
The new standard updates the auditor's
responsibilities to evaluate and report on the consistency of a company's
financial statements and align the auditor's responsibilities with SFAS No.
154.
Auditing Standard No. 6 also improves the auditor
reporting requirements by clarifying that the auditor's report should indicate
whether an adjustment to previously issued financial statements results from a
change in accounting principle or the correction of a misstatement.
Auditing Standard No. 6 will become effective 60 days
after SEC approval.
http://pcaob.org/News_and_Events/News/2008/01-29.aspx
January 29, 2008
The PCAOB adopted amendments to the PCAOB's interim
auditing standards.
The PCAOB adopted the amendments in light of the
impending issuance of Statement of Financial Accounting Standards, The Hierarchy of Generally Accepted Accounting
Principles.
The PCAOB removed the hierarchy of generally accepted
accounting principles (GAAP) from its interim auditing standards. The GAAP
hierarchy identifies the sources of accounting principles and the framework for
selecting principles to be used in preparing financial statements. The
PCAOB believes that the GAAP hierarchy is more appropriately located in the
accounting standards. Because the FASB intends to incorporate the hierarchy in
the accounting standards, it no longer will be needed in the auditing standards.
The PCAOB has coordinated with the FASB and understands that the FASB intends
to coincide the effective date of its GAAP hierarchy standard with that of the
PCAOB.
The amendments will become effective 60 days after SEC
approval.
http://pcaob.org/News_and_Events/News/2008/01-29.aspx
January 15, 2008
The FASB has released FASB Accounting Standards Codification, which organizes thousands of pronouncements comprising U.S. GAAP into
a combined single source. This includes pronouncements of the FASB,
the AICPA’s Accounting Standards Executive Committee (AcSEC) and the Emerging
Issues Task Force (EITF). The FASB is exposing this codification for a
verification phase of one year. During this time, users may register
to use the online system free of charge.
Press Release
http://www.fasb.org/news/nr011508.shtml
Codification
http://asc.fasb.org
January 10, 2008
The FASB issued Statement 133 Implementation Issue No. E23, effective January 1, 2008, which provides guidance that allows the "shortcut" method of accounting for derivative and hedging instruments to be applied in two cases: (i) swaps that have a non-zero fair value at inception and (ii) hedge items that have a settlement date subsequent to the swap trade date.
December 21, 2007
The SEC issued SAB No. 110, which amends SAB 107 to allow the "simplified"
method in developing an estimate of the expected term of so-called "plain
vanilla" stock options accounted for under FAS 123R, Share-Based Payment
under certain circumstances,.
Press Release
SAB 109
http://www.sec.gov/interps/account/sab110.htmDecember 4, 2007
The FASB issued Statement of FAS No. 141 (revised 2007), Business Combinations
(FAS 141R) and FAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51 (FAS 160). Both statements are effective
for public and private companies for fiscal years beginning on or after
December 15, 2008. Thus they will be effective January 1, 2009 for calendar
year end companies. FAS 141R will be applied prospectively. FAS 160 requires
retroactive adoption for exiting minority interests and is otherwise prospective.
Early adoption is not permitted.
FAS 141R
Summary http://www.fasb.org/st/summary/stsum141r.shtml
Text http://www.fasb.org/pdf/fas141r.pdf
FAS 160
Summary http://www.fasb.org/st/summary/stsum160.shtml
Text http://www.fasb.org/pdf/fas160.pdf
November 5, 2007
The SEC issued SAB No. 109, "Written Loan Commmitments Recorded at
Fair Value Through Earnings," which revises and rescinds portions
of SAB 105
Press Release
SAB 109
http://www.sec.gov/interps/account/sab109.htmJuly 25, 2007
The SEC approved the PCAOB's Auditing Standard No. 5: An Audit of Internal Control
Over Financial Reporting That Is Integrated with an Audit of Financial
Statements ("AS No. 5"), which replaces Auditing Standard No. 2: An Audit of Internal Control Over Financial Reporting
Performed in Conjunction With an Audit of Financial Statements.
http://www.sec.gov/news/press/2007/2007-144.htm
May 24, 2007
The PCAOB adopted Auditing Standard No. 5: An Audit of Internal Control Over Financial Reporting That Is Integrated with an Audit of Financial Statements ("AS No. 5"), which replaces Auditing Standard No. 2: An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements.
http://www.pcaobus.org/Rules/Docket_021/2007-05-24_Release_No_2007-005.pdfMay 23, 2007
The SEC adopted interpretive guidance for managers of public companies on how to conduct annual evaluations of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002.
http://www.sec.gov/news/press/2007/2007-104.htmMay 4, 2007
The FASB released Staff Position No. FIN 48-1, which provides final guidance on the definition of “settlement” in FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes.
http://www.fasb.org/fasb_staff_positions/fsp_fin48-1.pdf
The FASB issued Staff Position No. FIN 39-1, which amends FASB Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts.
http://pcps.aicpa.org/Resources/Keeping+Up+With+Standards/Risk+Assessment+Standards+Implementation+Guidance.htmApril 27, 2007
The Private Companies Practice Section (PCPS) of the AICPA has posted
an online toolkit relating to Statement on Auditing Standards (SAS) No. 112
“Communication of Internal Control Related Matters Identified in an
Audit.” SAS No. 112 is effective for audits performed on or after
December 15, 2006.
http://pcps.aicpa.org/Resources/Keeping+Up+With+Standards/SAS+No+112+Toolkit.htm
The PCPS has also posted reference materials relating to new risk assessment standards issued by the Auditing Standards Board (ASB) effective for audits of financial statements for periods beginning on or after December 15, 2006.
http://pcps.aicpa.org/Resources/Keeping+Up+With+Standards/Risk+Assessment+Standards+Implementation+Guidance.htm
February 23, 2007
The AICPA issued 10 TPAs relating to Statement of Position No. 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (SOP 05-1).
http://www.aicpa.org/download/acctstd/SOP_05-1_TPAs.pdf
The FASB issued FSP FAS 158-1 providing guidance on accounting for pension and other postretirement benefits under, and amending, FAS Nos. 87, 88, and 106 considering FAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.
http://fasb.org/fasb_staff_positions/fsp_fas158-1.pdf
February 15, 2007
The FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115. This standard permits entities to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. FAS No. 159 is effective for fiscal years beginning after November 15, 2007, or January 1, 2008 for calendar year end companies.
News Release
http://www.fasb.org/news/nr021507.shtml
Summary
http://fasb.org/st/summary/stsum159.shtml
Statement
http://fasb.org/pdf/fas159.pdf
January 4, 2007
The FASB staff released FSP FAS ETIF 00-19-2 which provides guidance under
FASB No. 5, Accounting for Contingencies in accounting for a contingent obligation to make future payments, or otherwise transfer consideration, under a registration rights arrangement. The FSP also explains how to account for a financial instrument under GAAP that includes a payment arrangement in connection with registration rights.
http://www.fasb.org/fasb_staff_positions/fsp_eitf00-19-2.pdf
November 30, 2006
The Accounting Standards, Auditing and Attest Standards, and Tax Teams
of the AICPA have issued non-authoritative Practice Guide on Accounting
for Uncertain Tax Positions Under FIN 48.
http://tax.aicpa.org/Resources/Professional+Standards+and+Ethics/Practice+Guide+on+Accounting+for+Uncertain+Tax+Positions+Under+FIN+48.htm
October 10, 2006
The FASB staff released FSP FAS 123(R)-5, addressing whether modifying an instrument in connection with an equity restructuring should be considered a modification when applying an FSP FAS 123(R)-1, which relates to modifications to financial instruments issued to employees as compensation when the employee no longer works for the company.
http://www.fasb.org/fasb_staff_positions/fsp_fas123r-5.pdf
Below is a link to FSP FAS 123(R)-1:
http://www.fasb.org/fasb_staff_positions/fsp_fas123r-1.pdf
The following is a link to the discussion of this amendment:
http://www.fasb.org/project/amend_fspfas123r-1.shtml
September 29, 2006The FASB issued FAS 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R). Under the new standard, calender year companies with publicly traded equity securities must recognize a net liability or asset to report the funded status of their defined benefit pension and other postretirement benefit plans on their balance sheets effective as of December 31, 2006.
News Release
http://www.fasb.org/news/nr092906.shtml
Summary
http://www.fasb.org/st/summary/stsum158.shtml
FAS 158
http://www.fasb.org/pdf/fas158.pdf
September 18, 2006
The FASB issued FAS 157, Fair Value Measurements. This standard provides enhanced guidance for using fair value to measure assets and liabilities.
Summary
http://www.fasb.org/st/summary/stsum157.shtml
FAS 157 (Excludes Appendix E – to be posted later)
http://www.fasb.org/pdf/fas156.pdfSeptember 14, 2006
The SEC staff issued Staff Accounting Bulleting (SAB) No. 108 to provide advice on how companies should analyze mistatements in current and prior financial statements to determine whether the mistatements are material with respect to any of such financial statements. Companies that have used the "rollover" and "iron curtain" methods will need to change to a "dual approach" under both the iron-curtain and the roll-over methods for fiscal year ending on or after November 15, 2006.
http://www.sec.gov/interps/account/sab108.pdf
September 8, 2006
The FASB staff issued FSP AUG AIR-1, which prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities.
http://www.fasb.org/fasb_staff_positions/fsp_augair-1.pdf
July 13, 2006
The FASB issued FIN 48, Accounting
for Uncertainty in Income Taxes.
FIN 48 requires recognition and measurement of uncertain income tax
positions using a "more-likely-than-not" approach. FIN 48 is effective for fiscal years beginning after December 15, 2006.
http://www.fasb.org/pdf/fin%2048.pdf
The FASB issued FSP No. FAS 13-2, which amends FASB Statement No. 13, Accounting for Leases, with respect to the timing of cash flows related to income taxes that are generated by a leveraged-lease transaction.
http://www.fasb.org/fasb_staff_positions/fsp_fas13-2.pdf
July 11, 2006
COSO issued guidance on internal controls for small public companies.
http://www.coso.org/publications.htm
June 9, 2006
The PCAOB issued Q&A stating that either a successor auditor or a predecessor auditor can audit adjustments made to prior-period financial statements if that auditor is independent and registered with the PCAOB. The Q&A also addresses responsibilities of auditors and the wording and dating of the audit report.
http://www.pcaobus.org/Standards/Staff_Questions_and_Answers/2006/QA_Adjustments.pdf
June 7, 2006
The AICPA issued a TPA stating that if consolidation is required under GAAP, parent company-only financial statements would not be in accordance with GAAP.
http://www.aicpa.org/download/acctstd/Parent_Only_TPA_Final.pdf
June 5, 2006
The AICPA released two TPAs to provide guidance on Statement of Position 03-3, "Accounting for Certain Loans or Debt Securities Acquired in a Transfer." The TPAs provide examples of how to account for multiple loan pools accounted for as a single asset.
http://www.aicpa.org/download/acctstd/TPA_03-3.pdf
http://www.aicpa.org/download/acctstd/TPA_03-3A.pdf
May 17, 2006
The AICPA released two TPAs addressing questions with respect to
Statement of Position (SOP) No. 03-3, Accounting
for Certain Loans or Debt Securities Acquired in a Transfer.
http://www.aicpa.org/download/acctstd/TPA_03-3A.pdf
April 26, 2006
The AICPA staff issued four new Technical Practice Aid (TPA) questions and
answers concerning accounting and auditing issues related to FASB
Interpretation No. 46(R), Consolidation of Variable Interest Entities.
http://www.aicpa.org/download/acctstd/FIN_46_R_TPAs.pdf
April 21, 2006
The SEC issued an order approving the PCAOB auditor ethics and
independence rules concerning independence, tax services, and contingent fees.
The PCAOB's press release is available on the
PCAOB's website.
http://www.pcaobus.org/News_and_Events/News/2006/04-21.aspx
The SEC's approval order is posted on the SEC’s website.
http://www.sec.gov/rules/pcaob/2006/34-53677.pdf
April 13, 2006
The FASB issued FSP FIN 46(R)-6, which provides rules to be used to determine the variability to be considered when applying FIN 46(R) on consolidation of variable interest entities. The FSP is required to be applied prospectively to all entities with which an enterprise first becomes involved and to all entities previously required to be analyzed under FIN 46(R) when a reconsideration event has occurred pursuant to paragraph 7 of FIN 46(r) beginning the first day of the first reporting period beginning after June 15, 2006. Retrospective application is not required but, if elected, must be completed no later than the end of the first annual reporting period ending after July 15, 2006.
http://www.fasb.org/fasb_staff_positions/fsp_fin46r-6.pdf
March 22, 2006
The FASB issued Statement No. 156, “Accounting for Servicing of Financial Assets” This is an amendment of FASB Statement No. 140. The new standar clarifies when to separately account for servicing rights, requires servicing rights to be separately recognized initially at fair value, and provides the option of subsequently accounting for servicing rights at either fair value or under the amortization method. The standard is effective for fiscal years beginning after September 15, 2006 but can be adopted early as long as financial statements for the fiscal year in which early adoption is elected, including interim statements, have not yet been issued.
http://www.fasb.org/pdf/fas156.pdf
February 16, 2006
The FASB issued "Statement
of Financial Accounting Standard No. 155, Accounting for Certain Hybrid
Instruments." This is an amendment
of FASB Statements No. 133 and 140. The
new standard allows financial instruments that have embedded derivatives to be
accounted for as a whole (eliminating the need to bifurcate the derivative from
its host) if the holder elects to account for the whole instrument on a fair
value basis. The standard also provides
makes certain other specific changes. This
statement is effective for all financial instruments acquired or issued after
the beginning of an entity’s first fiscal year that begins after September 15,
2006.
http://www.fasb.org/pdf/fas155.pdf
February 9, 2006
The PCAOB accounced that, on February 6, 2006, the SEC approved PCAOB Standard No. 4, “Reporting on Whether a Previously Reported Material Weakness Continues to Exis” which provides what an auditor must do when reporting on the remediation of a pre-existing material weakness in internal control over financial reporting as of a date other than at year end.
http://www.pcaobus.org/News_and_Events/News/2006/02-09.aspx
February 3, 2006
The FASB issued FSP No. FAS 123(R)-4, “Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event.” The FSP amends FAS 123(R), “Share-Based Payments” to provide that a contingency will not require liability method accounting if the contingent event is not probable and not in the control of the employee. If the contingent event becomes probable, the stock option must only then be accounted for under the liability method as a modification that changes an equity award to a liability award.
http://www.fasb.org/fasb_staff_positions/fsp_fas123r-4.pdf
December 29, 2005
FSP #SOP 94-4-1The FASB issued FSP #SOP 94-4-1 which provides guidance if an investment company desires to to value an investment contract at “contract value”, representing the principal balance plus accrued interest, instead of fair value.
http://www.fasb.org/fasb_staff_positions/fsp_aag_inv-1&sop_94-4-1.pdf
December 19, 2005
TPA #21.03.09TPA #21.03.09 addresses issues relating to instruments that are measured like debt securities, assessing delays and shortfalls, evidence of credit quality and probable deficiency, non-accrual loans, loans held for sale, treatment of commercial revolving loans and other questions.
http://www.aicpa.org/download/acctstd/TPA_03-3.pdf
FSP #SOP 94-6-1
The FASB issued FSP #SOP 94-6-1, Terms of Loan Products That May Give Rise
to a Concentration of Credit Risk. The FSP
is effective immediately. The FSP addresses
loan products that may result in a concentration of credit risk, as defined in
FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments.
http://www.fasb.org/fasb_staff_positions/fsp_sop94-6-1.pdf
November 23, 2005
The AICPA staff has issued Q&A (that are non-authoritative) related to accounting for operating leases. The Q&A are applicable to public companies, private companies, and not-for-profit organizations and focus on issues that resulted in restatements earlier in 2005. The Q&A provide guidance on (i) the term of a lease for accounting purposes, (ii) the period which a lessee should amortize or depreciate leasehold improvements, (iii) the periods that rent expense and rent revenue are to be recognized, such as during rent holidays and scheduled rent and space increases, and (iv) accounting for landlord incentive allowances in an operating lease, including classification on the statement of cash flows.
http://www.aicpa.org/download/acctstd/LEASE_TPAs_5600.07.pdf
November 10, 2005
FSP No. FIN 45-3
The FASB issued FASB Staff Position (FSP) No. FIN 45-3, “Application of FASB Interpretation [FIN] No. 45 to Minimum Revenue Guarantees Granted to a Business or Its Owners.” This FSP provides that a guarantor that provides a minimum revenue guarantee (such as in an earn-out provision) must recognize a liability for the fair value of the obligation under FIN No. 45, “Guarantor's Accounting and Disclosure Requirements of Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The FSP is effective at the beginning of the first fiscal quarter following November, 10, 2005.
http://www.fasb.org/fasb_staff_positions/fsp_fin45-3.pdf.
See also FIN 45 http://www.fasb.org/pdf/fin%2045.pdf.
FSP No. FAS 123(R)-3
Also, the FASB issued FSP No. FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” The FSP authorizes a short-cut for for companies that do not have the records and/or resources to calculate the pool of windfall tax benefits required by FASB Statement No. 123 (Revised 2004), Share-Based Payment. The short-cut method provides relief FAS 123(R).
http://www.fasb.org/fasb_staff_positions/fsp_fas123r-3.pdf.
See also FAS 123(R) http://www.fasb.org/pdf/fas123r.pdf
See also SAB 107 http://www.sec.gov/interps/account/sab107.pdf
November 3, 2005
On November 3, 2005, the FASB staff issued FSP No. FAS 115-1 and FAS 124-1
which withdraws guidance on determining whether an impairment is other-than-temporary
in EITF 03-1, "The Meaning of Other-Than-Temporary Impairment and
Its Application to Certain Investments," that was issued in 2004.
However, the FSP continues the guidance in EITF 03-1 for determining (i)
when an investment is impaired, (ii) how to measure the impairment loss,
and (iii) what disclosures should be made regarding impaired securities.
http://www.fasb.org/fasb_staff_positions/fsp_fas115-1&fas124-1.pdf
November 1, 2005
The following outlines how to analyze loss contingencies and unasserted claims under FAS 5:
http://www.fasb.org/pdf/fas5.pdf
1. If the matter is not an unasserted claim, go to step 2. If the matter involves an unasserted claim, first determine whether it is probable or not that the party will make a claim.
If it is not “probable” that a party will make a claim that is yet unasserted, the unasserted claim does not need to be disclosed or accrued. Probable generally means that the likelihood is more than about 75-80%.
If it is “probable” that a party will make a claim that is yet unasserted, the unasserted claim must be evaluated as any other loss contingency under FAS 5.
2. Loss contingencies are to be evaluated as follows:
Loss contingencies must be evaluated as to (i) the likelihood of outcome and (ii) whether the dollar amount can be reasonably estimated.
The likelihood of outcome can be either remote, reasonably possible, or probable.
If the likelihood of a loss is “remote”, there is no need for accrual or disclosure, regardless of materiality. Remote generally means that the probability is less than 5-10%.
If the likelihood is “reasonably possible” but not probable, there would be no accrual, but footnote disclosure would be required of the contingency if material, together with an estimate of the amount of the possible loss if it can be reasonably estimated, or a reasonable range of the loss, or a statement that no reasonable estimate is possible. Reasonably possible generally means that the probability is more than remote (5-10%) and less than probable (75-80%).
If the likelihood is “probable” and an amount can be reasonably estimated (see next paragraph), the amount must be accrued and additional disclosure may be required if necessary to not be misleading. If an amount or range cannot be reasonably estimated, disclosure is required of the contingency with a range of the possible loss or a statement that no reasonable range of loss can be estimated.
For loss contingencies that will be accrued, but if only a range of loss can be reasonably estimated, the best estimate within that range is accrued. If none of the estimates within the range is better than any other, the low end of the range is accrued, and disclosure should be made of the range.
A gain contingency is never accrued, but may need to be disclosed. The disclosure note should not give misleading implications as to the likelihood of realization. A gain is not recorded until realized. See ARB 50.
Note that if the likelihood of an event is in the “reasonably possible” or higher range, it may also be necessary to disclose the matter if material in MD&A under Item 303 of Regulation S-K and SEC interpretations thereof. These require the disclosure of any known demands, commitments, events or uncertainties that are “reasonably likely” to have a material effect (negative or positive) on liquidity, financial condition or operating performance. An SEC commissioner once suggested that “reasonably likely” means about 40% probability. Note that this is within but is not the same as “reasonably possible” under FAS 5.