The Auditing and Review Services Committee (ARSC) has issued Statement on Standards for Attestation Engagements (SSAE) No. 17, Reporting on Compiled Prospective Financial Statements When the Practitioner's Independence Is Impaired, to amend paragraph 23 of SASE No. 10 section 301, Financial Forecasts and Projections (AICPA, Professional Standards, vol. 1, AT sec. 301), to permit, but not require, the accountant to disclose the reason(s) for an independence impairment in a report on compiled prospective financial information.
You’ll recall that SSARS No. 19 permits, but does not require, the accountant to disclose the reasons he or she is not independent in a compilation report. The exposure draft for this SSAE was issued in April 2010 because the ARSC determined that the attestation standards should also be revised so that the practitioner, if he or she chooses, can disclose the reasons for independence impairment in the compilation report on compiled prospective financial information.
SSAE No. 17 is effective for compilations of prospective financial information for periods ending on or after December 15, 2010, with early implementation permitted.
You may obtain a hard copy of this SSAE from www.cpa2biz.com.
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Saturday, December 18, 2010
SSARS Exposure Draft
The Accounting and Review Services Committee (ARSC) has issued an Exposure Draft Proposed Statement On Standards For Accounting And Review Services, The Use of the Accountant’s Name in a Document or Communication Containing Unaudited Financial Statements That Have Not Been Compiled or Reviewed (Amends Statement on Standards for Accounting and Review Services No. 19, Compilation and Review Engagements [AICPA, Professional Standards, vol. 2, AR sec. 60 par. .51-.55]). You have until April 29, 2011 to comment on this proposed amendment.
The amendment would be effective for unaudited financial statements that have not been compiled or reviewed for periods ending on or after December 15, 2011.
The proposed SSARS would create new paragraphs in AR section 60, Framework for Performing and Reporting on Compilation and Review Engagements to cover the accountant’s responsibilities when he or she permits the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed.
This proposed SSARS would establish:
The amendment would be effective for unaudited financial statements that have not been compiled or reviewed for periods ending on or after December 15, 2011.
The proposed SSARS would create new paragraphs in AR section 60, Framework for Performing and Reporting on Compilation and Review Engagements to cover the accountant’s responsibilities when he or she permits the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed.
This proposed SSARS would establish:
- a requirement that prior to permitting the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed the accountant should read the financial statements and other information in the document and consider whether such financial statements and other information appears free from obvious material misstatements and from material inconsistencies with other knowledge or information that the accountant may have obtained.
- a nonreporting option when the accountant permits the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed provided that the accountant requests that the client clearly indicate that the unaudited financial statements were not compiled or reviewed by the accountant.
You may obtain a copy of the proposed SSARS from the AICPA website http://www.aicpa.org/.
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Friday, December 10, 2010
ASB Issues SAS on Reports on Application of Requirements of an Applicable Financial Reporting Framework
The Auditing Standards Board has issued Statement on Auditing Standards, Reports on Application of Requirements of an Applicable Financial Reporting Framework. This SAS supersedes SAS No. 50, Reports on the Application of Accounting Principles (AICPA, Professional Standards, vol. 1, AU sec. 625). It is effective for engagements that end on or after December 15, 2012.
This SAS covers the reporting accountant’s responsibilities when asked to issue a written report on either the application of the requirements of an applicable financial reporting framework to a specific transaction or the type of report that may be issued on a specific entity’s financial statements. It also applies to oral advice provided by the reporting accountant that the reporting accountant concludes is intended to be used by a principal to the transaction as an important factor considered in reaching a decision on the application of the requirements of an applicable financial reporting framework to a specific transaction or on the type of report that may be issued on a specific entity’s financial statements.
Because there are differing interpretations that may exist concerning whether and, if so, how existing accounting policies in an applicable financial reporting framework apply to new transactions or how new accounting policies in an applicable financial reporting framework apply to existing transactions, management and others may consult with accountants on the application of the requirements of an applicable financial reporting framework to those transactions or to increase their knowledge of specific financial reporting issues.
You should be aware that this SAS does not apply to:
This SAS covers the reporting accountant’s responsibilities when asked to issue a written report on either the application of the requirements of an applicable financial reporting framework to a specific transaction or the type of report that may be issued on a specific entity’s financial statements. It also applies to oral advice provided by the reporting accountant that the reporting accountant concludes is intended to be used by a principal to the transaction as an important factor considered in reaching a decision on the application of the requirements of an applicable financial reporting framework to a specific transaction or on the type of report that may be issued on a specific entity’s financial statements.
Because there are differing interpretations that may exist concerning whether and, if so, how existing accounting policies in an applicable financial reporting framework apply to new transactions or how new accounting policies in an applicable financial reporting framework apply to existing transactions, management and others may consult with accountants on the application of the requirements of an applicable financial reporting framework to those transactions or to increase their knowledge of specific financial reporting issues.
You should be aware that this SAS does not apply to:
- a continuing accountant with respect to the specific entity whose financial statements the continuing accountant has been engaged to report on,
- engagements either to assist in litigation involving accounting or auditing matters or to provide expert testimony in connection with such litigation,
- professional advice provided to another accountant in public practice,
- to communications such as position papers prepared by an accountant for the purpose of presenting views on an issue involving the application of the requirements of an applicable financial reporting framework, provided that these communications are not intended to provide guidance on the application of these requirements to a specific transaction.
You may download clarified auditing standards from the AICPA website at www.aicpa.org/InterestAreas/AccountingAndAuditing/Resources.
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ASB Issues Clarified SAS on Analytical Procedures
The Auditing Standards Board has issued another clarified auditing statement, Analytical Procedures (Redrafted). This SAS supersedes SAS No. 56, Analytical Procedures (AICPA, Professional Standards, vol. 1, AU sec. 329) and is effective for audits of financial statements for periods ending on or after December 15, 2012.
This SAS covers the auditor’s use of analytical procedures as substantive procedures (substantive analytical procedures) and his or her responsibility to perform analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion on the financial statements. This clarified SAS refers to two other clarified SASs, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (Redrafted) and Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained (Redrafted). These two SASs contain information on the use of analytical procedures as risk assessment procedures and the nature, timing, and extent of audit procedures in response to assessed risks.
You’ll recall that clarified SASs contain “objectives.” These objectives have to do with the objectives of the auditor. In this clarified SAS those objectives are:
This SAS covers the auditor’s use of analytical procedures as substantive procedures (substantive analytical procedures) and his or her responsibility to perform analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion on the financial statements. This clarified SAS refers to two other clarified SASs, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (Redrafted) and Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained (Redrafted). These two SASs contain information on the use of analytical procedures as risk assessment procedures and the nature, timing, and extent of audit procedures in response to assessed risks.
You’ll recall that clarified SASs contain “objectives.” These objectives have to do with the objectives of the auditor. In this clarified SAS those objectives are:
- to obtain relevant and reliable audit evidence when using substantive analytical procedures and
- to design and perform analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion about whether the financial statements are consistent with the auditor’s understanding of the entity.
You may download clarified auditing standards from the AICPA website www.aicpa.org/InterestAreas/AccountingAndAuditing/Resources.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 3. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Monday, December 6, 2010
Revision to SSARS No. 1
The Accounting and Review Services Committee (ARSC) has revised Interpretation No. 30 to SSARS No. 1 as amended. The revision provides guidance when the accountant reports on compiled or reviewed financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and the required comparative financial information is not provided.
The question asked in the interpretation, “May an accountant apply the reporting guidance in AR section 100 when engaged to report on financial statements presented in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB)?” The answer, “Yes,” basically because the IASB has been designated by the Council of the AICPA as the body to establish international financial reporting standards for both private and public entities pursuant to Rule 202.
You’ll find this interpretation particularly useful because it contains examples of emphasis of matter paragraphs, modification of the third paragraph of the standard report when compiling financial statements that omit substantially all disclosure but are otherwise in conformity with IFRS, and a review report when you have been engaged to review the historical financial statements in accordance with ISRE 2400.
This revised interpretation also answers a question concerning IFRS’s requirement to disclose comparative information in respect of the previous comparative period for all amounts presented in the current year’s financial statement. Failure to do so would be a departure from GAAP. The interpretation contains an example of a paragraph that may be added to the accountant’s compilation or review report that covers this issue.
The revised interpretation will be conformed for the issuance of SSARS No. 19, Compilation and Review Engagements.
The revised interpretation may be downloaded at
http://www.aicpa.org/InterestAreas/AccountingAndAuditing/Resources
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 3. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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The question asked in the interpretation, “May an accountant apply the reporting guidance in AR section 100 when engaged to report on financial statements presented in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB)?” The answer, “Yes,” basically because the IASB has been designated by the Council of the AICPA as the body to establish international financial reporting standards for both private and public entities pursuant to Rule 202.
You’ll find this interpretation particularly useful because it contains examples of emphasis of matter paragraphs, modification of the third paragraph of the standard report when compiling financial statements that omit substantially all disclosure but are otherwise in conformity with IFRS, and a review report when you have been engaged to review the historical financial statements in accordance with ISRE 2400.
This revised interpretation also answers a question concerning IFRS’s requirement to disclose comparative information in respect of the previous comparative period for all amounts presented in the current year’s financial statement. Failure to do so would be a departure from GAAP. The interpretation contains an example of a paragraph that may be added to the accountant’s compilation or review report that covers this issue.
The revised interpretation will be conformed for the issuance of SSARS No. 19, Compilation and Review Engagements.
The revised interpretation may be downloaded at
http://www.aicpa.org/InterestAreas/AccountingAndAuditing/Resources
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 3. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Sunday, November 28, 2010
ASB Reissues Proposed SAS
The ASB has reissued an exposure draft, Proposed Revised Statement On Auditing Standards Financial Statements Prepared In Accordance With A Financial Reporting Framework Generally Accepted In Another Country. It will supersede SAS No. 51, Reporting on Financial Statements Prepared for Use in Other Countries. The exposure draft was issued November 9, 2010. The comment period ends January 31, 2011.
The ASB issued an exposure draft Reporting on Financial Statements Prepared in Accordance With a Financial Reporting Framework Generally Accepted in Another Country in 2009. However, after revising that exposure draft as a result of issues raised in comment letters, the Board decided to reexpose the SAS.
In the proposed revised SAS, when financial statements are prepared in accordance with a financial reporting framework generally accepted in another country, and such financial statements are intended for use in the other country, the proposed revised SAS would require the inclusion of an emphasis of matter paragraph that will highlight the foreign financial reporting framework in any report also intended for use in the United States, while permitting an unqualified opinion.
In addition the concept of limited use in the previous exposure draft has been eliminated in the proposed revised SAS.
Effective Date
The proposed revised SAS would be effective for audits of financial statements for periods ending on or after December 15, 2012.
The reissued exposure draft is available on the AICPA website, http://www.aicpa.org/.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 3. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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The ASB issued an exposure draft Reporting on Financial Statements Prepared in Accordance With a Financial Reporting Framework Generally Accepted in Another Country in 2009. However, after revising that exposure draft as a result of issues raised in comment letters, the Board decided to reexpose the SAS.
In the proposed revised SAS, when financial statements are prepared in accordance with a financial reporting framework generally accepted in another country, and such financial statements are intended for use in the other country, the proposed revised SAS would require the inclusion of an emphasis of matter paragraph that will highlight the foreign financial reporting framework in any report also intended for use in the United States, while permitting an unqualified opinion.
In addition the concept of limited use in the previous exposure draft has been eliminated in the proposed revised SAS.
Effective Date
The proposed revised SAS would be effective for audits of financial statements for periods ending on or after December 15, 2012.
The reissued exposure draft is available on the AICPA website, http://www.aicpa.org/.
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 3. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Friday, November 19, 2010
SQCS No. 8 Replaces SQCS No. 7
As part of its clarity drafting conventions the ASB has issued Statement on Quality Control Standards (SQCS) No. 8, A Firm’s System of Quality Control (Redrafted). This SQCS supersedes SQCS No. 7. It was issued November 2010 and is effective as of January 1, 2012. Early application is permitted.
As with many of the redrafted standards SQCS No 8, does not change or expand SQCS No. 7 in any significant respect. Instead certain requirements that are duplicative of broader requirements in SQCS No. 7 have been moved to application and other explanatory material. This is consistent with International Standard on Quality Control No. 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements.
Documentation
You should be aware that Paragraph 46 of SQCS No. 8 contains a requirement that procedures established for dealing with differences of opinion should enable a member of the engagement team to document that member’s disagreement with the conclusions reached after appropriate consultation.
You’ll recall that this requirement was included in SAS No. 108, Planning and Supervision (AICPA, Professional Standards, vol. 1, AU sec. 311, par. .32). The ASB believes that this requirement is more appropriately placed at the firm level for all engagements.
A summary of SQCS No. 8 is available on the AICPA website, http://www.aicpa.org/InterestAreas/AccountingAndAuditing.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 3. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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As with many of the redrafted standards SQCS No 8, does not change or expand SQCS No. 7 in any significant respect. Instead certain requirements that are duplicative of broader requirements in SQCS No. 7 have been moved to application and other explanatory material. This is consistent with International Standard on Quality Control No. 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements.
Documentation
You should be aware that Paragraph 46 of SQCS No. 8 contains a requirement that procedures established for dealing with differences of opinion should enable a member of the engagement team to document that member’s disagreement with the conclusions reached after appropriate consultation.
You’ll recall that this requirement was included in SAS No. 108, Planning and Supervision (AICPA, Professional Standards, vol. 1, AU sec. 311, par. .32). The ASB believes that this requirement is more appropriately placed at the firm level for all engagements.
A summary of SQCS No. 8 is available on the AICPA website, http://www.aicpa.org/InterestAreas/AccountingAndAuditing.
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 3. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Friday, November 12, 2010
Original Auditing Standards: Where are they?
Most of the news on auditing standards lately has been on Clarified Auditing Standards. As you know the Auditing Standards Board (ASB) has been working on redrafting, revising, and converging audit, attest, and quality control standards with international standards. But the clarified auditing statements are not effective until December 15, 2012. So meanwhile where do you find the current standards?
Since the AICPA revamped their website it is more difficult to find the standards. So for your information here’s the link:
http://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx.
On this page you’ll find a list of the SASs from No. 1 to 120, with links to their respective Auditing Sections (AU) in the professional standards. The list is current as of June 1, 2010.
Since the AICPA revamped their website it is more difficult to find the standards. So for your information here’s the link:
http://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx.
On this page you’ll find a list of the SASs from No. 1 to 120, with links to their respective Auditing Sections (AU) in the professional standards. The list is current as of June 1, 2010.
Proposed ASU on Transfers and Servicing
The FASB has issued an exposure draft on Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements designed to improve the accounting for repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The comment period ends January 15, 2011.
As you are no doubt aware, in a typical repo transaction, an entity transfers financial assets to a counterparty in exchange for cash with an agreement for the counterparty to return the same or equivalent financial assets for a fixed price in the future. Under Topic 860, Transfers and Servicing, an entity may or may not recognize a sale upon the transfer of financial assets subject to repo agreements, based, in part, on whether the entity has maintained effective control over the transferred financial assets.
The proposed Update is designed to simplify the accounting for these transactions by removing from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets, as well as implementation guidance related to that criterion.
Proposed ASUs are available on the FASB website, www.fasb.org.
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As you are no doubt aware, in a typical repo transaction, an entity transfers financial assets to a counterparty in exchange for cash with an agreement for the counterparty to return the same or equivalent financial assets for a fixed price in the future. Under Topic 860, Transfers and Servicing, an entity may or may not recognize a sale upon the transfer of financial assets subject to repo agreements, based, in part, on whether the entity has maintained effective control over the transferred financial assets.
The proposed Update is designed to simplify the accounting for these transactions by removing from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets, as well as implementation guidance related to that criterion.
Proposed ASUs are available on the FASB website, www.fasb.org.
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 2. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Tuesday, November 2, 2010
SEC Work Plan on IFRS Progress Report
The SEC Staff has published its first progress report on the “Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers.” As you are aware the SEC has been studying whether to allow U.S. issuers in the U.S. to use IFRS. The SEC directed the SEC Staff to come up with a work plan to determine whether, when, and how current financial reporting system for U.S. issuers should be transitioned to a system that incorporates IFRS. The Work Plan was published in February 2010 and covers the following area:
Characteristics of IFRS and standard-setting process:
Characteristics of IFRS and standard-setting process:
- Sufficient development and application of IFRS for the U.S. domestic reporting system.
- The independence of standard setting for the benefit of investors.
Transition considerations:
- Investor understanding and education regarding IFRS.
- Examination of the U.S. regulatory environment that would be affected by a change in accounting standards.
- The impact on issuers, both large and small, including changes to accounting systems. changes to contractual arrangements, corporate governance considerations, and litigation contingencies.
- Human capital readiness.
The update draws no major conclusions. However, you will find some areas of particular interest in the progress report including concerns about the funding of the IASB which is funded by voluntary contributions. In addition industry regulators are concerned about the general lack of industry-specific standards and practices in IFRS. Work is also being done to analyze federal and state tax impacts, audit regulation and standard setting and broker-dealer and investment company reporting. Another issue has to do with the method of any incorporation of IFRS because of the incorporation of ‘U.S. GAAP’ references currently in U.S. laws, contractual documents, regulatory requirements and guidelines, and similar documents.
You may download the Work Plan Progress Report at www,sec.gov/spotlight/gloabalaccountingstandards/workplanprogress102910.pdf.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 2. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Friday, October 29, 2010
Compilation and Review of Personal Financial Statements
Those of you who may be engaged to compile or review personal financial statements will find an exhibit issued by the AICPA to their Guide, Compilation and Review Engagements of interest.
The exhibit covers compilations and reviews of personal financial statements. It points out that AR section 80, Compilation of Financial Statements, and AR section 90, Review of Financial Statements (AICPA, Professional Standards, vol. 2) are applicable to compilations and reviews of personal financial statements in the same manner as to compilations and reviews of financial statements of commercial entities. The exhibit provides specific guidance regarding how those AR sections are applied in compilations and reviews of personal financial statements.
It reminds us that FASB ASC Section 274 says that personal financial statements should present assets at their estimated current values and liabilities at their estimated current amounts at the date of the financial statements.
It contains illustrations of engagement letters for compilations and reviews of personal financial statements; client representation letters; as well as illustrations of the accountant’s compilations and review reports.
This exhibit may be downloaded from the AICPA website at http://www.aicpa.org under InterestAreas/AccountingAndAuditing/Resources/CompReview.
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The exhibit covers compilations and reviews of personal financial statements. It points out that AR section 80, Compilation of Financial Statements, and AR section 90, Review of Financial Statements (AICPA, Professional Standards, vol. 2) are applicable to compilations and reviews of personal financial statements in the same manner as to compilations and reviews of financial statements of commercial entities. The exhibit provides specific guidance regarding how those AR sections are applied in compilations and reviews of personal financial statements.
It reminds us that FASB ASC Section 274 says that personal financial statements should present assets at their estimated current values and liabilities at their estimated current amounts at the date of the financial statements.
It contains illustrations of engagement letters for compilations and reviews of personal financial statements; client representation letters; as well as illustrations of the accountant’s compilations and review reports.
This exhibit may be downloaded from the AICPA website at http://www.aicpa.org under InterestAreas/AccountingAndAuditing/Resources/CompReview.
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 2. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Friday, October 22, 2010
Blue-Ribbon Panel Picks Differential GAAP
The Blue–Ribbon Panel on Private Company Standards (the Panel) met for the fourth time October 8, 2010 in New York. Previously the Panel has considered seven alternative standard–setting models and structures for private companies including one that retained the current model and two that incorporated IFRS for SMEs. They eliminated four of the models and retained three. The models were further delineated between a restructured FASB Board and a separate private company standards board.
At the October meeting after thoughtful discussion a majority of panel members favored differential GAAP and a separate board.
On October 19, 2010 at their fall meeting the AICPA Governing Council approved a resolution supporting work of blue ribbon panel on private company financial reporting. An overwhelming voice vote supported the resolution. The Council declared the profession's readiness to implement differential GAAP for private companies as determined by a separate standard-setting board.
Those recommendations will be included in a report to the Financial Accounting Foundation (FAF). The separate board would consist of people with private company experience and report to the FAF, which oversees the FASB and GASB.
How will differential GAAP affect your practice?
Tell us how you think it will affect your practice by adding a comment.
The minutes of the Blue-Ribbon Panel's meetings are available on FASB website, http://www.fasb.org/ under Standards.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 2. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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At the October meeting after thoughtful discussion a majority of panel members favored differential GAAP and a separate board.
On October 19, 2010 at their fall meeting the AICPA Governing Council approved a resolution supporting work of blue ribbon panel on private company financial reporting. An overwhelming voice vote supported the resolution. The Council declared the profession's readiness to implement differential GAAP for private companies as determined by a separate standard-setting board.
Those recommendations will be included in a report to the Financial Accounting Foundation (FAF). The separate board would consist of people with private company experience and report to the FAF, which oversees the FASB and GASB.
How will differential GAAP affect your practice?
Tell us how you think it will affect your practice by adding a comment.
The minutes of the Blue-Ribbon Panel's meetings are available on FASB website, http://www.fasb.org/ under Standards.
New Publication
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Saturday, October 2, 2010
FAF/AICPA/NASBA Blue-Ribbon Panel on Standard Setting for Private Companies is Seeking Input from Accountants
The American Institute of Certified Public Accountants (AICPA), the Financial Accounting Foundation (FAF; the parent organization of the Financial Accounting Stan
The Panel will comprehensively review the current system of stan
- Who are the actual users of private company financial statements and how do they use GAAP financial statements in their decision making?
- What is the key, decision-useful information that the various users need from GAAP financial statements?
- Are current GAAP financial statements meeting those needs? Why or why not?
- Are the benefits of GAAP financial statements outweighing the costs of preparing those statements for private companies?
- How does stan
- To the extent that current GAAP is not meeting user needs in a cost-beneficial manner, what are some possible alternatives for private company stan
The Panel is currently seeking input from accountants regarding these matters at: http://www.fasb.org/cs/ContentServer?site=FASB&c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176157332360 . The time to have our voices heard is now!
Saturday, September 11, 2010
New Proposed ASU on Leases
Back in March 2009 the FASB and the IASB issued a discussion paper, Leases: Preliminary Views. After considering the responses to this discussion paper, the two Boards have issued a Proposed Accounting Standards Update Leases (Topic 840). This proposed ASU was issued August 17, 2010. The comment period ends December 15, 2010.
The main proposal in the proposed ASU is that lessees and lessors should apply a right-of-use model in accounting for all leases (including leases of right-of-use assets in a sublease) other than leases of biological and intangible assets, leases to explore for or use natural resources and leases of some investment properties. This means that:
(a) a lessee would recognize an asset representing its right to use the leased (‘underlying’) asset for the lease term (the ‘right-of-use’ asset) and a liability to make lease payments.
(b) a lessor would recognize an asset representing its right to receive lease payments and, depending on its exposure to risks or benefits associated with the underlying asset, would either recognize a lease liability while continuing to recognize the underlying asset (a performance obligation approach); or derecognize the rights in the underlying asset that it transfers to the lessee and continue to recognize a residual asset representing its rights to the underlying asset at the end of the lease term (a derecognition approach).
Assets and liabilities recognized by lessees and lessors would be measured on a basis that:
(a) assumes the longest possible lease term that is more likely than not to occur, taking into account the effect of any options to extend or terminate the lease.
(b) uses an expected outcome technique to reflect the lease payments, including contingent rentals and expected payments under term option penalties and residual value guarantees, specified by the lease.
(c) is updated when changes in facts or circumstances indicate that there would be a significant change in those assets or liabilities since the previous reporting period.
For contracts that combine service and lease components, the right to receive lease payments and the liability to make lease payments would exclude payments arising from distinct service components and for the draft IFRS, non-distinct service components for lessors that apply the derecognition approach.
For leases of 12 months or less, lessees and lessors would be able to apply simplified requirements.
The exposure draft also contains proposed disclosures based on stated objectives. This includes disclosures about the amounts recognized in the financial statements arising from leases and the amount, timing and uncertainty of cash flows arising from those contracts.
ASUs are available on the FASB website, www.fasb.org under Standards.,br/>
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Friday, August 20, 2010
Proposed ASU on Disclosure of Certain Loss Contingencies
The FASB issued Proposed Accounting Standards Update Contingencies (Topic 450) Disclosure of Certain Loss Contingencies on July 20, 2010. At that time the comment period was to have ended August 20, 2010. The FASB has extended the comment period to Sept. 20, 2010 as a result of feedback from early respondents. For public entities, the new guidance would be effective for fiscal years ending after December 15, 2010, and interim and annual periods in subsequent fiscal years. For nonpublic entities, the new guidance would be effective for the first annual period beginning after December 15, 2010, and for interim periods of fiscal years after the first annual period.
The FASB issued this proposed Update because investors and other users of financial reporting have expressed concerns that disclosures about loss contingencies under the existing guidance in Topic 450 do not provide adequate and timely information to assist them in assessing the likelihood, timing, and magnitude of future cash outflows associated with loss contingencies.
The amendments in this proposed Update would apply to all entities, both public and nonpublic, except that nonpublic entities would not be required to provide a tabular reconciliation of accrued loss contingencies.
Objective
This proposed Update would establish the following disclosure objective: An entity shall disclose qualitative and quantitative information about loss contingencies to enable financial statement users to understand (a) the nature of the loss contingencies (b) their potential magnitude and (c) their potential timing (if known).
To achieve this objective, an entity would consider the following principles in determining disclosures that are appropriate for its individual facts and circumstances for loss contingencies that meet the disclosure threshold:
a. During early stages of a loss contingency’s life cycle, an entity would disclose information that is available to enable users to understand the loss contingency’s nature, potential magnitude, and potential timing (if known). In early stages information may be limited and so disclosure may be limited. In subsequent reporting periods, disclosure would be more extensive as more information becomes available.
b. An entity may aggregate disclosures about similar contingencies (for example, by class or type) so that the disclosures are understandable and not too detailed.
Disclosures
The amendments in this proposed Update would require disclosure of certain remote loss contingencies. This expands the population of loss contingencies that are required to be disclosed to achieve more timely disclosure of remote loss contingencies with a potentially severe impact.
When assessing the materiality of loss contingencies to determine whether disclosure is required, an entity would not consider the possibility of recoveries from insurance or other indemnification arrangements.
The proposed amendments would retain the current qualitative disclosures. In addition to the quantitative disclosures required under GAAP, the amendments would require disclosure of publicly available quantitative information, other relevant nonprivileged information, and, in some cases, information about possible recoveries from insurance and other sources.
A public entity would be required to provide tabular reconciliations, by class, of recognized (accrued) loss contingencies that present the activity in the account during the reporting period.
Proposed ASUs are available on the FASB website, http://www.fasb.org/.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 2. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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The FASB issued this proposed Update because investors and other users of financial reporting have expressed concerns that disclosures about loss contingencies under the existing guidance in Topic 450 do not provide adequate and timely information to assist them in assessing the likelihood, timing, and magnitude of future cash outflows associated with loss contingencies.
The amendments in this proposed Update would apply to all entities, both public and nonpublic, except that nonpublic entities would not be required to provide a tabular reconciliation of accrued loss contingencies.
Objective
This proposed Update would establish the following disclosure objective: An entity shall disclose qualitative and quantitative information about loss contingencies to enable financial statement users to understand (a) the nature of the loss contingencies (b) their potential magnitude and (c) their potential timing (if known).
To achieve this objective, an entity would consider the following principles in determining disclosures that are appropriate for its individual facts and circumstances for loss contingencies that meet the disclosure threshold:
a. During early stages of a loss contingency’s life cycle, an entity would disclose information that is available to enable users to understand the loss contingency’s nature, potential magnitude, and potential timing (if known). In early stages information may be limited and so disclosure may be limited. In subsequent reporting periods, disclosure would be more extensive as more information becomes available.
b. An entity may aggregate disclosures about similar contingencies (for example, by class or type) so that the disclosures are understandable and not too detailed.
Disclosures
The amendments in this proposed Update would require disclosure of certain remote loss contingencies. This expands the population of loss contingencies that are required to be disclosed to achieve more timely disclosure of remote loss contingencies with a potentially severe impact.
When assessing the materiality of loss contingencies to determine whether disclosure is required, an entity would not consider the possibility of recoveries from insurance or other indemnification arrangements.
The proposed amendments would retain the current qualitative disclosures. In addition to the quantitative disclosures required under GAAP, the amendments would require disclosure of publicly available quantitative information, other relevant nonprivileged information, and, in some cases, information about possible recoveries from insurance and other sources.
A public entity would be required to provide tabular reconciliations, by class, of recognized (accrued) loss contingencies that present the activity in the account during the reporting period.
Proposed ASUs are available on the FASB website, http://www.fasb.org/.
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 2. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Sunday, August 15, 2010
Blue Ribbon Panel Asking for Feedback
As you are no doubt aware, the Blue Ribbon Panel, a joint effort by the AICPA; the Financial Accounting Foundation (FAF) FASB’s parent organization; and the National Association of State Boards of Accountancy (NASB) has been discussing alternate models for private company financial reporting. The panel considered seven alternative models at its July meeting. They eliminated models that were based on IFRS and a model that effectively would have maintained the status quo. The three models that remain would result in differences in GAAP for private companies, where warranted, compared with GAAP for public companies. The three are:
- U.S. GAAP with Exclusions for Private Companies—with enhancements
- U.S. GAAP—Baseline GAAP with Public Company Add-Ons
- Separate, Stand-Alone GAAP Based on Current U.S. GAAP
Another recommendation to come out of the panel’s discussion is consideration of a separate board for private companies under the FAF. FASB would still set public company standards and the new board would be made up of individuals that are focused on private companies. This “private companies board” would decide whether, what and how GAAP should apply to private companies starting with the FASB standards.
Now the panel is asking for your feedback. They are asking users of private company financial statements, preparers and practitioners to respond to a series of questions. The questions will help the panel in (1) discussing how accounting standards can best meet the needs of U.S. users of private company financial statements and (2) making recommendations. The questions are on fasb.org and must be submitted by Sept. 15. A summary of the responses will be distributed to panel members and participating observers. The summary will be included as part of the observer notes (a publicly available meeting handout) for the panel’s next meeting, Oct. 8 at the AICPA’s New York City office.
Take advantage of this opportunity to tell the panel what you think about private company accounting standards. And while you’re at it, tell us what you think about a separate accounting standards board for private companies by leaving a comment.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 2. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Saturday, August 7, 2010
Commission Studying the Future of Accounting Education
Now's your chance to tell a new commission what you think needs to be taught to future accountants. The American Accounting Association (AAA) and the AICPA have formed a new commission to study possible future paths of higher education for students who plan on becoming accountants. The "Pathways Commission" will ask for input from all areas the accounting community. This includes individuals and representatives from organizations that impact the various current accounting education pathways.
According to Bruce Behn, University of Tennessee professor and chair of the commission, the commission's goal is to facilitate an open, transparent discussion to be supported by both technolgy and public discussions.
The commission recognizes the difficulty of sustaining the momentum for change in the dynamic environment of accounting practice and education. For this reason the commission's efforts are structured to continue into the future.
The commission was formed to study accounting pathways because a number of forces are affecting accounting education including:
According to Bruce Behn, University of Tennessee professor and chair of the commission, the commission's goal is to facilitate an open, transparent discussion to be supported by both technolgy and public discussions.
The commission recognizes the difficulty of sustaining the momentum for change in the dynamic environment of accounting practice and education. For this reason the commission's efforts are structured to continue into the future.
The commission was formed to study accounting pathways because a number of forces are affecting accounting education including:
- Shortages of qualified teachers with accounting doctorates,
- The need to revise the accounting curricula regularly in light of fast-paced business changes,
- University budget constraints that threaten to make the cost of education prohibitive, and
- The need for training in specialized areas to meet the profession's demands.
The commission will hold its first meeting Oct. 15-17 in Washington, D.C.
More information on the commission may be found at http://www.pathwayscommission.org/.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Saturday, July 31, 2010
ASU No. 2010
The FASB issued ASU No. 2010–20, Receivables (Topic 310) Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses in July 2010.
The objective of this ASU is to provide financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. It is intended to provide additional information to assist financial statement users in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. Currently, a high threshold for recognition of credit impairments impedes timely recognition of losses.
Amendments in this Update:
- Apply to all entities, both public and nonpublic. Affect all entities with financing receivables, excluding short-term trade accounts receivable or receivables measured at fair value or lower of cost or fair value.
- The extent of the effect depends on the relative significance of financing receivables to an entity’s operations and financial position.
Disclosures
This Update requires an entity to provide disclosures that facilitate financial statement users’ evaluation of the following:
- The nature of credit risk inherent in the entity’s portfolio of financing receivables
- How that risk is analyzed and assessed in arriving at the allowance for credit losses
The changes and reasons for those changes in the allowance for credit losses.
To achieve the above objective, an entity should provide disclosures on a disaggregated basis. The amendments in this Update define two levels of disaggregation—portfolio segment and class of financing receivable.
Effective date
For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. Therefore, for calendar year issuers, the year end information will be presented for 2010, but activity for the year will not be presented until 1st quarter 2011.
For nonpublic entities the disclosures are effective for annual reporting periods ending on or after December 15, 2011.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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Friday, July 23, 2010
PCAOB Proposed AS Related to Confiramtions and Related Amendments
If you or your firm audit public companies then you'll be interested in the PCAOB's latest proposed Auditing Standard. The PCAOB released Proposed Auditing Standard Related to Confirmation and Related Amendments to PCAOB Standards on July 13, 2010. The comment period ends September 13, 2010.
The proposed auditing standard, Confirmation,
The proposed auditing standard, Confirmation,
- Supersedes the Board's standard, AU section 330, The Confirmation Process, and related amendments to the Board's auditing standards.
- Is applicable to all registered firms conducting audits in accordance with PCAOB standards.
The new standard:
- Requires confirmation procedures for specific accounts.
- Incorporates procedures in response to risk of material misstatement.
- Updates the standard to reflect significant advances in technology.
- Defines a confirmation response to include electronic or other medium.
- Enhances requirements when confirmation responses include disclaimers and restrictive language.
In drafting the proposed standard the Board considered International Standard on Auditing (ISA) 505, External Confirmations, issued by the International Auditing and Assurance Standards Board (IAASB) and the Proposed Statement on Auditing Standards, External Confirmations (the ASB's proposed SAS), of the ASB of the AICPA.
The proposed auditing standard may be downloaded from the PCAOB’s website, www.pcaob.com.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx
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