FAF Responds to Blue–Ribbon Panel

The Financial Accounting Foundation (FAF), FASB’s parent organization, is forming a working group to review the adequacy and effectiveness of FASB’s efforts in setting standards for the private company and nonprofit sectors.

You’ll recall that the Blue–Ribbon Panel on Private Company Standards (the Panel) delivered its final report to the FAF earlier this year. At that time the Panel recommended that the FAF create a board separate from FASB that would set private company reporting standards. The creation of the working group is the next step in this process.

The working group will be composed of FAF trustees and staff and intends to issue an action plan in six to eight months on whether or how to devise rules that differ from those of public companies. It will conduct roundtable meetings, surveys and meetings with advisory and constituent groups. At the same time FAF will seek input on suggested improvements, including the solutions recommended by the blue-ribbon panel.

You may keep up with FAF, FASB, and the GASB at http://www.fasb.org/.

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FASB and IASB Continue Discussions on Leases

As you know the FASB and IASB have been working on a project to get leases onto corporate balance sheets. The two boards have decided that there may be some reason to create two categories of leases. The original proposal would establish a single accounting method for all leases. The boards are now considering a proposal in which leases would look a lot like today's operating leases and capital leases. They have agreed to consider a structure where “finance leases” would be treated like an installment purchase, putting an asset on the balance sheet as well as a liability to be paid down over time. “Other-than-finance” leases would also appear on the balance sheet, but would flow through the income statement like today's operating leases because the financing element would not be considered significant.

The boards have asked their staff to establish indicators that would be used to identify the difference between the two types of leases and do some outreach to see if that would quell the criticism of the original proposal. They have softened their views on how companies should account for renewal options and other factors that lead to variable lease payments when it's not clear at the outset of the lease when or whether such circumstances would ever come into play.

In addition the boards

• Decided to raise the threshold for deciding when lease renewal options should be included in the liability.
• Tentatively concluded that lessees and lessors should follow the same basic guidelines for deciding if an obligation tied to some kind of variability would be included in the liability or the receivable.

More details on this discussion may be found in the February 16, 2011 Summary of Board Decisions on the FASB website, www.fasb.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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PEEC Issues Exposure Draft

The Professional Ethics Executive Committee (PEEC) has issued an exposure draft, Omnibus Proposal AICPA Professional Ethics Division Interpretations and Rulings. This exposure draft covers proposed interpretations to various sections of the Professional Code of Conduct including Rule 101, Independence and revisions to Rule 101. It also contains a proposed revision to Conceptual Framework for AICPA Independence Standards, proposed definitions and deletions of various Ethics Rulings.

Comments on the proposed pronouncements must be received at the AICPA by May 31, 2011. The PEEC will evaluate the comments and may decide to publish one or more of the proposed pronouncements. Once published, the pronouncements become effective on the last day of the month in which they are published in the Journal of Accountancy, except if otherwise stated in the pronouncements.

The exposure draft is available for download on the AICPA Website, http://www.aicpa.org/InterestAreas/ProfessionalEthics/Community/ExposureDrafts

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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