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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Tuesday, March 15, 2011
Saturday, March 5, 2011
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
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.
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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
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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
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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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Saturday, February 26, 2011
SSARS No. 20 Issued
Following up on the issueance of SAS No. 121 the Accounting and Review Services Committee (ARSC) issued SSARS No. 20, Revised Applicability of Statements on Standards for Accounting and Review Service. Issued February 2011, this SSARS is effective for reviews of financial statements for periods beginning after December 15, 2011. Early application is permitted.
SSARS No. 20 simply amends paragraph .01 of AR section 90, Review of Financial Statements, so that SSARSs do not apply when the provisions of SAS No. 100, Interim Financial Information, as amended by SASs No. 116, Interim Financial Information, and No. 121, Revised Applicability of Statement on Auditing Standards No. 100, Interim Financial Information (AICPA, Professional Standards, vol. 1, AU sec. 722), apply.
Information on AICPA standard setting activities are available on the AICPA website http://www.aicpa.org/ under the Interest and Research tabs.
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SSARS No. 20 simply amends paragraph .01 of AR section 90, Review of Financial Statements, so that SSARSs do not apply when the provisions of SAS No. 100, Interim Financial Information, as amended by SASs No. 116, Interim Financial Information, and No. 121, Revised Applicability of Statement on Auditing Standards No. 100, Interim Financial Information (AICPA, Professional Standards, vol. 1, AU sec. 722), apply.
Information on AICPA standard setting activities are available on the AICPA website http://www.aicpa.org/ under the Interest and Research tabs.
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 4. 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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SAS No. 121 Issued by ASB
The Auditing Standards Board (ASB) has issued SAS No. 121, Revised Applicability of Statement on Auditing Standards No. 100, Interim Financial Information. Issued in February 2011 this SAS is effective for interim reviews of interim financial information for periods beginning after December 15, 2011. Early application is permitted.
Looking back to February 2009, you’ll recall that the ASB issued SAS No. 116, Interim Financial Information, which amended SAS No. 100, Interim Financial Information,(AU section 722 of AICPA Professional Standards) to address the independent accountant’s professional responsibilities when the accountant undertakes an engagement to review interim financial information of a nonissuer. SAS No. 121 further amends SAS No. 100 to make AU section 722 applicable when the accountant audited the entity’s latest annual financial statements, and the appointment of another accountant to audit the current year financial statements is not effective prior to the beginning of the period covered by the review.
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Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 4. 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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Looking back to February 2009, you’ll recall that the ASB issued SAS No. 116, Interim Financial Information, which amended SAS No. 100, Interim Financial Information,(AU section 722 of AICPA Professional Standards) to address the independent accountant’s professional responsibilities when the accountant undertakes an engagement to review interim financial information of a nonissuer. SAS No. 121 further amends SAS No. 100 to make AU section 722 applicable when the accountant audited the entity’s latest annual financial statements, and the appointment of another accountant to audit the current year financial statements is not effective prior to the beginning of the period covered by the review.
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 4. 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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Comparative Financial Statements After SSARS No. 19
As you are aware, SSARS No. 19, Compilation and Review Engagements was effective for compilations and reviews of financial statements for period ending on or after December 15, 2010. Since SSARS No. 19 revised the reporting requirements for compilation and review engagements accountants have questioned how they should report when comparative financial statements are presented and the prior year compilation or review was not performed in accordance with SSARS No. 19.
The AICPA has issued guidance on how to handle this question in an article entitled Reporting on Compiled or Reviewed Financial Statements For Periods Ended on or After December 15, 2010 With Comparative Financial Statements For Periods Ended Before December 15, 2010.
AR section 200, Reporting on Comparative Financial Statements has been revised to reflect conforming changes necessary due to the issuance of SSARS No. 19. The reissuance of a prior year report on financial statements that the accountant compiled or reviewed in accordance with pre SSARS No. 19 literature is not a compilation or review of those financial statements. It is the reissuance of a report on a service previously performed and reported on. Therefore the accountant may use the SSARS No. 19 reporting format to reissue his or her prior year report. He or she does not have to reissue the report using the pre SSARS No. 19 report format.
Guidance from the AICPA contains examples of compilation and review reports on comparative financial statements prepared in accordance with accounting principles generally accepted in the United States of America for the years ended December 31, 2010 and 2009.
In addition to the above guidance, the AICPA also offers additional implementation guidance and training on SSARS No. 19, including:
Compilation and Review Engagements Guide
Compilation and Review Developments - Risk Alert
Personal Financial Statements Exhibit Companion to SSARS No. 19
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 4. 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 AICPA has issued guidance on how to handle this question in an article entitled Reporting on Compiled or Reviewed Financial Statements For Periods Ended on or After December 15, 2010 With Comparative Financial Statements For Periods Ended Before December 15, 2010.
AR section 200, Reporting on Comparative Financial Statements has been revised to reflect conforming changes necessary due to the issuance of SSARS No. 19. The reissuance of a prior year report on financial statements that the accountant compiled or reviewed in accordance with pre SSARS No. 19 literature is not a compilation or review of those financial statements. It is the reissuance of a report on a service previously performed and reported on. Therefore the accountant may use the SSARS No. 19 reporting format to reissue his or her prior year report. He or she does not have to reissue the report using the pre SSARS No. 19 report format.
Guidance from the AICPA contains examples of compilation and review reports on comparative financial statements prepared in accordance with accounting principles generally accepted in the United States of America for the years ended December 31, 2010 and 2009.
In addition to the above guidance, the AICPA also offers additional implementation guidance and training on SSARS No. 19, including:
Compilation and Review Engagements Guide
Compilation and Review Developments - Risk Alert
Personal Financial Statements Exhibit Companion to SSARS No. 19
New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 4. 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, February 12, 2011
Proposed Statement On Auditing Standards
The ASB issued Proposed Statement on Auditing Standards Alert As To the Intended Use of The Auditor’s Written Communication on December 21, 2010. The proposed SAS supersedes SAS No. 87, Restricting the Use of an Auditor’s Report (AICPA, Professional Standards, vol. 1, AU sec. 53]). The comment period ends April 29, 2011.
This proposed SAS is part of the ASB’s Clarity Project and
This proposed SAS is part of the ASB’s Clarity Project and
- Eliminates the use of the term "restricted use" and instead addresses the intended use of such communications.
- Establishes an umbrella requirement to include an alert as to the intended use of the auditor’s written communication when the subject matter of that communication is based on measurement or disclosure criteria that are determined by the auditor to be suitable only for a limited number of users who can be presumed to have an adequate understanding of the criteria, measurement or disclosure criteria that are available only to the specified parties, or matters identified by the auditor during the course of the engagement that are not the primary objective of the engagement (commonly referred to as a by-product report).
- Modifies the guidance pertaining to single combined reports covering both (a) communications that are required to include an alert as to intended use and (b) communications that are for general use, which do not ordinarily include such an alert.
The proposed SAS would be effective for written communications related to audits of financial statements for periods ending on or after December 15, 2012, and, for all other engagements conducted in accordance with generally accepted auditing standards (GAAS), for written communications issued on or after December 15, 2012.
Proposed SASs are available for download on the AICPA's 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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