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A unique checklist of standard setting activities in the United States

We have prepared this high level summary to assist you in the preparation of your financial statements and other reporting documents for the year ended January 31, 2007.  For any standard or exposure draft published after the reference year-end, please consult the Web site of the relevant organization.

 

Effective this year

Effective next year

Proposals

At the time of publication, the external links included in this page were active. However, if the documents on the hosting site have been subsequently modified, moved or archived, these external links may no longer work. If you need to locate a specific document and/or external site listed on this page that is no longer active, please contact us.

 

Standards effective this year issued by:

  American Institute of Certified Public Accountants (AICPA)
  Financial Accounting Standards Board (FASB)
  Emerging Issues Task Force - FASB (EITF)
  Guidance on FAS 133 Implementation Issues
  Securities and Exchange Commission (SEC)
  Other
 
American Institute of Certified Public Accountants (AICPA)
Description Overview
SOP 04-2, Accounting for Real Estate Time-Sharing Transactions The Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) issued the SOP to address diversity in practice caused by a lack of guidance specific to real estate time-sharing transactions. Areas of diversity in practice have included accounting for uncollectibles, recovery or repossession of time-sharing intervals, selling and marketing costs, operations during holding periods, developer subsidies to interval owners associations, and upgrade and reload transactions.

The SOP is effective for financial statements issued for fiscal years beginning after June 15, 2005, with earlier application encouraged. Concurrently, the Financial Accounting Standards Board has issued FAS 152, Accounting for Real Estate Time-Sharing Transactions – an amendment of FAS 66 and FAS 67.

That FAS includes amendments to FASB pronouncements that are being made in conjunction with issuance of the SOP.

TPA for SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer

Some of the issues addressed by this Technical Practical Aid (TPA) are:
  1. Does the scope of SOP 03-3 include debt securities?
  2. Instruments Accounted For As Debt Securities under SOP 03-3
  3. Determining Evidence of Significant Delays and Shortfalls Relative to SOP-03-3
  4. Determining Evidence of Deterioration of Credit Quality and Probability of Contractual Payment Deficiency in accordance with SOP-03-3
  5. Acquired Non-accrual Loans under SOP 03-3

see also :

TPA 1400.32 Parent-Only Financial Statements and Relationship to GAAP

The issue addressed by this TPA is:

If consolidation is required under generally accepted accounting principles (GAAP), are there any circumstances in which an entity may prepare parent company-only financial statements without preparing related consolidated financial statements and say that the parent company-only financial statements are in accordance with GAAP?

TPA for FIN 46(R), Consolidation of Variable Interest Entities

Some of the issues addressed by this TPA are:
  • If a reporting entity is the primary beneficiary of a variable interest entity (VIE), would it be appropriate to issue combined financial statements rather than consolidated financial statements?
  • Is it appropriate to present stand-alone financial statements of a variable interest entity (VIE)?
  • What are the implications for the auditors’ report if the reporting entity does not consolidate the variable interest entity?
  • Do the consolidation or disclosure provisions apply to financial statements prepared under the income tax basis of accounting?

TPA 2210.28

Accounting for Certain Liquidated Damages

Issued November 2006

Inquiry: “Liquidated damages” represent contractual payments to a buyer of property, plant, and equipment (PP&E) for the non-delivery or non-completion of construction of PP&E by a stated completion date.

The amount is specified in advance by contract—for example, a stated amount per day of delay—rather than a computation of actual losses of the buyer caused by the delay. Liquidated damages are negotiated to represent compensation for a reasonable estimate of the buyer’s costs associated with a delay. Liquidated damages are specified in advance in order to eliminate the need for possibly contentious after-the-fact negotiations about actual costs incurred.

How should a buyer of PP&E account for liquidated damages, as defined above?

TPA 5700.01

Income Tax Accounting for Contributions to Certain Nonprofit Scholarship Funding Organizations

Issued November 2006

Inquiry: A state’s corporate income taxpayers are allowed a credit against their state corporate income tax of 100 percent of eligible contributions made during the year to a nonprofit scholarship funding organization. Unused credits may be carried forward up to three years. The taxpayer may not convey, assign, or transfer the credit to another entity unless all of the assets of the taxpayer are conveyed, assigned, or transferred in the same transaction.

Should corporate income taxpayers report contributions that qualify for the tax credit as contributions or as income tax expense in income statements prepared in accordance with generally accepted accounting principles?

TPA 5400.05

Accounting and Disclosures Guidance for Losses from Natural Disasters - Nongovernmental Entities

The following questions that may arise in accounting for losses incurred as a result of a natural disaster are addressed by this TPA:
  1. How should losses from a natural disaster of a type that is reasonably expected to re-occur be classified in the statement of operations?
  2. When should an asset impairment loss related to a natural disaster be recognized?
  3. When should a liability for non-impairment losses and costs related to a natural disaster be recognized?
  4. What is the accounting for insurance recoveries to cover losses sustained in a natural disaster? Also, what are the additional considerations related to business interruption insurance recoveries?
  5. What are the required disclosures regarding the impact of a natural disaster?

TIS Section 6910, Investment Companies

Issued December 2006

The questions addressed are:

  • Recognition of Premium/Discount on Short Positions in Fixed-Income Securities
  • Presentation of Reverse Repurchase Agreements
  • Accounting Treatment of Offering Costs Incurred by Investment Partnerships
  • Meaning of “Continually Offer Interests”

TPA 6910.16

Presentation of boxed investment positions in the condensed schedule of investments of non-registered investment partnership

The TPA addresses how long and short positions in the same security (“boxed positions”) should be disclosed, either on a gross or net basis in the schedule of investments.

Some of the issues addressed are:

  1. The disclosure of long and and short positions
  2. The disclosure of an investment in an issuer when one or  more securities and one or more derivative contracts  are held
  3. Information required to be disclosed in the financial statements when comparative statements are presented
  4. The presentation of purchases and sales or maturities of investments in the statement of cash flows

TPA, Section 1200 Income FAS

Accounting by Non-insurance Enterprises for Property and Casualty Insurance Arrangements That Limit Insurance Risk

The TPA addresses accounting for property and casualty insurance contracts between a policyholder and an insurance enterprise.

Some of the issues addressed are:

  1. What are “finite” insurance transaction
  2. What types of insurance risk limiting features do finite insurance contracts normally contain
  3. The importance of transfer of insurance risk important under GAAP
  4. Some accounting guidance for transfer of insurance risk
  5. The differences between retroactive and prospective insurance
  6. Accounting for retroactive and prospective insurance
  7. Accounting for multiple-year retrospectively rated insurance
  8. Define deposit accounting
  9. Identify accounting model for insurance transactions

ASB Issues SSAE 14, SSAE Hierarchy

Issued November 2006

The ASB issued SSAE 14.18 The SSAE:

  • Identifies the body of attest literature, establishing a hierarchy for publications.
  • Clarifies the authority of attest publications issued by the AICPA and others.
  • Specifies which attest publications the practitioner (1) must comply with and (2) should be aware of when conducting an attest engagement.
  • Amends the 11 attestation standards to conform with the terms established in SSAE 13.19

A summary of SSAE 14 is available on the AICPA’s Web site. The complete statement can be purchased online from the AICPA Store.

SAE 14 is effective when the subject matter or assertion is as of, or for, a period ending on or after December 15, 2006.

Audit Alert: Understanding SAS 112

The AICPA issued an Audit Risk Alert to help auditors implement SAS 112.6 The Alert clarifies common misunderstandings regarding the application of SAS 112. The following concepts will assist with implementation:
  • Auditors cannot be part of a client’s internal control.
  • Auditors cannot be a compensating control for the client.
  • SAS 112 requires auditors to evaluate control deficiencies if they are identified, not to search for them.

View the alert

Financial Accounting Standards Board (FASB)
Description Overview
AAG INV-1 and SOP 94-4-1, FASB Staff Position

Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans

Issued December 2005

The Board directed the FASB staff to issue this FSP to

  1. describe the limited circumstances in which the net assets of an investment company (also referred to hereinafter as a fund) should reflect the contract value (which generally equals the principal balance plus accrued interest) of certain investments that it holds and
  2. provide a definition of a fully benefit-responsive investment contract.

This FSP also provides guidance with respect to the financial statement presentation and disclosure of fully benefit-responsive investment contracts.

Effective Date and Transition

  • The financial statement presentation and disclosure guidance in paragraphs 8–11 of this FSP, considering the special transition guidance outlined in paragraph 13, is effective for financial statements for annual periods ending after December 15, 2006.
  • The revised definition of fully benefit-responsive in paragraph 7 of this FSP shall be effective for all investment contracts as of the last day of the annual period ending after December 15, 2006. Earlier application to interim or annual periods is permitted.
  • If comparative financial statements are presented, the guidance in this FSP shall be applied retroactively to all prior periods presented.
  • If an investment contract is considered fully benefit-responsive under the revised definition as of the last day of the annual period ending after December 15, 2006, that contract shall be considered fully benefit-responsive for all periods presented, provided that contract would have been considered fully benefit-responsive in accordance with the then existing provisions of SOP 94-4.
APB 18-1, FSP

Accounting by an Investor for its Proportionate Share of Other Comprehensive Income of an Investee Accounted for under the Equity Method in Accordance with APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, upon a Loss of Significant Influence

Issued July 12, 2005

Questions have arisen as to how an investor should account for its proportionate share of an investee’s equity adjustments for OCI upon a loss of significant influence.

  • The FASB staff believes that an investor’s proportionate share of an investee’s equity adjustments for OCI should be offset against the carrying value of the investment at the time significant influence is lost.

Effective Date and Transition:

  • The guidance in this FSP is effective as of the first reporting period beginning after July 12, 2005.
  • Upon adoption of this FSP, any amount of an investee’s equity adjustments for OCI recorded in the shareholders’ equity of the investor, relating to an investment for which the reporting entity no longer has an ability to exercise significant influence, should be offset against the carrying value of the investment.  The amount that is offset should not include any items of OCI, relating to unrealized gains and losses recorded in accordance with FAS 115, that are recorded by an investor for an investment that is accounted for as an available-for-sale security in accordance with FAS 115 upon adoption of this FSP.
  • If comparative financial statements are provided for earlier periods, those financial statements shall be reclassified to reflect application of the provisions of this FSP.
  • This FSP does not provide guidance for entities that have historically not recorded their proportionate share of an investee’s equity adjustments for OCI. These entities should refer to APB Opinion No. 20, Accounting Changes, for the appropriate guidance.

FAS 13-1, FASB Staff Position,

Accounting for Rental Costs Incurred during a Construction Period

Issued in September 2005

Questions have arisen as to whether rental costs associated with ground and building operating leases that are allocated to the period of construction of a lessee asset that is directly related to the leased property may be capitalized (that is, rental costs incurred during a construction period). This FSP addresses whether a lessee may capitalize rental costs incurred during a construction period and, if so, the types of rental costs that can be capitalized.

FASB Staff position:

Rental costs incurred during and after a construction period are for the right to control the use of a leased asset during and after construction of a lessee asset. There is no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period. Therefore, rental costs associated with ground or building operating leases that are incurred during a construction period shall be recognized as rental expense. The rental costs shall be included in income from continuing operations.

The guidance in this FSP shall be applied to the first reporting period beginning after December 15, 2005. Early adoption is permitted for financial statements or interim financial statements that have not yet been issued. A lessee shall cease capitalizing rental costs as of the effective date of this FSP for operating lease arrangements entered into prior to the effective date of this FSP. Retrospective application in accordance with FAS 154, Accounting Changes and Error Corrections, is permitted but not required.

FAS 123 (R), Share-Based Payment This FAS is a revision of FAS 123, Accounting for Stock- Based Compensation.

This FAS supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. 

This FAS establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This FAS focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.

This FAS is effective:

  1. For public entities that do not file as small business issuers—as of the beginning of the first interim or annual reporting period that begins after June 15, 2005
  2. For public entities that file as small business issuers—as of the beginning of the first interim or annual reporting period that begins after December 15, 2005
  3. For nonpublic entities—as of the beginning of the first annual reporting period that begins after December 15, 2005. 

This FAS applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. The cumulative effect of initially applying this FAS, if any, is recognized as of the required effective date.

Download the FAS

Download the FAQ

FAS 123(R)-1 - FSP

Classification and Measurement of Freestanding Financial Instruments Originally Issued as Employee Compensation

The Board directed the FASB staff to issue this FSP to defer at this time the requirement of FAS 123 (revised 2004), Share-Based Payment, that a freestanding financial instrument originally subject to FAS 123(R) becomes subject to the recognition and measurement requirements of other applicable GAAP when the rights conveyed by the instrument to the holder are no longer dependent on the holder being an employee of the entity. 

The guidance in this FSP supersedes FSP EITF 00-19-1, “Application of EITF Issue No. 00-19 to Freestanding Financial Instruments Originally Issued as Employee Compensation,” and amends paragraph 11(b) of FAS 133, Accounting for Derivative Instruments and Hedging Activities, and FAS 133 Implementation Issue No. C3, “Scope Exceptions: Exception Related to Share-Based Payment Arrangements.”

The guidance in this FSP shall be applied upon initial adoption of FAS 123(R). An entity that adopted FAS 123(R) prior to the issuance of this FSP shall apply the guidance in this FSP in either

  1. the first reporting period beginning after the date the FSP is posted to the FASB website (August 31, 2005) or
  2. an earlier period, if the financial statements for that period have not been issued.

That entity shall recognize the effect of adopting this FSP according to either of two methods described in the FSP.

FAS 123(R)-2 - FSP

Practical Accommodation to the Application of Grant Date as Defined in FAS 123(R)

Issued in October 2005

The definition of grant date in Appendix E of FAS 123(R) includes criteria for determining that a share-based payment award has been granted. One of the criteria is a mutual understanding by the employer and employee of the key terms and conditions of a share-based payment award.

FASB Staff Position:

In determining the grant date of an award subject to FAS 123(R), assuming all other criteria have been met, a mutual understanding of the key terms and conditions of an award to individual employees shall be presumed to exist at the date the award is approved in accordance with the relevant corporate governance requirements (that is, by the Board or management with the relevant authority) if both of the following conditions are met:

  1. The recipient does not have the ability to negotiate the key terms and conditions of the award with the employer.
  2. The key terms of the award are expected to be communicated to all of the recipients within a relatively short time period from the date of approval.

The guidance in this FSP shall be applied upon initial adoption of FAS 123(R). An entity that adopted FAS 123(R) prior to the issuance of this FSP shall apply the guidance in this FSP in the first reporting period beginning after the date the FSP is posted to the FASB Web site (October 18, 2005).

FAS 123(R)-3, FSP

Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards

Issued in November 2005

Paragraph 81 of FAS 123 (revised 2004), Share-Based Payment, indicates that:

  • for purposes of calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of FAS 123(R) (APIC pool), an entity shall include the net excess tax benefits that would have qualified as such had the entity adopted FAS 123 for recognition purposes.

Because discussions with constituents have revealed that some entities do not have, and may not be able to recreate, information about the net excess tax benefits that would have qualified as such had those entities adopted FAS 123 for recognition purposes, this FSP provides an elective alternative transition method.

That method comprises:

  • a computational component that establishes a beginning balance of the APIC pool and <
  • a simplified method to determine the subsequent impact on the APIC pool of awards that are fully vested and outstanding upon the adoption of FAS 123(R).

The impact on the APIC pool of awards partially vested upon, or granted after, the adoption of FAS 123(R) should be determined in accordance with the guidance in FAS 123(R).

The guidance in this FSP is effective after the date the FSP is posted to the FASB website (November 10, 2005).

FAS 123(R)-4, FSP

Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event

Issued in February 2006

This FSP addresses the classification of options and similar instruments issued as employee compensation that allow for cash settlement upon the occurrence of a contingent event. The guidance in this FSP amends paragraphs 32 and A229 of FAS 123 (revised 2004), Share-Based Payment.

The guidance in this FSP shall be applied upon initial adoption of FAS 123(R). An entity that adopted FAS 123(R) prior to the issuance of this FSP shall apply the guidance in this FSP in the first reporting period beginning after the date the FSP is posted to the FASB website (Feb 3, 2006).

  • If in applying FAS 123(R) an entity treated options or similar instruments that allow for cash settlement upon the occurrence of a contingent event in a manner consistent with the guidance in this FSP, then that entity would not be required to retrospectively apply the guidance in this FSP to prior periods.
  • However, if in applying FAS 123(R) an entity treated options or similar instruments that allow for cash settlement upon the occurrence of a contingent event in a manner inconsistent with the guidance in this FSP, then that entity would be required to retrospectively apply the guidance in this FSP to prior periods.
  • Early application of this guidance is permitted in periods for which financial statements have not yet been issued.

FAS 143-1 - FASB Staff Position

Accounting for Electronic Equipment Waste Obligations

The Board directed the FASB staff to issue this FSP to address the accounting for obligations associated with Directive 2002/96/EC on Waste Electrical and Electronic Equipment (the “Directive”) issued by the European Union. 

The Directive was enacted on February 13, 2003 and directs EU-member countries to adopt legislation to regulate the collection, treatment, recovery, and environmentally sound disposal of electrical and electronic waste equipment.  The Directive distinguishes between “new” and “historical” waste. New waste relates to products put on the market after August 13, 2005. All products put on the market on or before this August 13, 2005 are deemed to be historical waste for the purposes of the Directive.

For the financing of historical waste, the Directive also distinguishes between:

  • historical waste from private households and
  • historical waste from “users other than private households” (commercial users).

This FSP deals with questions that have arisen as to:

  • whether commercial users of electronic equipment or producers of electronic equipment sold to both commercial users and private households should recognize the effects of the Directive with respect to historical waste under U.S. GAAP, and if so, when and how to account for those effects.

The guidance in this FSP shall be applied the later of the first reporting period ending after June 8, 2005 or the date of the adoption of the law by the applicable EU-member country.

Earlier application is encouraged in periods for which financial statements have not yet been issued when the FSP is finalized if the law has been adopted in those periods by the applicable EU-member country.

FAS 150-5 - FASB Staff Position

Issuer’s Accounting under FAS 150 for Freestanding Warrants and Other Similar Instruments on Shares That Are Redeemable

The Board directed the FASB staff to issue this FSP to address whether freestanding warrants and other similar instruments on shares that are redeemable (either puttable or mandatorily redeemable) would be subject to the requirements of FAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, regardless of the timing of the redemption feature or the redemption price.

The guidance in this FSP also is applicable to options or similar instruments on redeemable shares that are no longer subject to FAS 123(R), Share-Based Payment. Paragraphs A230–A232 of FAS 123(R) provide guidance for determining when an instrument ceases to be subject to the requirements of that FAS.

Effective date and transition:

  • The guidance in this FSP shall be applied to the first reporting period beginning after June 30, 2005.
  • If the guidance in this FSP results in changes to previously reported information, the cumulative effect shall be reported according to the transition provisions of FAS 150 in the first reporting period beginning after June 30, 2005.
FAS 151, Inventory Costs The Financial Accounting Standards Board (FASB) has issued FAS 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4.

The amendments made by FAS 151 will improve financial reporting by clarifying that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and by requiring the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities.

Effective date and transition:

  • The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005.
  • Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004.
  • The provisions of FAS 151 should be applied prospectively.

Download the FAS

FAS 152, Accounting for Real Estate Time-Sharing Transactions—an amendment of FAS 66 and 67 This FAS amends FAS 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions.

This FAS also amends FAS 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for:

  1. incidental operations and
  2. costs incurred to sell real estate projects does not apply to real estate time-sharing transactions.

The accounting for those operations and costs is subject to the guidance in SOP 04-2.

This FAS is effective for financial statements for fiscal years beginning after June 15, 2005.

Download the FAS

FAS 153, Exchanges of Non-monetary Assets—an amendment of APB Opinion No. 29 The guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions, is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle.

This FAS amends Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.

Effective date and transition:

  • The Board decided that the provisions of this FAS should be effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. 
  • Earlier application of the provisions of this FAS is permitted so that entities based in the European Union that report under U.S. GAAP would have the opportunity to implement its provisions prior to the requirement to report under international financial reporting standards (IFRS). 

Download the FAS

FAS 154, Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FAS 3 This FAS replaces APB Opinion No. 20, Accounting Changes, and FAS 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This FAS applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed.

Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This FAS requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change.

Effective date and transition:

  • The Board decided that the provisions of this FAS should be effective for accounting changes made in fiscal years beginning after December 15, 2005.
  • The Board decided to require prospective application of this FAS because it does not believe the benefits of adjusting previously issued financial statements to retrospectively apply accounting changes that were made before this FAS was issued outweigh the costs of doing so.

Download the FAS

FIN 45-3,  FASB Staff Position

Application of FIN 45 to Minimum Revenue Guarantees Granted to a Business or Its Owners

Issued in November 2005

The issue is whether a guarantor should apply the recognition, measurement, and disclosure provisions of FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to a guarantee granted to a business or its owners that the revenue of the business (or a specific portion of the business) for a specified period of time will be at least a specified minimum amount (hereafter referred to as a minimum revenue guarantee)

The Board believes that a minimum revenue guarantee granted to a business or its owners meets the characteristics in paragraph 3(a) of Interpretation 45 because the guarantee’s underlying (the business’s gross revenues) is related to an asset or equity security of the guaranteed party.

Effective date and transition:

  • The FSP is effective for new minimum revenue guarantees issued on or after the beginning of the first fiscal quarter following the date that the final FSP is posted to the FASB website (November 10, 2005).
  • Earlier application of the provisions of this FSP is permitted.
  • For any minimum revenue guarantees issued prior to the initial application of the FSP and not accounted for under Interpretation 45, the retroactive application of the initial recognition and initial measurement provisions of Interpretation 45 is not permitted.

SOP 78-9-1, FASB Staff Position

Interaction of AICPA Statement of Position 78-9, Accounting for Investments in Real Estate Ventures, and EITF Issue No. 04-5, "Investor's Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights."

Issued July 14, 2005

This Board-directed FSP amends AICPA Statement of Position (SOP) 78-9, Accounting for Investments in Real Estate Ventures.

At the June 15–16, 2005 Emerging Issues Task Force (EITF) meeting, the EITF reached a consensus on EITF Issue No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" (Issue 04-5). The consensus provides a framework for addressing when a general partner, or general partners as a group, controls a limited partnership or similar entity. The EITF acknowledged that the consensus in Issue 04-5 conflicts with certain aspects of SOP 78-9. The EITF agreed that the assessment of whether a general partner, or the general partners as a group, controls a limited partnership should be consistent for all limited partnerships, irrespective of the industry within which the limited partnership operates. Accordingly, the EITF requested and the Board agreed to amend the guidance in SOP 78-9 to be consistent with the consensus in Issue 04-5.

Effective date and transition:

  • For general partners of all new partnerships formed and for existing partnerships for which the partnership agreements are modified, the guidance in this FSP is effective after June 29, 2005.
  • For general partners in all other partnerships, the guidance in this FSP is effective no later than the beginning of first reporting period in fiscal years beginning after December 15, 2005, and the application of either Transition Method A or Transition Method B, described below, is permitted.
Interpretation No. 46R, Consolidation of Variable Interest Entities FSP FIN 46(R)-6, “Determining the Variability to Be Considered in Applying FIN 46(R)”

This FSP addresses how a reporting enterprise should determine the variability to be considered in applying FIN 46 (revised December 2003), Consolidation of Variable Interest Entities. The variability that is considered in applying Interpretation 46(R) affects the determination of (a) whether the entity is a variable interest entity (VIE), (b) which interests are variable interests1 in the entity, and (c) which party, if any, is the primary beneficiary of the VIE. That variability will affect any calculation of expected losses and expected residual returns, if such a calculation is necessary.

Effective the first day of the first reporting period beginning after June 15, 2006.

FSP AUG AIR-1, Accounting for Planned Major Maintenance Activities

Issued September 2006

This FSP addresses the accounting for planned major maintenance activities. This FSP amends certain provisions in the AICPA Industry Audit Guide, Audits of Airlines (Airline Guide), and APB Opinion No. 28, Interim Financial Reporting.

This FSP prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities in annual and interim financial reporting periods.

An entity shall apply the same method of accounting for planned major maintenance activities in annual and interim financial reporting periods.

Effective date:

The guidance in this FSP shall be applied to the first fiscal year beginning after December 15, 2006. Earlier adoption is permitted as of the beginning of an entity’s fiscal year. The guidance in this FSP shall be applied retrospectively for all financial statements presented, unless it is impracticable to do so.

Results of the 2006 Annual FASAC Survey

FASAC's annual survey on the priorities of the FASB provides valuable perspectives and observations about the Board's process and direction. The 2006 survey asked Council members, Board members, and other interested constituents to provide their views about the FASB's priorities, future financial reporting issues, international convergence, and educational efforts.

Key observations and conclusions from the responses to the 2006 survey are:

  • The conceptual framework and revenue recognition (for the fifth consecutive year) topped the list of issues that FASAC members believe should be the Board’s priority.
  • FASAC members believe that fair value issues, complex financial instruments, and companies’ strategic alliances will require the Board’s attention in the future.
  • FASAC members overwhelmingly support the notion of international convergence but would advise the Board to address a pressing domestic need on its own if a joint project would take significantly longer.
  • While many FASAC members do not believe that the Board should be in the business of developing training or educational materials, they encouraged the Board to enhance its outreach to the academic community and others to ensure that today’s and tomorrow’s accountants are prepared for new concepts in accounting standards.

Thirty-one current FASAC members, 7 Board members, and 35 other constituents (including several members of the Small Business Advisory Committee and the User Advisory Council) responded to the survey.

 Results of the 2006 Annual FASAC Survey (193 pages)

Emerging Issues Task Force - FASB (EITF)
Description Overview

EITF Issue 00-19-1- FSP

Application of EITF Issue No. 00-19 to Freestanding Financial Instruments Originally Issued as Employee Compensation Date

Issued May 31, 2005

The Board directed the FASB staff to issue this FSP to clarify the application of EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” to freestanding financial instruments originally issued as employee compensation that can be settled only by delivering registered shares. This FSP clarifies that a requirement to deliver registered shares, in and of itself, will not result in liability classification for freestanding financial instruments originally issued as employee compensation. This clarification is consistent with the Board’s intent in issuing FAS 123 (revised 2004), Share-Based Payment.

The guidance in this FSP shall be applied in accordance with the effective date and transition provisions of FAS 123(R).  See below.

EITF 04-5, Investor's Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights Updated June 2005: Consensus reached at the June 15-16 meeting.

In practice today, the question of whether a partnership should be consolidated by one of its partners is typically addressed by analogizing to the guidance in AICPA Statement of Position 78-9, Accounting for Investments in Real Estate Ventures, which specifically provides guidance on the accounting for investments in real estate ventures including investments in corporate joint ventures, general partnerships, limited partnerships, and undivided interests.

The issue is what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would consolidate the limited partnership in accordance with generally accepted accounting principles absent the existence of the rights held by the limited partner(s).

Effective date:

The Task Force reached a consensus that for general partners of all new limited partnerships formed and for existing limited partnerships for which the partnership agreements are modified, the guidance in this Issue is effective after June 29, 2005.

The Task Force also reached a consensus that for general partners in all other limited partnerships, the guidance in this Issue is effective no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005, and that application of either Transition Method A or Transition Method B, described below, would be acceptable..

EITF 04-6, “Accounting for Stripping Costs Incurred During Production in the Mining Industry” In the mining industry, companies may be required to remove overburden and other mine waste materials to access mineral deposits. The costs of removing overburden and waste materials are referred to as "stripping costs." During the development of a mine (before production begins), it is generally accepted in practice that stripping costs are capitalized as part of the depreciable cost of building, developing, and constructing the mine. Those capitalized costs are typically amortized over the productive life of the mine using the units of production method. A mining company may continue to remove overburden and waste materials, and therefore incur stripping costs, during the production phase of the mine. Questions have been raised about the appropriate accounting for stripping costs incurred during the production phase, and diversity in practice exists.

Effective for fiscal years beginning after December 15, 2005.

EITF 04-13, "Accounting for Purchases and Sales of Inventory with the Same Counterparty Updated September 2005: Consensus reached at the September 15, 2005 meeting.

An entity may sell inventory to another entity in the same line of business from which it also purchases inventory. The purchase and sale transactions may be pursuant to a single contractual arrangement or separate contractual arrangements and the inventory purchased or sold may be in the form of raw materials, work-in-process, or finished goods.

The following questions have been raised regarding the accounting for these types of transactions:

  • under what circumstances should two or more transactions with the same counterparty (counterparties) be viewed as a single non-monetary transaction within the scope of APB 29?
  • if non-monetary transactions within the scope of APB 29 involve inventory, are there any circumstances under which the transactions should be recognized at fair value?

Download the Draft Abstract

Effective date and transition:

  • Any consensus on this Issue should be applied to transactions completed in reporting periods beginning after March 15, 2006, whether pursuant to arrangements that were in place at the date of initial application of the consensus or arrangements executed subsequent to that date. 
  • The carrying amount of the inventory that was acquired under these types of arrangements prior to the initial application of the consensus and that still remains in an entity's statement of financial position at the date of initial application of the consensus should not be adjusted for this consensus. 
  • Early application will be permitted in periods for which financial statements have not been issued.
EITF Issue No. 05-1

Accounting for the Conversion of an Instrument That Became Convertible upon the Issuer's Exercise of a Call Option

Updated June 2006

At its June 28, 2006 meeting, the Board ratified the consensuses reached by the Task Force in this Issue.

The Task Force reached a [consensus] that the issuance of equity securities to settle a debt instrument (pursuant to the instrument's original conversion terms) that became convertible upon the issuer's exercise of a call option should be accounted for as a conversion if the debt instrument contained a substantive conversion feature as of its issuance date, as defined herein. That is, no gain or loss should be recognized related to the equity securities issued to settle the instrument. The issuance of equity securities to settle a debt instrument that became convertible upon the issuer's exercise of a call option should be accounted for as a debt extinguishment if the debt instrument did not contain a substantive conversion feature as of its issuance date. That is, the fair value of the equity securities issued should be considered a component of the reacquisition price of the debt.

Effective date:

This Issue applies to all conversions within the scope of this Issue that result from the exercise of call options and is effective in interim or annual reporting periods beginning after June 28, 2006 (the Board ratification date of the consensus), irrespective of whether the instrument was entered into prior or subsequent to Board ratification of this Issue. For instruments issued prior to the effective date of this consensus, the assessment as to whether a substantive conversion feature exists at issuance should be based only on assumptions, considerations, and/or marketplace information available as of the issuance date. 13. Early application of this Issue is permitted in periods for which financial statements have not yet been issued. Retrospective application to previously issued financial statements is not permitted.

EITF issue 05-5,  Accounting for Early Retirement or Postemployment Programs with Specific Features (Such As Terms Specified in Altersteilzeit Early Retirement Arrangements) Issued June 2005

The Altersteilzeit (ATZ) arrangement is an early retirement program in Germany designed to create an incentive for employees, within a certain age group, to transition from (full or part-time) employment into retirement before their legal retirement age. The program was created by legislation in 1996 and through subsequent extensions is now scheduled to expire in 2009. Employers taking advantage of this legislation must sign a contract under the legal framework outlined in the legislation with the workers' council/unions or with the individual employees (employees not within a workers' council/union) to qualify for subsidies from the government. The German government provides a subsidy (reimbursement) to an employer for the bonuses paid to the employee and the additional contributions paid into the German government pension scheme under an ATZ arrangement for a maximum of six years. To receive this subsidy, an employer must meet certain criteria (typically, an employer must hire replacement employees from currently registered unemployed persons or former trainees).

This Issue addresses specific features in ATZ arrangements. Any consensus reached in this Issue may apply to other types of benefit arrangements with the same or similar terms.

  • Issue 1— How to account for the bonus feature and additional contributions into the German government pension scheme under a Type II ATZ arrangement
  • Issue 2— How to account for the government subsidy under Type I and Type II ATZ arrangements.

The consensus in this Issue should be applied to fiscal years beginning after December 15, 2005, and reported as a change in accounting estimate effected by a change in accounting principle as described in paragraph 19 of FAS 154. A company should provide the disclosures required by paragraph 22 of FAS 154.

EITF 05-8, Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature

Updated September 2005: Consensus reached at the September 15, 2005 meeting.

When a company issues convertible debt with a beneficial conversion feature, the debt is bifurcated into a liability component and an equity component in accordance with EITF Issues No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" and No. 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments." The equity component is measured at the intrinsic value of the beneficial conversion feature on the commitment date. For income tax purposes, all of the proceeds are recorded as a liability and nothing is recorded in shareholders' equity.

The issues are whether the issuance of convertible debt with a beneficial conversion feature results in a basis difference and, if so, whether that basis difference is a temporary difference under FAS 109, Accounting for Income Taxes.

Effective for the first interim or annual reporting period beginning after December 15, 2005.

EITF Issue No. 06-2

Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FAS 43

Updated June 2006

At its June 28, 2006 meeting, the Board ratified the consensuses reached by the Task Force in this Issue.

The Task Force reached a [consensus] that an employee's right to a compensated absence under a sabbatical or other similar benefit arrangement (a) that requires the completion of a minimum service period and (b) in which the benefit does not increase with additional years of service accumulates pursuant to paragraph 6(b) of FAS 43 for arrangements in which the individual continues to be a compensated employee and is not required to perform duties for the entity during the absence. Therefore, assuming all of the other conditions of paragraph 6 of FAS 43 are met, the compensation cost associated with a sabbatical or other similar benefit arrangement should be accrued over the requisite service period.

The Task Force reached a [consensus] that this Issue should be applied in financial reports for fiscal years beginning after the date the [consensus] is ratified by the Board. Entities should recognize the effects of applying the [consensus] on this Issue as a change in accounting principle through retrospective application to all prior periods unless it is impracticable to do so.

Effective date:

The Task Force reached a consensus that this Issue should be effective for fiscal years beginning after December 15, 2006. An entity should apply the consensus reached in this Issue through either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position at the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods. Earlier adoption of this guidance is permitted as of the beginning of an entity's fiscal year provided that the entity has not yet issued financial statements, including interim financial statements, for any period of that fiscal year.

Guidance on FAS 133 Implementation Issues (aka Derivatives Implementation Group)
Description Overview
Download complete list of Implementation Issues
NEW
Issued January 2007
Securities and Exchange Commission (SEC)
Description Overview

SAB 108, Process of quantifying financial statement misstatements

Issued September 2006

The interpretations in this Staff Accounting Bulletin express the staff’s views regarding the process of quantifying financial statement misstatements.

The interpretations in this Staff Accounting Bulletin are being issued to address diversity in practice in quantifying financial statement misstatements and the potential under current practice for the build up of improper amounts on the balance sheet.

Effective for annual financial statements covering the first fiscal year ending after November 15, 2006.

SAB 107, Share-Based Payments On March 29, 2005, the SEC issued SAB 107 to provide public companies additional guidance in applying the provisions of FAS 123(R), Share-Based Payment.

Among other things, the SAB describes the SEC staff’s expectations in determining the assumptions that underlie the fair value estimates and discusses the interaction of FAS 123(R) with certain existing SEC guidance. The guidance is also beneficial to users of financial statements in analyzing the information provided under FAS 123(R).

The SAB is applied upon the adoption of FAS 123(R).

See also: Securities and Exchange Commission's Office of Economic Analysis Memorandum, "Economic Perspective on Employee Option Expensing"

Release No. IC-27504, Mutual Fund Redemption Fees

Issued September 2006

The SEC  is adopting amendments to a rule under the Investment Company Act. The rule, among other things, requires most open-end investment companies (“funds”) to enter into agreements with intermediaries, such as broker-dealers, that hold shares on behalf of other investors in so called “omnibus accounts.” These agreements must provide funds access to information about transactions in these accounts to enable the funds to enforce restrictions on market timing and similar abusive transactions. The Commission is amending the rule to clarify the operation of the rule and reduce the number of intermediaries with which funds must negotiate shareholder information agreements. The amendments are designed to reduce the costs to funds (and fund shareholders) while still achieving the goals of the rulemaking.

Effective date: December 4, 2006.

Release No. IC-27538 Definition of Eligible Portfolio Company under the Investment Company Act of 1940 Issued October 2006

The Commission today is adopting two new rules under the Investment Company Act of 1940 (“Investment Company Act” or “Act”). The new rules more closely align the definition of eligible portfolio company, and the investment activities of business development companies (“BDCs”), with the purpose that Congress intended. The rules expand the definition of eligible portfolio company in a manner that promotes the flow of capital to certain small, developing and financially troubled companies.

Effective date: November 30, 2006

NEW

Release 34-55043  Interagency FAS on Sound Practices Concerning Elevated Risk Complex Structured Finance Activities

Issued January 2007

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the SEC have issued a final FAS on complex structured finance activities.

The FAS describes the types of internal controls and risk management procedures that should help large financial institutions identify, manage, and address the heightened legal and reputational risks that may arise from certain complex structured finance transactions.

The final FAS is substantially similar to the Revised FAS issued for comment in May 2006. There have been minor modifications made to address comments received on the revised statement to clarify the principles, scope, and intent of the final FAS. The FAS represents supervisory guidance for institutions supervised by the four banking agencies and serves as a policy statement for institutions supervised by the SEC. As part of the ongoing supervisory process, the agencies will use the final FAS in reviewing the internal controls and risk management policies, procedures, and systems of financial institutions that are engaged in complex structured finance transactions.

Release No. 34-54684 Amendments to the Tender Offer Best-Price Rules Issued November 2006

"We are adopting amendments to the language of the third-party and issuer tender offer best-price rules to clarify that the provisions apply only with respect to the consideration offered and paid for securities tendered in a tender offer. We also are amending the third-party and issuer tender offer best-price rules to provide that any consideration that is offered and paid according to employment compensation, severance or other employee benefit arrangements entered into with security holders of the subject company that meet certain requirements will not be prohibited by the rules. Finally, we are amending the third-party and issuer tender offer best-price rules to provide a safe harbor provision so that arrangements that are approved by certain independent directors of either the subject company’s or the bidder’s board of directors, as applicable, will not be prohibited by the rules."

Effective date: December 8, 2006

Release No. 34-54106, Joint Final Rules: Application of the Definition of Narrow-Based Security Index to Debt Securities Indexes and Security Futures on Debt Securities Issued July 2006

The Commodity Futures Trading Commission ("CFTC") and the SEC ("SEC") (together, the "Commissions") are adopting a new rule and amending an existing rule under the Commodity Exchange Act ("CEA") and adopting two new rules under the Securities Exchange Act of 1934 ("Exchange Act"). The rules will modify the applicable statutory listing standards requirements to permit security futures to be based on individual debt securities or a narrow-based security index composed of such securities. In addition, these rules and rule amendment will exclude from the definition of "narrow-based security index" debt securities indexes that satisfy specified criteria. A future on a debt securities index that is excluded from the definition of narrow-based security index will not be a security future and may trade subject to the exclusive jurisdiction of the CFTC.

Effective date: August 14, 2006.

Release No. 33-8765 Executive Compensation Disclosure

Issued December 2006

The SEC is adopting, as interim final rules, amendments to the disclosure requirements for executive and director compensation. The amendments to Item 402 of Regulations S-K and S-B revise Summary Compensation Table and Director Compensation Table disclosure with respect to stock awards and option awards to provide disclosure of the compensation cost of awards over the requisite service period, as described in Financial Accounting Standards Board FAS 123 (revised 2004) Share-Based Payment (FAS 123R).

FAS 123R defines a requisite service period as the period or periods over which an employee is required to provide service in exchange for a share-based payment. The revised disclosure replaces disclosure in the Summary Compensation Table and Director Compensation Table of the aggregate grant date fair value of awards computed in accordance with FAS 123R.

The amendments revise the Grants of Plan-Based Awards Table to add a column showing, on an grant-by-grant basis, the full grant date fair value of awards computed in accordance with FAS 123R.

The amendments also revise the Grants of Plan-Based Awards Table to include information concerning repriced or materially modified options, stock appreciation rights and similar option-like instruments, disclosing the incremental fair value computed as of the repricing or modification date computed in accordance with FAS 123R.

The amendments to the Director Compensation Table in Item 402 of Regulation S-K require footnote disclosure corresponding to the new Grants of Plan-Based Awards Table fair value disclosures.

The amendments are intended to provide investors with more complete and useful disclosure about executive compensation. Disclosing the compensation cost of stock and option awards over the requisite service period will give investors a better idea of the compensation earned by an executive or director during a particular reporting period, consistent with the principles underlying the financial statement disclosure; and retaining the requirement to disclose the grant date fair value will give investors useful information about the total impact of compensation decisions made by a company in a particular reporting period.

Effective Date: December 29, 2006

Release nos. 33-8732A; 34-54302A; IC-27444A, Executive Compensation and Related Person Disclosure (conforming amendments)

Issued August 2006

The SEC is adopting amendments to the disclosure requirements for executive and director compensation, related person transactions, director independence and other corporate governance matters and security ownership of officers and directors.

These amendments apply to disclosure in proxy and information statements, periodic reports, current reports and other filings under the Securities Exchange Act of 1934 and to registration statements under the Exchange Act and the Securities Act of 1933. We are also adopting a requirement that disclosure under the amended items generally be provided in plain English.

The amendments are intended to make proxy and information statements, reports and registration statements easier to understand. They are also intended to provide investors with a clearer and more complete picture of the compensation earned by a company’s principal executive officer, principal financial officer and highest paid executive officers and members of its board of directors.

In addition, they are intended to provide better information about key financial relationships among companies and their executive officers, directors, significant shareholders and their respective immediate family members. In Release No. 33-8735, published elsewhere in the proposed rules section of this issue of the Federal Register, we also request additional comments regarding the proposal to require compensation disclosure for three additional highly compensated employees.

Effective date: November 7, 2006.

Release Nos. 33-8730A; 34-54294A, Internal Control Over Financial Reporting In Exchange Act Periodic Reports of Foreign Private Issuers That Are Accelerated Filers

Issued August 2006

SEC is extending the compliance date that was published on March 8, 2005, in Release No. 33-8545 [70 FR 11528], for foreign private issuers that are accelerated filers, but not large accelerated filers, for amendments to Forms 20-F and 40-F that require a foreign private issuer to include in its annual reports an attestation report by the issuer’s registered public accounting firm on management’s assessment on internal control over financial reporting.

Effective date: September 14, 2006, except Temporary §210.2-02T, Temporary Item 15T of Form 20-F, and Temporary Instruction 2T of General Instruction B(6) of Form 40-F are effective from September 14, 2006, to December 31, 2007.

Release Nos. 33-8724; 34-54168, Amendments to the Informal and Other Procedures; Public Company Accounting Oversight Board Budget Approval Process

Issued August 2006

The SEC (“SEC” or “Commission”) is amending its Informal and Other Procedures to add a rule that facilitates Commission review and approval of the budget and accounting support fee for the Public Company Accounting Oversight Board (“PCAOB” or “Board”), which is required by the Sarbanes-Oxley Act of 2002.

Effective date: August 23, 2006.

Release Nos. 33-8713, Fund of Funds Investments Issued July 2006

The SEC is adopting three new rules under the Investment Company Act of 1940 that address the ability of an investment company (“fund”) to acquire shares of another fund. Section 12(d)(1) of the Act prohibits, subject to certain exceptions, so-called “fund of funds” arrangements, in which one fund invests in the shares of another. The rules broaden the ability of a fund to invest in shares of another fund in a manner consistent with the public interest and the protection of investors. The Commission also is adopting amendments to forms used by funds to register under the Investment Company Act and offer their shares under the Securities Act of 1933. The amendments improve the transparency of the expenses of funds of funds by requiring that the expenses of the acquired funds be aggregated and shown as an additional expense in the fee table of the fund of funds.

Effective date: July 31, 2006.

Release 33-8591, Securities Offering Reform

Issued February 13, 2006:

Technical corrections to the rules adopted

Effective date: February 13, 2006

Original issue:

The SEC is adopting rules that will modify and advance significantly the registration, communications, and offering processes under the Securities Act of 1933. Today’s rules will eliminate unnecessary and outmoded restrictions on offerings.

In addition, the rules will provide more timely investment information to investors without mandating delays in the offering process that we believe would be inconsistent with the needs of issuers for timely access to capital. The rules also will continue our long-term efforts toward integrating disclosure and processes under the Securities Act and the Securities Exchange Act of 1934. The rules will further these goals by addressing communications related to registered securities offerings, delivery of information to investors, and procedural aspects of the offering and capital formation processes.

Effective date: December 1, 2005

Release No. 33-8568, Amendment to Rule 4-01(a) of Regulation S-X Regarding the Compliance Date for FAS 123 (Revised 2004), Share-Based Payment

The SEC is amending Regulation S-X to amend the date for compliance with FAS 123 (revised 2004), Share-Based Payment (“FAS No. 123R”) so that each registrant that is not a small business issuer will be required to prepare financial statements in accordance with FAS 123R beginning with the first interim or annual reporting period of the registrant’s first fiscal year beginning on or after June 15, 2005.

The SEC is also amending the effective date for compliance with FAS No. 123R so that each small business issuer will be required to prepare financial statements in accordance with FAS 123R beginning with the first interim or annual reporting period of the registrant’s first fiscal year beginning on or after December 15, 2005.

Effective date: April 21, 2005.

Release No. 33-8567, First-Time Application of International Financial Reporting Standards

The Commission is adopting amendments to Form 20-F to provide a onetime accommodation relating to financial statements prepared under International Financial Reporting Standards (“IFRS”) for foreign private issuers registered with the SEC. This accommodation applies to foreign private issuers that adopt IFRS prior to or for the first financial year starting on or after January 1, 2007.

The accommodation permits eligible foreign private issuers for their first year of reporting under IFRS to file two years rather than three years of statements of income, changes in shareholders' equity and cash flows prepared in accordance with IFRS, with appropriate related disclosure.

The accommodation retains current requirements regarding the reconciliation of financial statement items to generally accepted accounting principles as used in the United States (“U.S. GAAP”).  In addition, the Commission is amending Form 20-F to require certain disclosures of all foreign private issuers that change their basis of accounting to IFRS.

Effective date: May 20, 2005.

Release 33-8545, Management’s Report on Internal Control over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports of Non-Accelerated Filers and Foreign Private Issuers; Extension of compliance dates The compliance dates are extended as follows:
  • A company that is a non-accelerated filer, or foreign private issuer that files its annual reports on Form 20-F or Form 40-F, must begin to comply with these requirements for its first fiscal year ending on or after July 15, 2006.
  • These filers must begin to comply with the provisions of Exchange Act Rule 13a-15(d) or 15d-15(d), whichever applies, requiring an evaluation of changes to internal control over financial reporting requirements with respect to the company’s first periodic report due after the first annual report that must include management’s report on internal control over financial reporting.

In addition, the SEC is applying the extended compliance period for these filers to amended portion of the introductory language in paragraph 4 of the certification required by Exchange Act Rules 13a-14(a) and 15d-14(a) that refers to the certifying officers’ responsibility for establishing and maintaining internal control over financial reporting for the company, as well as paragraph 4(b).  The amended language must be provided in the first annual report required to contain management’s internal control report and in all periodic reports filed thereafter.

The extended compliance dates also apply to the amendments of Exchange Act Rules 13a-15(a) and 15d-15(a) relating to the maintenance of internal control over financial reporting. The remainder of the compliance dates relating to accelerated filers and registered investment companies published in Release No. 33-8392 (see below) are not affected by this release.

NEW

SEC Issues Q&As on Executive Compensation and Related Person Disclosure

Issued January 2007

The staff of the SEC’s Division of Corporation Finance has issued interpretive guidance on Item 402 of Regulation S-K — Executive Compensation. The guidance addresses frequently asked questions related to the application of the Executive Compensation and Related Person Disclosure rules that were issued by the SEC in August 2006 and the Executive Compensation amendments that were issued in December 2006. It also addresses questions and answers regarding general applicability of the interim final rules and offers interpretive responses for specific situations.

This guidance replaces Item 402 of Regulation S-K Interpretations in the July 1997 Manual of Publicly Available Telephone Interpretations and the March 1999 Supplement to the Manual of Publicly Available Telephone Interpretations.

NEW

Sample Letter Sent in Response to Inquiries Related to Filing Restated Financial Statements for Errors in Accounting for Stock Option Grants

Issued January 2007

In December 2006, the Division of Corporation Finance responded to inquiries from several public companies requesting filing guidance as they prepare to restate previously issued financial statements for errors in accounting for stock option grants. The following illustrative letter provides information for registrants to consider as they prepare reports to be filed with the Commission to correct errors in accounting for stock option grants.

Download the Complete list of SEC Final Rules Releases
Other
Description Overview
Download the Sarbanes-Oxley Act/PCAOB Implementation Central
 

Standards effective next year issued by:

American Institute of Certified Public Accountants (AICPA)
Financial Accounting Standards Board (FASB)
Emerging Issues Task Force - FASB (EITF)
Securities and Exchange Commission (SEC)
 
American Institute of Certified Public Accountants (AICPA)
Description Overview
SOP 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts Issued September 2005

This SOP provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in FASB No. 97. The SOP defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract.

This SOP is effective for internal replacements occurring in fiscal years beginning after December 15, 2006, with earlier adoption encouraged. Retrospective application of this SOP to previously issued financial statements is not permitted.

Initial application of this SOP should be as of the beginning of an entity’s fiscal year (that is, if the SOP is adopted prior to the effective date, all prior interim periods of the year of adoption should be restated).

Practice Guide: Interpretation 48 Issued November 2006

The AICPA issued Practice Guide on Accounting for Uncertain Tax Positions Under FIN 48.21 Although not authoritative, the guide gives the reader a general overview of the requirements of Interpretation 48.

For years beginning after December 15, 2006, all GAAP-based financial statements must account for taxes in accordance with FIN 48, Accounting for Uncertain Tax Positions, including a required analysis of all tax positions at the beginning of the period or, for calendar-year-end businesses, as of January 1, 2007.

Convertible Debt, Convertible Preferred Shares, Warrants, and Other Equity-Related Financial Instruments

Issued December 2006

This Technical Practice Aid (hereafter referred to as Practice Aid) is not intended to provide practitioners with interpretative guidance or to describe the accounting for specific instruments. Rather, it is intended to assist practitioners in identifying the scope of and the inter-relationships between the various relevant accounting pronouncements. To accomplish that goal, the Practice Aid is a roadmap addressing the accounting considerations that should be considered in analyzing freestanding and embedded derivative financial instruments at issuance and on an ongoing basis. This roadmap comprises several parts each of which is integral to the analysis and therefore should be used together.

Financial Accounting Standards Board (FASB)
Description Overview

FAS 13-2 FASB Staff Position,

Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction

Issued July 2006

This FSP addresses how a change or projected change in the timing of cash flows relating to income taxes generated by a leveraged lease transaction affects the accounting by a lessor for that lease. The guidance in this FSP amends FAS 13, Accounting for Leases.

Effective date and transition:

The guidance in this FSP shall be applied to fiscal years beginning after December 15, 2006. Earlier application is permitted as of the beginning of an entity’s fiscal year, provided that the entity has not yet issued financial statements, including financial statements for any interim period, for that fiscal year.

 
UPDATE
Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FAS 109
Issued January 2007

The FASB decided at the January 17, 2007, Board meeting not to delay the effective date of Interpretation 48. The Interpretation is still effective for fiscal years beginning after December 15, 2006.

Released in June 2006

This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FAS 109, Accounting for Income Taxes. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

Effective Date :

This Interpretation is effective for fiscal years beginning after December 15, 2006. Earlier application of the provisions of this Interpretation is encouraged if the enterprise has not yet issued financial statements, including interim financial statements, in the period this Interpretation is adopted.

FTB 85-4-1, FASB Staff Position

Accounting for Life Settlement Contracts by Third-Party Investors

Issued March 2006

This FSP provides initial and subsequent measurement guidance and financial statement presentation and disclosure guidance for investments by third-party investors in life settlement contracts. This FSP also amends certain provisions of FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance, and FAS 133, Accounting for Derivative Instruments and Hedging Activities.

Effective Date and Transition

The guidance in this FSP shall be applied to fiscal years beginning after June 15, 2006. Earlier application is permitted as of the beginning of an investor’s fiscal year, provided that the investor has not yet issued its first quarter financial statements for that fiscal year. An investor shall apply the guidance prospectively for all new life settlement contracts. At the date of adoption, an investor shall make a one-time irrevocable election to account for its currently held life settlement contracts on an instrument-by-instrument basis using either the fair value method or the investment method and recognize a cumulative-effect adjustment to beginning retained earnings. The disclosure requirements of this FSP shall be applied as of the most recent statement of financial position or income statement presented.

FAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FAS 87, 88, 106, and 132(R)

Issued September 2006

This FAS improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization.

This FAS also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. This FAS requires an employer that is a business entity and sponsors one or more single-employer defined benefit plans to:

  • Recognize the funded status of a benefit plan—measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation—in its statement of financial position. For a pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated postretirement benefit obligation.
  • Recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to FAS 87, Employers’ Accounting for Pensions, or No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. Amounts recognized in accumulated other comprehensive income, including the gains or losses, prior service costs or credits, and the transition asset or obligation remaining from the initial application of Statements 87 and 106, are adjusted as they are subsequently recognized as components of net periodic benefit cost pursuant to the recognition and amortization provisions of those Statements.
  • Measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions).
  • Disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation.

This FAS also applies to a not-for-profit organization or other entity that does not report other comprehensive income. This FAS’s reporting requirements are tailored for those entities.

This FAS amends FAS 87, FAS 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, FAS 106, and FAS 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, and other related accounting literature. Upon initial application of this FAS and subsequently, an employer should continue to apply the provisions in Statements 87, 88, and 106 in measuring plan assets and benefit obligations as of the date of its statement of financial position and in determining the amount of net periodic benefit cost.

This FAS improves financial reporting because the information reported by a sponsoring employer in its financial statements is more complete, timely, and, therefore, more representationally faithful. Thus, it will be easier for users of those financial statements to assess an employer’s financial position and ability to satisfy postretirement benefit obligations.

This FAS results in financial statements that are more complete because it requires an employer that sponsors a single-employer defined benefit postretirement plan to report the overfunded or underfunded status of the plan in its statement of financial position rather than in the notes.

This FAS results in more timely financial information because it requires an employer to recognize all transactions and events affecting the overfunded or underfunded status of a defined benefit postretirement plan in comprehensive income (or changes in unrestricted net assets) in the year in which they occur. Moreover, this FAS requires that plan assets and benefit obligations be measured as of the date of an employer’s fiscal year-end statement of financial position, thus eliminating the alternative of a measurement date that could be up to three months earlier.

This FAS results in financial reporting that is more understandable by eliminating the need for a reconciliation in the notes to financial statements.

Effective date:

An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006.

An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007.

However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this FAS in preparing those financial statements.

FAS 157, Fair Value Measurements

Issued September 2006

This FAS defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This FAS applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this FAS does not require any new fair value measurements. However, for some entities, the application of this FAS will change current

The changes to current practice resulting from the application of this FAS relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements.

The definition of fair value retains the exchange price notion in earlier definitions of fair value. This FAS clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. Therefore, the definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price).

This FAS emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, this FAS establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The notion of unobservable inputs is intended to allow for situations in which there is little, if any, market activity for the asset or liability at the measurement date. In those situations, the reporting entity need not undertake all possible efforts to obtain information about market participant assumptions. However, the reporting entity must not ignore information about market participant assumptions that is reasonably available without undue cost and effort.

This FAS clarifies that market participant assumptions include assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or the risk inherent in the inputs to the valuation technique. A fair value measurement should include an adjustment for risk if market participants would include one in pricing the related asset or liability, even if the adjustment is difficult to determine. Therefore, a measurement (for example, a “mark-to-model” measurement) that does not include an adjustment for risk would not represent a fair value measurement if market participants would include one in pricing the related asset or liability.

This FAS clarifies that market participant assumptions also include assumptions about the effect of a restriction on the sale or use of an asset. A fair value measurement for a restricted asset should consider the effect of the restriction if market participants would consider the effect of the restriction in pricing the asset. That guidance applies for stock with restrictions on sale that terminate within one year that is measured at fair value under FAS 115, Accounting for Certain Investments in Debt and Equity Securities, and No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations.

This FAS clarifies that a fair value measurement for a liability reflects its nonperformance risk (the risk that the obligation will not be fulfilled). Because nonperformance risk includes the reporting entity’s credit risk, the reporting entity should consider the effect of its credit risk (credit standing) on the fair value of the liability in all periods in which the liability is measured at fair value under other accounting pronouncements, including FAS 133, Accounting for Derivative Instruments and Hedging Activities.

This FAS affirms the requirement of other FASB Statements that the fair value of a position in a financial instrument (including a block) that trades in an active market should be measured as the product of the quoted price for the individual instrument times the quantity held (within Level 1 of the fair value hierarchy). The quoted price should not be adjusted because of the size of the position relative to trading volume (blockage factor). This FAS extends that requirement to broker-dealers and investment companies within the scope of the AICPA Audit and Accounting Guides for those industries.

This FAS expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. The disclosures focus on the inputs used to measure fair value and for recurring fair value measurements using significant unobservable inputs (within Level 3 of the fair value hierarchy), the effect of the measurements on earnings (or changes in net assets) for the period. This FAS encourages entities to combine the fair value information disclosed under this FAS with the fair value information disclosed under other accounting pronouncements, including FAS 107, Disclosures about Fair Value of Financial Instruments, where practicable.

The guidance in this FAS applies for derivatives and other financial instruments measured at fair value under FAS 133 at initial recognition and in all subsequent periods. Therefore, this FAS nullifies the guidance in footnote 3 of EITF Issue No. 02-3, “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities.” This FAS also amends FAS 133 to remove the similar guidance to that in Issue 02-3, which was added by FAS 155, Accounting for Certain Hybrid Financial Instruments.

This FAS is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year.

The provisions of this FAS should be applied prospectively as of the beginning of the fiscal year in which this FAS is initially applied, except as follows. The provisions of this FAS should be applied retrospectively to the following financial instruments as of the beginning of the fiscal year in which this FAS is initially applied (a limited form of retrospective application):

  • A position in a financial instrument that trades in an active market held by a broker-dealer or investment company within the scope of the AICPA Audit and Accounting Guides for those industries that was measured at fair value using a blockage factor prior to initial application of this FAS
  • A financial instrument that was measured at fair value at initial recognition under FAS 133 using the transaction price in accordance with the guidance in footnote 3 of Issue 02-3 prior to initial application of this FAS
  • A hybrid financial instrument that was measured at fair value at initial recognition under FAS 133 using the transaction price in accordance with the guidance in FAS 133 (added by FAS 155) prior to initial application of this FAS.

FAS 156, Accounting for Servicing of Financial Assets—an amendment of FAS 140

Issued March 2006

This FAS amends FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This FAS:

  1. Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in any of the following situations:
    1. A transfer of the servicer’s financial assets that meets the requirements for sale accounting
    2. A transfer of the servicer’s financial assets to a qualifying special-purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting securities and classifies them as either available-for-sale securities or trading securities in accordance with FAS 115, Accounting for Certain Investments in Debt and Equity Securities
    3. An acquisition or assumption of an obligation to service a financial asset that does not relate to financial assets of the servicer or its consolidated affiliates.
  2. Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.
  3. Permits an entity to choose either of the following subsequent measurement methods for each class of separately recognized servicing assets and servicing liabilities:
    1. Amortization method—Amortize servicing assets or servicing liabilities in proportion to and over the period of estimated net servicing income or net servicing loss and assess servicing assets or servicing liabilities for impairment or increased obligation based on fair value at each reporting date.
    2. Fair value measurement method—Measure servicing assets or servicing liabilities at fair value at each reporting date and report changes in fair value in earnings in the period in which the changes occur.
  4. At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under FAS 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.
  5. Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

Effective Date and Transition:

  • An entity should adopt this FAS as of the beginning of its first fiscal year that begins after September 15, 2006. Earlier adoption is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued financial statements, including interim financial statements, for any period of that fiscal year. The effective date of this FAS is the date an entity adopts the requirements of this FAS
  • An entity should apply the requirements for recognition and initial measurement of servicing assets and servicing liabilities prospectively to all transactions after the effective date of this FAS.
  • An entity may elect to subsequently measure a class of separately recognized servicing assets and servicing liabilities at fair value as of the beginning of any fiscal year, beginning with the fiscal year in which the entity adopts this FAS. An entity that elects to subsequently measure a class of separately recognized servicing assets and servicing liabilities at fair value should apply that election prospectively to all new and existing separately recognized servicing assets and servicing liabilities within those classes that a servicer elects to subsequently measure at fair value. The effect of remeasuring an existing class of separately recognized servicing assets and servicing liabilities at fair value should be reported as a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year and should be separately disclosed.
  • This FAS permits an entity to reclassify certain available-for-sale securities to trading securities, regardless of the restriction in paragraph 15 of FAS 115, provided that those available-for-sale securities are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value. This option is available only once, as of the beginning of the fiscal year in which the entity adopts this FAS. Any gains and losses associated with the reclassified securities that are included in accumulated other comprehensive income at the time of the reclassification should be reported as a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year that an entity adopts this FAS. The carrying amount of reclassified securities and the effect of that reclassification on the cumulative-effect adjustment should be separately disclosed.

FAS 155, Accounting for Certain Hybrid Financial Instruments—an amendment of FAS 133 and 140

Issued February 2006

This FAS amends FAS 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This FAS:

  1. Permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation
  2. Clarifies which interest-only strips and principal-only strips are not subject to the requirements of FAS 133.
  3. Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation.
  4. Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives.
  5. Amends FAS 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.

This FAS 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. The fair value election provided for in paragraph 4(c) of this FAS may also be applied upon adoption of this FAS for hybrid financial instruments that had been bifurcated under paragraph 12 of FAS 133 prior to the adoption of this FAS. Earlier adoption is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued financial statements, including financial statements for any interim period for that fiscal year.

Final FSP FAS 126-1 Applicability of Certain Disclosure and Interim Reporting Requirements for Obligors for Conduit Debt Securities

Issued October 2006

FSP FAS 126-1 amends certain accounting standards to clarify the definition of a “public entity.” The definition now includes entities that are obligors for conduit debt securities, including those that participate in a pooled conduit debt security, and that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets). Any references in authoritative accounting literature to the definition of a public entity or enterprise that are not included in the list below are unaffected by this FSP. The specific accounting standards amended by this FSP are:

  • APB Opinion No. 28, Interim Financial Reporting
  • FAS 69, Disclosures About Oil and Gas Producing Activities
  • FAS 109, Accounting for Income Taxes
  • FAS 126, Exemption From Certain Required Disclosures About Financial Instruments for Certain Nonpublic Entities
  • FAS 131, Disclosures About Segments of an Enterprise and Related Information
  • FAS 132 (revised 2003), Employers’ Disclosures About Pensions and Other Postretirement Benefits
  • FAS 141, Business Combinations
  • AICPA Audit and Accounting Guide, Health Care Organizations
  • AICPA Audit and Accounting Guide, Not-for-Profit Organizations

The FSP should be applied prospectively in fiscal periods beginning after December 15, 2006. If an entity elects to apply the guidance retrospectively, it must do so to all prior periods. If an entity issues interim financial statements, the FSP shall be applied to the first interim period after the date of adoption.

Final FSP FAS 123(R)-5 Amendment of FASB Staff Position FAS 123(R)-1

Issued October 2006

FSP FAS 123(R)-5 addresses whether a modification of an instrument in connection with an equity restructuring should be considered a modification for purposes of applying FSP FAS 123(R)-1.5 This FSP states that no change in the recognition or the measurement (due to a change in classification as a result of a modification solely to reflect an equity restructuring that occurs when the holders are no longer employees) of the instruments will result if two conditions are met: (1) there is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved — that is, the holder is made whole) or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring, and (2) all holders of the same class of equity instruments (for example, stock options) are treated in the same manner. Other modifications that take place when the holder is no longer an employee shall be subject to the modification guidance in paragraph A232 of FAS 123(R).

The FSP shall be applied in the first reporting period beginning after October 10, 2006. Early application is permitted in periods for which financial statements have not yet been issued. If an entity applied FAS 123(R) in a manner consistent with the provisions of this FSP, then continued application is required prospectively. Otherwise, an entity should apply the provisions of this FSP retrospectively.

Final FSP FAS 123(R)-6 Technical Corrections of FAS 123(R)

Issued October 2006

FSP FAS 123(R)-66 addresses certain technical corrections of FAS 123(R). The amendments exempt nonpublic entities from disclosing the aggregate intrinsic value of fully vested share options (or share units) and share options expected to vest at the date of the latest statement of financial position. This FSP also revises the definition of “short-term inducement” to exclude an offer to settle an award. In addition, two illustrations are revised to comply with paragraph 42 in FAS 123(R) and to clarify reversal dates for modifications.

The FSP shall be applied in the first reporting period beginning after October 20, 2006. Early application is permitted in periods for which financial statements have not yet been issued. If an entity applied FAS 123(R) in a manner consistent with the provisions of this FSP, then continued application is required prospectively. Otherwise, an entity should apply the provisions of this FSP retrospectively.

FSP EITF 00-19-2 Accounting for Registration Payment Arrangements

Issued December 2006

This FSP addresses an issuer’s accounting for registration payment arrangements. This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FAS 5, Accounting for Contingencies.

The guidance in this FSP amends FAS 133, Accounting for Derivative Instruments and Hedging Activities, and FAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, and FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to include scope exceptions for registration payment arrangements.

This FSP further clarifies that a financial instrument subject to a registration payment arrangement should be accounted for in accordance with other applicable GAAP without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement.

Effective date:

This FSP shall be effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the date of issuance of this FSP. For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of this FSP, this guidance shall be effective for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years.

Emerging Issues Task Force - FASB (EITF)
Description Overview
EITF Issue No. 06-1

Accounting for Consideration Given by a Service Provider to Manufacturers or Resellers of Equipment Necessary for an End-Customer to Receive Service from the Service Provider

Updated September 2006

At its September 20, 2006 meeting, the Board ratified the consensus reached by the Task Force in this Issue.

Download the consensus reached

This abstract  addresses the following issues:

  • Issue 1— Whether the consideration given by a service provider to a manufacturer or reseller (that is not a customer of the service provider) that in turn provides a benefit to the service provider's customer should be characterized as "cash consideration" or "other than cash" consideration for purposes of applying EITF Issue No. 01-9, "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)"
  • Issue 2— Whether the consideration given by a service provider to a manufacturer or a reseller of equipment that benefits a customer of both the service provider and the equipment manufacturer or reseller and where the equipment is necessary for a customer to receive a service from the service provider is, in substance, the same as the service provider giving the consideration directly to the end- customer
  • Issue 3— Whether the consideration given by a service provider to a manufacturer or a reseller (that is not a customer of the service provider) of equipment, when the equipment is necessary for an end-customer to receive a service from the service provider, and where the consideration can be linked to the benefit received by the service provider's customer, should be accounted for in accordance with the model used in Issue 01-9.

Effective date:

The Task Force reached a [consensus] that this Issue should be effective for the first annual reporting period beginning after June 15, 2007. Earlier adoption is permitted for financial statements that have not yet been issued.

EITF Issue No. 06-3

How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income FAS (That Is, Gross versus Net Presentation)

Updated June 2006

At its June 28, 2006 meeting, the Board ratified the consensuses reached by the Task Force in this Issue.

The issues are:

  • Issue 1— Whether the scope of this Issue should include (a) all nondiscretionary amounts assessed by governmental authorities, (b) all nondiscretionary amounts assessed by governmental authorities in connection with a transaction with a customer, or (c) only sales, use, and value added taxes
  • Issue 2— How taxes assessed by a governmental authority within the scope of the Issue (Issue 1) should be presented in the income statement (that is, gross versus net presentation).

The Task Force reached a [consensus] on :

  • Issue 1 that the scope of this Issue includes any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but are not limited to, sales, use, value added, and some excise taxes.
  • Issue 2 that the presentation of taxes within the scope of Issue 1 on either a gross (included in revenues and costs) or a net (excluded from revenues) basis is an accounting policy decision that should be disclosed pursuant to Opinion 22. In addition, for any such taxes that are reported on a gross basis, a company should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. The disclosure of those taxes can be done on an aggregate basis.

The [consensuses] reached in this Issue are not intended to readdress the consensuses in Issues No. 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent," No. 00-10, "Accounting for Shipping and Handling Fees and Costs," and No. 01-14, "Income FAS Characterization of Reimbursements Received for 'Out-of-Pocket' Expenses Incurred."

Effective date:

The [consensuses] in this Issue should be applied to financial reports for interim and annual reporting periods beginning after December 15, 2006. Earlier application is permitted.

EITF Issue No. 06-4

Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements

Updated September 2006

At its September 20, 2006 meeting, the Board ratified the consensus reached by the Task Force in this Issue.

Download the consensus reached

This abstract  addresses the following issue: Whether the postretirement benefit associated with an endorsement split-dollar life insurance arrangement is effectively settled in accordance with either FAS 106 or Opinion 12 upon entering into such an arrangement.

Effective date:

The consensus in this Issue is effective for fiscal years beginning after December 15, 2007, with earlier application permitted.

Entities should recognize the effects of applying the consensus in this Issue through either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods.

EITF Issue No. 06-5

Accounting for Purchases of Life Insurance—Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4

Updated September 2006

At its September 20, 2006 meeting, the Board ratified the consensus reached by the Task Force in this Issue.

Download the consensus reached

This abstract  addresses the following issues:

  • Issue 1— Whether a policyholder should consider any additional amounts included in the contractual terms of the insurance policy other than the cash surrender value in determining the amount that could be realized under the insurance contract in accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance."
  • Issue 2— Whether a policyholder should consider the contractual ability to surrender all of the individual-life policies (or certificates in a group policy) at the same time in determining the amount that could be realized under the insurance contract in accordance with Technical Bulletin 85-4.

Effective date:

The Task Force reached a tentative conclusion that this Issue should be effective for fiscal years beginning after December 15, 2006. Earlier adoption is permitted as of the beginning of a fiscal year for periods in which interim or annual financial statements have not yet been issued.

EITF Issue No. 06-6 Application of Issue No. 05-7

Issued November 2006

Consensuses was reached on EITF Issue No. 06-6 Application of Issue No. 05-7

The issues are:

  1. How a debtor should account for an exchange of debt instruments with substantially different terms
  2.  How a debtor should account for a substantial modification in the terms of an existing debt agreement (other than a troubled debt restructuring)
  3.  If a gain or loss is recognized from an exchange or modification, whether the gain or loss should be classified as extraordinary.

Effective for changes occurring in interim or annual reporting periods beginning after November 29, 2006.

EITF Issue No. 06-7, "Issuer's Accounting for a Previously Bifurcated Conversion Option in a Convertible Debt Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria in FAS 133, Accounting for Derivative Instruments and Hedging Activities

Issued November 2006

An entity may issue convertible debt with an embedded conversion option that is required to be bifurcated under FAS 133 if all of the conditions in paragraph 12 of that FAS are met. An embedded conversion option that initially requires separate accounting as a derivative under FAS 133 may subsequently no longer meet the conditions that would require separate accounting as a derivative. A reassessment of whether an embedded conversion option must be bifurcated under FAS 133 is required each reporting period. When an entity is no longer required to bifurcate a conversion option pursuant to FAS 133, there are differing views on how an entity should recognize that change.

The issue is how an issuer should account for a previously bifurcated conversion option in a convertible debt instrument if that conversion option no longer meets the bifurcation criteria in FAS 133.

The consensus in this Issue should be applied to all previously bifurcated conversion options in convertible debt instruments that no longer meet the bifurcation criteria in FAS 133 in interim or annual periods beginning after December 15, 2006, irrespective of whether the debt instrument was entered into prior or subsequent to the effective date of this Issue. Earlier application of this Issue is permitted in periods for which financial statements have not yet been issued. Retrospective application pursuant to FAS 154 to previously issued financial statements is permitted.

Effective for interim and annual periods beginning after December 15, 2006.

EITF Issue No. 06-8, "Applicability of the Assessment of a Buyer's Continuing Investment under FAS 66, Accounting for Sales of Real Estate, for Sales of Condominiums"

Issued November 2006

Paragraph 37 of FAS 66 provides guidance on what criteria must be met to recognize profit under the percentage-of-completion method for individual units in a condominium project that are being sold separately. One criterion is that the sales price is collectible (paragraph 37(d) of FAS 66). To provide guidance on how entities should assess the collectibility of the sales price, paragraph 37(d) of FAS 66 parenthetically references paragraph 4 of FAS 66.

Under paragraph 4 of FAS 66, "…collectibility of the sales price is demonstrated by the buyer's commitment to pay, which in turn is supported by substantial initial and continuing investments that give the buyer a stake in the property sufficient that the risk of loss through default motivates the buyer to honor its obligation to the seller." Questions have been raised about whether the continuing investment test in paragraph 12 of FAS 66 should be applied in order to conclude that the sales price is collectible and to recognize profit under the percentage-of-completion method.

The issue is whether an entity needs to evaluate the adequacy of the buyer's continuing investment pursuant to paragraph 12 of FAS 66 to recognize profit under the percentage-of completion method.

The Task Force reached a tentative conclusion that this Issue should be effective for  the first annual reporting period beginning after March 15, 2007. Earlier application is permitted as of the beginning of an entity's fiscal year.

EITF Issue No. 06-9, "Reporting a Change in (or the Elimination of) a Previously Existing Difference between the Fiscal Year-End of a Parent Company and That of a Consolidated Entity or between the Reporting Period of an Investor and That of an Equity Method Investee"

Issued November 2006

To allow for more timely preparation of consolidated financial statements, ARB 51 and Opinion 18 allow an entity to consolidate the results of a entity's operations (or recognize changes in the net assets of an equity method investment) as of, and for a period ending not more than three months prior to the parent's or investor's fiscal year-end. In practice, questions have arisen as to how a parent or investor should recognize a change to the reporting year-end of either a consolidated entity or an equity method investee. That change may include a change in or the elimination of the previously existing difference (lag period) due to the parent's or investor's ability to obtain financial results from a reporting period that is more consistent with, or the same as, that of the parent or investor.

The issue is how a parent should recognize the effect of a change to (or the elimination of) an existing difference between the parent's reporting period and the reporting period of a consolidated entity or between the reporting period of an investor and the reporting period of an equity method investee.

Effective for changes occurring in interim or annual reporting periods beginning after November 29, 2006.

Securities and Exchange Commission (SEC)

Release No.  34-54867 Delegation of Authority to Chief Administrative Law Judge

Issued December 2006

The SEC is amending its rules to delegate authority to the Chief Administrative Law Judge to issue orders to discontinue administrative proceedings as to a particular respondent who has died or cannot be found, or because of a mistake in the identity of a respondent named in the order for proceedings. The delegation is intended to conserve Commission resources, as well as expedite disposition of administrative proceedings.

Effective Date: January 8, 2007

Release No. 33-8760 Internal Control Over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers and Newly Public Companies

Issued December 2006

We are extending further for smaller public companies the dates that were published on September 29, 2005, in Release No. 33-8618 [70 FR 56825], for their compliance with the internal control reporting requirements mandated by Section 404 of the Sarbanes-Oxley Act of 2002. Under the extension, a non-accelerated filer is not required to provide management’s report on internal control over financial reporting until it files an annual report for its first fiscal year ending on or after December 15, 2007. If we have not issued additional guidance for management on how to complete its assessment of internal control over financial reporting in time to be of sufficient assistance in connection with annual reports filed for fiscal years ending on or after December 15, 2007, we will consider whether we should further postpone this date. A non-accelerated filer is not required to file the auditor’s attestation report on internal control over financial reporting until it files an annual report for its first fiscal year ending on or after December 15, 2008. We will consider further postponing this date after we consider the anticipated revisions to Auditing Standard No. 2. Management’s report included in a non-accelerated filer’s annual report during the filer’s first year of compliance with the Section  404(a) requirements will be deemed “furnished” rather than filed. Management’s report for foreign private issuers filing on Form 20-F or 40-F that are accelerated filers (but not large accelerated filers) also will be deemed furnished rather than filed for the year that such issuers are only required to provide management’s report. Companies that only provide management’s report during their first year of compliance in accordance with our rules must state in the annual report that the report does not include the auditor’s attestation report and that the company’s registered public accounting firm has not attested to management’s report on the company’s internal control over financial reporting.

We also are adopting amendments that provide for a transition period for a newly public company before it becomes subject to the internal control over financial reporting requirements. Under the new amendments, a company will not become subject to these requirements until it either had been required to file an annual report for the prior fiscal year with the Commission or had filed an annual report with the Commission for the prior fiscal year. A newly public company is required to include a statement in its first annual report that the annual report does not include either management’s assessment on the company’s internal control over financial reporting or the auditor’s attestation report.

Effective Date: February 20, 2007; see effective date section of the release for temporary item exceptions.

 

Outstanding exposure-drafts issued by:

American Institute of Certified Public Accountants (AICPA)
Financial Accounting Standards Board (FASB)
Emerging Issues Task Force - FASB (EITF)
Securities and Exchange Commission (SEC)
 
American Institute of Certified Public Accountants (AICPA)
Description Overview

Exposure draft, Proposed Interpretation 101-16 Under Rule 101: Indemnification, Limitation of Liability, and ADR Clauses in Engagement Letters and Proposed Revision to Interpretation 101-3 Under Rule 101: Performance of Non-attest Services: Forensic Accounting Services and Tax Compliance Services

Issued September 2006

This exposure draft contains important proposals for review and comment by the AICPA’s membership and other interested parties regarding pronouncements for possible adoption by the Professional Ethics Executive Committee (the PEEC, or Committee).

Proposed Interpretation 101-16 Under Rule 101: Indemnification, Limitation of Liability, and ADR Clauses in Engagement Letters

This interpretation provides guidance to members concerning the impact that certain indemnification and limitation of liability provisions may have on a member’s independence when included in engagement letters or other agreements entered into with a client. Certain types of indemnification and limitation of liability provisions in an attest engagement pose an unacceptable threat to a member’s independence because they may result in a member’s performance of insufficient attest procedures in reliance on the belief that the member’s exposure to damages and litigation expense is reduced through the indemnification or limitation of liability provision.

This interpretation also provides guidance on the effect of arrangements whereby the unsuccessful party will pay the legal fees and expenses of the successful party and limitations on the time period in which a client may file a claim or its right to assign or transfer a claim. Finally, this interpretation provides guidance on arrangements whereby a member and client agree to use arbitration, mediation, or other ADR techniques or proceedings to resolve a dispute between them, or agree to waive a jury trial.

Proposed Revision to Interpretation 101-3 Under Rule 101: Performance of Non-attest Services: Forensic Accounting Services and Tax Compliance Services

Upon considering the comments received to the September 15, 2005, proposal and receiving further input from members who perform forensic accounting services, the Committee is proposing to incorporate revised guidance on forensic accounting services into Interpretation 101-3, Performance of Non-attest Services. Accordingly, those forensic accounting services that would be permitted under the proposal would be subject to the general requirements of the interpretation, including the requirement to have the client designate an individual who possesses suitable skill, knowledge, and/or experience to oversee the services and that the requirement that the member establish and document in writing the understanding reached with the client regarding the services to be performed.

Discussion Draft- Clarification of the scope of the audit and accounting guide investment companies and accounting by parent  companies and equity method investors for investments in investments company

Issued August 2006

This Statement of Position (SOP) provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (the Guide). For those entities that are investment companies under this SOP, this SOP also addresses whether the specialized industry accounting principles of the Guide (referred to as investment company accounting) should be retained by a parent company in consolidation or by an investor that has the ability to exercise significant influence over the investment company and applies the equity method of accounting to its investment in the entity (referred to as an equity method investor). In addition, this SOP includes certain disclosure requirements for parent companies and equity method investors in investment companies that retain investment company accounting in the parent company’s consolidated financial statements or the financial statements of an equity method investor.

For purposes of the separate financial statements of an entity, the Guide is applicable to

  1. entities regulated by the 1940 Act or similar requirements (as defined in paragraph 9 of this SOP) and
  2. separate legal entities whose business purpose and activity are investing in multiple substantive investments for current income, capital appreciation, or both, with investment plans that include exit strategies.

This SOP includes guidance on the application of that definition and other factors to consider in determining whether the entity is investing for

  1. current income, capital appreciation, or both or
  2. strategic operating purposes. Entities that are investment companies are required to apply the provisions of the DISCUSSION DRAFT – AUGUST 15, 2006  Guide in presenting their financial statements.

Entities that are not investment companies should not apply the provisions of the Guide. This SOP also provides guidance for determining whether investment company accounting applied by a subsidiary or equity method investee should be retained in the financial statements of the parent company or an equity method investor. That guidance should be used to evaluate relationships between

  1. the parent company or equity method investor and
  2. investees to determine, among other matters, whether the parent company or equity method investor (through the investment company) is investing for current income, capital appreciation, or both, rather than for strategic operating purposes.

If the application of that guidance leads to the conclusion that investment company accounting should not be retained in the financial statements of the parent company or equity method investor, the financial information of the investment company should be adjusted as if investment company accounting had not been applied by the subsidiary or equity method investee for purposes of the consolidated financial statements of the parent company or the application of the equity method of accounting by an equity method investor.

Enhancing the Financial Accounting and Reporting Standard-Setting Process for Private Companies

Issued June 2006

The FASB and the AICPA recognize the importance of for-profit private entities (private companies) to job creation, to entrepreneurialism, and to the overall vitality of our nation’s economy.

Both organizations share a commitment to the needs of constituents of private company financial reporting. In line with this commitment, the FASB and the AICPA recognize the need to carefully evaluate whether financial reporting standards meet the needs of users of private company financial reports and whether the changes can be implemented by private companies in a cost-effective manner.

The FASB and the AICPA are committed to exploring ways to enhance the value, transparency, and cost effectiveness of financial reporting for private companies. This proposal further reflects the mission of the FASB as the standard setter in the United States to establish and improve standards of financial accounting and reporting for both public and private companies.

Specifically, this document proposes

  1. to make certain improvements to the FASB’s current processes for determining whether differences are needed in prospective and existing accounting standards for private company financial reporting and
  2. to sponsor a committee designed to increase private company constituent input in the standard-setting process. In assessing the need for differences for private companies in recognition, measurement, disclosure, and presentation, the FASB will consider the needs of users of financial statements as well as cost-benefit considerations.

Comment period ended on August 15, 2006

Financial Accounting Standards Board (FASB)
Description Overview

Tentative Guidance on FAS 133 Implementation Issues

Issued December 2006

The text of Implementation Issue BH17 is available on the FASB’s Web site.

Exposure Draft Proposed Statement of Financial Accounting Standards Disclosures about Derivative Instruments and Hedging Activities an amendment of FAS 133

Issued December 2006

The FASB has issued an Exposure Draft intended to improve the disclosure requirements in FAS 133 and other relevant literature for derivative instruments and related hedged items. The proposed FAS would require the following:

  • Qualitative disclosure of the objectives and strategies for using derivative instruments.
  • Quantitative tabular disclosure of the notional amounts, fair values, and gains and losses on derivative instruments and related hedged items.
  • Qualitative disclosure of the counterparty credit risk and contingent features in derivative instruments.
  • The balance sheet and income statement location of certain information about derivative instruments.

The FASB believes that the requirements proposed in this Exposure Draft will enhance financial statement users’ understanding of the additional risks an entity may encounter when using derivatives. The Board also believes that the Exposure Draft’s amendments to the current requirements more effectively communicate these risks and that the new provisions will clarify how derivatives and related hedged items affect the financial statements. The requirements included in the Exposure Draft would be effective for financial statements issued for fiscal years and interim periods ending after December 15, 2007; early application is encouraged. The Exposure Draft encourages, but does not require, disclosures for earlier periods at initial adoption. In years after initial adoption, the proposed FAS would require disclosures for earlier periods. Comments are due by March 2, 2007. The text of the Exposure Draft is available on the FASB’s Web site.

Comment period ends on March 2, 2007

NEW

FSP FAS 128-a  Computational Guidance for Computing Diluted EPS under the Two-Class Method

Issued in January 2007

The FASB has issued proposed FSP FAS 128-a to provide guidance for computing diluted earnings per share (EPS) when applying the two-class method. FAS 128 requires the two-class method of computing EPS for securities that are not convertible into a class of common stock. Current guidance provides examples of computing basic EPS under the two-class method, but does not specifically address computing diluted EPS.

According to the proposed FSP, the following three-step process should be used to compute diluted EPS:

1. Compute basic EPS using the two-class method.

2. Compute diluted EPS using total earnings allocated to the common stock under Step 1 (with earnings available/allocated to common shareholders as the numerator).

• If the participating security is also a potential common share, then determine the more dilutive effect under each of the following two approaches:

a. Assume the instrument has been exercised, converted, or issued.

b. Add back the undistributed earnings allocated to the participating security in arriving at basic EPS.

• If the participating security is not a potential common share, determine the dilutive effect using Step 2(b) above.

3. Determine whether diluted EPS is required to be presented for a second class of common stock, in accordance with paragraph 61(d) of FAS 128.

The proposed FSP will have the same effective date as proposed FSP EITF 03-6-a, with all prior-period EPS data adjusted retrospectively.

Comments period ends March 27, 2007

FAS 131-a, Proposed FSP

Determining Whether Operating Segments Have “Similar Economic Characteristics” under Paragraph 17 of FAS 131, Disclosures about Segments of an Enterprise and Related Information

Questions have arisen on how to determine whether two or more operating segments have “similar economic characteristics” for purposes of applying paragraph 17 of FAS 131, Disclosures about Segments of an Enterprise and Related Information. The Board directed the FASB staff to issue this FSP to address these questions.
  • An enterprise is permitted to aggregate two or more operating segments into a single operating segment only if the operating segments meet all of the criteria in paragraph 17 of FAS 131. 

Other issues addressed by the Board are:

  • Should both quantitative and qualitative factors be considered for purposes of determining whether the economic characteristics of two or more operating segments are similar?
  • How should an enterprise identify the factors to consider for purposes of determining whether two or more operating segments have similar economic characteristics?

Download the Proposed FSP.

Comment period ended April 18, 2005.

Proposed FSP FAS 141-b, 142-e, and 144-b Fair Value Measurements in Business Combinations and Impairment Tests

Issued in October 2006

Proposed FSP FAS 141-b, 142-e, and 144-b13 clarifies the guidance on fair value measurements set forth in Statements 141, 142, and 144. It provides interim guidance until FAS 157 becomes effective. All provisions in this proposed FSP, except for the clarification regarding measurement attributes to be applied in a business combination, will no longer apply once FAS 157 is adopted. The proposed FSP addresses the diversity in practice (primarily related to when a reporting entity uses entity-specific assumptions, rather than the assumptions of market participants) concerning the required measurement of non-financial assets at fair value in business combinations and impairment tests.

Effective for financial statements issued for fiscal years beginning after December 15, 2006, and for interim periods within those fiscal years. The proposed FSP should be applied prospectively; earlier adoption is encouraged.

Comment period ended on November 22, 2006

Proposed FSP FAS 144-c Classifying and Accounting for a Depreciable Asset as Held-for-Sale When an Equity Method Investment Is Obtained.

Issued in October 2006

Proposed FSP FAS 144-c states that an entity shall classify a long-lived asset as held-for-sale and cease depreciating the long-lived asset once it meets the held-for-sale criteria. This holds true regardless of whether the entity plans to use the equity method of accounting to account for its direct or indirect interest in the long-lived asset.

Applied prospectively in the first reporting period beginning after the FSP is posted to the FASB’s Web site. Early adoption is permitted for financial statements or interim financial statements that have not yet been issued.

Comment period ended December 15, 2006

Proposed FSP FAS 158-a—Conforming Amendments to the Illustrations in FAS 87, No. 88, and No. 106 and to the Related Staff Implementation Guides

Issued in December 2006

This proposed FSP would make conforming amendments to the illustrations contained in the following appendixes to reflect the provisions of FAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans:

  • Appendix B of FAS 87, Employers’ Accounting for Pensions,
  • Appendix B of FAS 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and
  • Appendix C of FAS 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. This proposed FSP also would make conforming changes to the questions and answers contained in the following FASB Special Reports and incorporate that guidance as new appendixes to Statements 87, 88, and 106, respectively:
  •  A Guide to Implementation of FAS 87 on Employers’ Accounting for Pensions,
  • A Guide to Implementation of FAS 88 on Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and
  • A Guide to Implementation of FAS 106 on Employers’ Accounting for Postretirement Benefits Other Than Pensions.

Those FASB Special Reports would be superseded. The Board notes that incorporating the implementation guidance into appendixes of Statements 87, 88, and 106 would elevate that guidance from Level D to Level A in the GAAP hierarchy. That change would be beneficial to preparers, auditors, and users of financial statements because it would consolidate most of the guidance on accounting for postretirement benefits. Users of subsequent versions of the Original Pronouncements (as amended) would find Statements 87, 88, and 106 along with updated versions of their illustrations and related guidance together in a single volume. That approach is consistent with the objectives of the Board’s current codification project.

This proposed FSP would not amend the standard sections of Statements 87, 88, or 106. This proposed FSP also would not provide any additional implementation guidance for FAS 158 or change any of its provisions. Most of the conforming changes that this FSP would make involve the following:

  1. Changing references to unrecognized gains and losses, unrecognized prior service costs and credits, and unrecognized transition assets and obligations to refer to amounts included in accumulated other comprehensive income
  2. Eliminating reconciliations of the funded status of a defined benefit postretirement plan to amounts recognized in the employer’s statement of financial position
  3.  Eliminating illustrations and guidance on the additional minimum pension liability
  4. Eliminating illustrations and guidance on the measurement date.

The Board invites individuals and organizations to send written comments on all matters in this proposed FSP. Specifically, the Board invites individuals and organizations to comment on whether the amendments in the proposed FSP make the illustrations and related guidance conform to the provisions of FAS 158. If not, what additional amendments or changes should be made?

Comment period ended January 8, 2007

Proposed FSP FIN39-a—Amendment of FIN 39

Issued in December 2006

This FSP addresses:

  • Certain modifications to FIN 39, Offsetting of Amounts Related to Certain Contracts
  • Whether a reporting entity that is party to a master netting arrangement1 can offset the receivable or payable recognized upon payment or receipt of cash collateral against fair value amounts recognized for derivative instruments that have been offset under the same master netting arrangement in accordance with paragraph 10 of Interpretation 39.

Comment period ended January 31, 2007

Proposed FSP FIN 46(R)-d

Issued November 2006

The FASB issued proposed FSP FIN 46(R)-d.

The proposed FSP’s objective is to provide an exception to the scope of Interpretation 46(R).2 The exception would apply to investments accounted for at fair value in accordance with the specialized accounting guidance in the AICPA’s Audit and Accounting Guide, Investment Companies. Interpretation 46(R) indefinitely defers its effective date for investment companies that are not subject to SEC Regulation S-X, Rule 6-03(c)(1), but that are accounting for their investments in accordance with the specialized accounting guidance in the Investment Companies guide. The Board indicated in Interpretation 46(R) that it would consider modifying the Interpretation to provide a scope exception upon the issuance of a Statement of Position (SOP) by the AICPA.

The AICPA has finalized an SOP, Clarification of the Scope of the Audit and Accounting Guide, Investment Companies, and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies. The Board decided that the SOP would be effective in limiting the use of the specialized accounting in the Investment Companies guide to appropriate facts and circumstances. The effective date of the proposed FSP will be upon initial adoption of the final SOP. The transition guidance in paragraph 57 of the SOP should be applied for this FSP as well.

The text of proposed FSP FIN 46(R)-d is available on the FASB’s Web site.

Comments were due by December 22, 2006.

Accounting for Transfers of Financial Assets—an amendment of FAS 140  (Proposed Statement of Financial Accounting Standards)

Issued August 11, 2005

Some of the amendments and clarifications arising from this proposed FAS to FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, are as follows:

  1. It would require that the isolation analysis consider any arrangement or agreement made in connection with a transfer even if it was not entered into at the time of the transfer.
  2. It would require that if the transferee is a qualifying SPE, no arrangement or agreement is made between any holder of beneficial interests issued by the qualifying SPE and the transferor, or its consolidated affiliates or agents that would have caused the assets not to be isolated as required by paragraphs 9(a) and 9(d) if the same arrangement or agreement had involved the qualifying SPE instead of its beneficial interest holders.
  3. It would define a participating interest as a portion of a financial asset that
    1. conveys proportionate ownership rights with priority under the law that is equal to the priority of each other participating interest,
    2. involves no recourse to or subordination by any participating interest holder, and
    3. does not entitle any participating interest holder to receive cash before any other participating interest holder.
  4. It establishes specific conditions for reporting a transfer of a portion (or portions) of a financial asset as a sale
  5. It would replace the term retained interest with other, more specific terms.
  6. It would require that a transferor’s beneficial interest be initially measured at fair value.

The provisions of paragraph 9(a) of FAS 140 (as amended herein) would be applied by both public and nonpublic entities upon issuance of this proposed FAS.

Comment period ended on October 10, 2005.

Proposed Statement of Financial Accounting Standards,

Business Combinations a replacement of FAS 141

The objective of this proposed FAS is that all business combinations be accounted for by applying the acquisition method. In accordance with the acquisition method, the acquirer measures and recognizes the acquiree, as a whole, and the assets acquired and liabilities assumed at their fair values as of the acquisition date.

This proposed FAS would replace FAS 141, Business Combinations. In addition, this proposed FAS would be required to be applied at the same time as Proposed Statement of Financial Accounting Standards, Consolidated Financial Statements, Including Accounting and Reporting of Non-controlling Interests in Subsidiaries.

This proposed FAS would apply prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after December 15, 2006. Earlier application would be encouraged. However, this proposed FAS would be applied only at the beginning of an annual period that begins on or after the date on which this proposed FAS is issued. If this proposed FAS is applied before its effective date, that fact would be disclosed and Proposed FAS, Consolidated Financial Statements, Including Accounting and Reporting of Non-controlling Interests in Subsidiaries, would be applied at the same time.

Comment period ended on October 28, 2005.

Proposed Statement of Financial Accounting Standards,

Consolidated Financial Statements, Including Accounting and Reporting of Non-controlling Interests in Subsidiaries a replacement of ARB No. 51

This proposed FAS would replace Accounting Research Bulletin No. 51, Consolidated Financial Statements, as amended by FAS 94, Consolidation of All Majority-Owned Subsidiaries. It also would establish standards for the accounting and reporting of non-controlling interests (sometimes called minority interests) in consolidated financial statements and for the loss of control of subsidiaries.

This proposed FAS would carry forward, without reconsideration, the provisions of ARB 51, as amended, related to consolidation purpose and policy and certain of the provisions related to consolidation procedure. It would not change the requirement in ARB 51 that all companies in which the parent has a controlling financial interest be consolidated. To facilitate its objective of codification and simplification of U.S. generally accepted accounting principles (GAAP), the Financial Accounting Standards Board (Board) decided to incorporate into this proposed FAS the guidance in ARB 51 and the guidance for the accounting and reporting of non-controlling interests and loss of control of subsidiaries. This proposed FAS also would amend FAS 128, Earnings per Share, to specify the computation, presentation, and disclosure requirements for earnings per share if a parent has one or more partially owned subsidiaries.

This proposed FAS would be effective for annual periods beginning on or after December 15, 2006, with earlier application encouraged. The requirements of this FAS would not be permitted to be applied before the beginning of the annual period in which this FAS is issued. If applied before the effective date, this proposed FAS and proposed FAS 141(R) would be required to be applied at the same time.

Comment period ended on October 28, 2005.

Proposed Statement of Financial Accounting Standards,

The Hierarchy of Generally Accepted Accounting Principles

This proposed FAS is the result of a broader effort by the Board to improve the quality of financial accounting standards and the standard-setting process. The Board believes that improving the GAAP hierarchy, as set forth in AICPA FAS on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles, is an important element of improving the quality of accounting standards and the standard-setting process.

The Board is responsible for identifying the sources of accounting principles and providing enterprises with a framework for selecting the principles used in the preparation of financial statements that are presented in conformity with GAAP. The Board believes that the GAAP hierarchy should be directed to enterprises because it is the enterprise (not its auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP.

Accordingly, the Board concluded that the GAAP hierarchy should reside in the accounting literature established by the FASB and decided to issue this proposed FAS. The Board expects to address:

  1. the complexity of the GAAP hierarchy in its codification and retrieval project, which will integrate GAAP literature into a single authoritative codification, and
  2. the role of FASB Concepts Statements in its conceptual framework project.

This proposed FAS would not result in a change in current practice. This proposed FAS would be effective for fiscal periods beginning after September 15, 2005.

Comment period ended on June 27, 2005.

Proposed Statement of Financial Accounting Standards,

Earnings per Share—an amendment of FAS 128

Revision of Exposure Draft Issued December 15, 2003

Issued in September 2005

This proposed FAS would amend FAS 128, Earnings per Share, to clarify guidance for mandatorily convertible instruments, the treasury stock method, contracts that may be settled in cash or shares, and contingently issuable shares. 

This proposed FAS is a revision of the December 2003 proposed FAS, Earnings per Share, which was issued as part of the Board’s project on short-term international convergence. That proposed FAS would:

  • Amend the computational guidance in FAS 128 for calculating the number of incremental shares included in diluted shares when applying the treasury stock method
  • Eliminate the provision of FAS 128 that allows an entity to rebut the presumption that contracts that may be settled in either cash or shares will be settled in shares
  • Require that shares that would be issued upon conversion of a mandatorily convertible instrument be included in the weighted-average number of ordinary shares outstanding used in computing basic earnings per share (EPS) from the date when future conversion becomes mandatory.

The Board decided that this FAS should be effective for fiscal periods ending after June 15, 2006. The Board does not anticipate significant changes in financial reporting to result from applying the provisions of this FAS and, therefore, does not believe that significant lead time is required prior to implementation. In addition, the Board believes that affected entities will have had ample time to anticipate the changes required by this FAS during the period between deliberations and issuance of a final FAS.

Download the Revision of Exposure Draft

Download the Initial Exposure Draft issued December 15, 2003.

Comment period ended on November 30, 2005

Liabilities and Equity Milestone Draft, Proposed Classification for Single-Component Financial Instruments and Certain Other Instruments

This draft proposes classification requirements for entities that issue or hold single component instruments, including instruments whose payoffs are related to an entity’s own equity instruments. In addition, it addresses certain issues that were raised after the issuance of FAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, particularly in relation to instruments, such as mandatorily redeemable shares, that have ownership characteristics and also require the reporting entity to settle the instrument with cash or other assets.

Under the principles proposed in this draft, the following single-component instruments would be classified as equity:

  1. Perpetual instruments
  2. Direct ownership instruments
  3. Indirect ownership instruments indexed to and settled or ultimately settled with the same direct ownership instruments on which their counterparty payoffs are based.

Other instruments in the scope of this draft would be classified as liabilities or assets.  This draft applies to single-component instruments (arrangements comprising one component). The Board plans to define characteristics of multiple-component instruments in deliberations of its next milestone. 

Consistent with its broader convergence goals, the Board will use this project to further converge with accounting standards developed by the IASB. Presently, the FASB and the IASB plan to conduct this project under a “modified joint approach.”

Proposed Statement of Financial Accounting Standards

The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FAS 115

Issued in January 2006

This proposed FAS would create a fair value option under which an entity may irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities, with changes in fair value recognized in earnings as those changes occur.

An entity would be permitted to elect the fair value option at initial recognition of a financial asset or financial liability or upon an event that gives rise to new-basis accounting for that item. The election of the fair value option would be made on a contract-by-contract basis and would need to be supported by concurrent documentation or a preexisting documented policy.

This proposed FAS would require an entity to report its financial assets and financial liabilities that, pursuant to electing the fair value option, would be subsequently measured at fair value in a manner that separates those reported fair values from the carrying amounts of assets and liabilities subsequently measured using another measurement attribute on the face of the statement of financial position.

This proposed FAS would amend FAS 115, Accounting for Certain Investments in Debt and Equity Securities, to require that securities reported at fair value in accordance with FAS 115 satisfy this financial statement presentation requirement.

This proposed FAS would also require an entity to provide information that would allow users to understand the effect on earnings of changes in the fair values of assets and liabilities subsequently measured at fair value as a result of a fair value election.

Adoption of this proposed FAS would be required as of the beginning of an entity’s first fiscal year that begins after December 15, 2006, with earlier adoption permitted as of the beginning of an entity’s earlier fiscal year that begins after issuance of the final FAS.

Comment period ended on April 10, 2006.

Selected Issues Relating to Assets and Liabilities with Uncertainties

Issued in September 2005

In October 2004, the FASB and IASB embarked on a joint project to develop a converged and improved conceptual framework by building on their existing frameworks. Initial efforts have focused on the objectives of financial reporting and the qualitative characteristics of financial reporting information. 

As part of the project’s next phase, the Boards will discuss assets and liabilities, including the role of probability and uncertainty in defining, recognizing, and measuring assets and liabilities.  The staff’s opinion is that the existing frameworks do not adequately address either probability or uncertainty as they relate to assets and liabilities. To some extent, either probability or uncertainty plays some role in defining, recognizing, and measuring assets and liabilities in both frameworks. However, that role is not always clear, and is at times inconsistent within or between frameworks.

Download the Invitation to Comment

Comment period ended on January 3, 2006.

Bifurcation of Insurance and Reinsurance Contracts for Financial Reporting (Invitation to Comment)

Issued May 2006

The purpose of this FASB Invitation to Comment is to gather input from the buyers and sellers of insurance and reinsurance contracts and the users of their financial statements about the possible bifurcation of those contracts. Bifurcation would divide some or all of these contracts into the following components for financial reporting purposes:

  • Components that transfer significant insurance risk and are accounted for as insurance—for policyholders, that means premiums are expensed during the contract period and the occurrence of an insured event generates an insurance recovery that is recorded as a gain in the income statement.
  • Financing components that are accounted for as deposits—for policyholders, that means premiums paid are recorded as an asset by the policyholder and the recovery from an insured event is a reduction to the deposit with no income statement benefit. The accounting by insurance companies and reinsurance companies (as policyholders) generally mirrors the accounting by non-insurance-company policyholders.

Accounting for insurance contracts affects not only insurance and reinsurance companies, but also non-insurance companies that buy insurance contracts (referred to herein as corporate policyholders). Substantially all entities buy insurance and could be affected by the issues discussed in this Invitation to Comment. This Invitation to Comment does not address the accounting for the insurance components or the deposit components, and nothing in the Invitation to Comment should be interpreted to change current insurance accounting guidance. The terms corporate and company are used for simplicity in this Invitation to Comment and are not intended to suggest that non-corporate entities, such as partnerships and not-for-profit organizations, would not be affected by the issues discussed.

Comment period ended on August 24, 2006

US FASB and IASB Publish First Draft Chapters of Joint Conceptual Framework

Issued July 2006

The US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB)  each published for public comment a consultative document setting out their preliminary views on the first two chapters of an enhanced conceptual framework. The draft chapters define the objective of financial reporting, and the qualitative characteristics of decision-useful financial information. The document is the first to result from the boards’ joint project on the conceptual framework. This project was described in their Memorandum of Understanding published in February 2006, which laid out a joint programme of work for the FASB and the IASB. The work on the conceptual framework will inform both boards’ efforts to achieve the objectives described in the Memorandum of Understanding.

Download the preliminary views

Comment period ended in November 2006

Proposed Statement of Financial Accounting Standards Not-for-Profit Organizations: Mergers and Acquisitions

Issued October 2006

The FASB has issued two separate, but related, Exposure Drafts that address merger and acquisition accounting guidance for not-for-profit organizations. The first Exposure Draft, Not-for-Profit Organizations: Mergers and Acquisitions, outlines the requirements for accounting for a merger or acquisition transaction by a not-for-profit organization. The general objectives of the statement, as proposed, are to:

  • Recognize the identifiable assets acquired and liabilities assumed that compose the business or nonprofit activity acquired in a merger or acquisition.
  • Measure those assets and liabilities at their fair values as of the acquisition date.
  • Recognize either goodwill of the acquired business or nonprofit activity, or the contribution inherent in the merger or acquisition, as a residual based on the value of the identifiable assets acquired, liabilities assumed, and the consideration transferred (if any).
  • Disclose information to enable users of the financial statements to evaluate the nature and financial effects of the merger or acquisition.

The proposed effective date for both Exposure Drafts is the fiscal year that begins about six months after issuance of the respective final FAS. The provisions of the Exposure Drafts are to be applied prospectively.

Comment period ends January 29, 2007

Proposed Statement of Financial Accounting Standards Not-for-Profit Organizations: Goodwill and Other Intangible Assets Acquired in a Merger or Acquisition Issued October 2006

The FASB has issued two separate, but related, Exposure Drafts that address merger and acquisition accounting guidance for not-for-profit organizations. The second Exposure Draft, Not-for-Profit Organizations: Goodwill and Other Intangible Assets Acquired in a Merger or Acquisition, addresses the accounting guidance for intangible assets after a merger or acquisition. This Exposure Draft proposes that not-for-profit organizations provide:

  • Consistent and comparable information about identifiable intangible assets acquired in a merger or acquisition.
  • More relevant information. Not-for-profit organizations would be required to evaluate goodwill for impairment. This requirement would end the amortization of goodwill by those organizations.

The proposed effective date for both Exposure Drafts is the fiscal year that begins about six months after issuance of the respective final FAS. The provisions of the Exposure Drafts are to be applied prospectively.

Comment period ends on January 29, 2007

NEW

Invitation to Comment on Valuation Guidance for financial reporting

Issued January 2007

The FASB has issued an Invitation to Comment (ITC) to solicit views on valuation guidance for financial reporting purposes. A number of organizations currently issue valuation standards; those standards generally focus on professional practice issues and the application of valuation techniques.

Included in the ITC are questions as to (1) whether a need exists for valuation guidance on financial reporting, (2) what role the FASB and appraisal or other organizations should have, (3) what process should be used in issuing valuation guidance, and (4) whether the guidance should be implemented on a national or international level.

Comments period ends April 15, 2007.

Emerging Issues Task Force - FASB (EITF)
Description Overview

Proposed FSP EITF 03-6-a

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

Issued October 2006

Proposed FSP EITF 03-6-a clarifies that rights to receive unpaid dividends or dividend equivalents on unvested share-based payment awards (except the right to receive cash dividends that the holder will forfeit if the award does not vest) constitute participation rights and therefore should be included in the computation of basic earnings per share (EPS) pursuant to the two-class method. A share-based payment award that participates in undistributed earnings via a reduction in the exercise price of the award when distributions are made to common shareholders is not considered a participation right. The proposed FSP also states that dividends or dividend equivalents paid on unvested share-based payment awards shall not be included in the earnings allocation in computing basic EPS.

Effective in the first reporting period beginning after the date the FSP is posted to the FASB’s Web site. All prior-period EPS data presented shall be adjusted retrospectively.

Comment period ends on December 19, 2006

Draft abstract, EITF Issue No. 06-10, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements”

Issued November 2006

Issue 06-10 is a follow-up issue to Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” The consensus reached in Issue 06-4 is that an employer should recognize a liability for future benefits associated with an endorsement split-dollar life insurance arrangement in accordance with FAS 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, or APB Opinion No. 12, Omnibus Opinion — 1967, based on the substantive nature of the agreement with the employee. At issue is whether this consensus should be applied to collateral assignment split-dollar arrangements.

The key difference between an endorsement and a collateral assignment split-dollar arrangement is who owns and controls the underlying life insurance policy — the employer (endorsement) or employee (collateral assignment).

Because employees own and control these policies, employers have historically recorded their interests in collateral assignment split-dollar arrangements as employee receivables, generally recognized at discounted amounts in accordance with APB Opinion No. 21, Interest on Receivables and Payables. As the arrangements are considered tantamount to employee loans, postretirement benefit obligations generally have not been recognized.

The Task Force reached a tentative conclusion that an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar arrangement, in accordance with FAS 106 (if deemed part of a postretirement plan) or Opinion 12 (if not part of a plan). The postretirement benefit should be determined (and measured) based on the substantive agreement with the employee.

The Task Force concluded that an employer remains subject to the risk and rewards associated with the underlying insurance contract that collateralizes the employer’s interest. In addition, an employer’s continuing interest in the underlying insurance contract precludes a “settlement” pursuant to FAS 106. Regarding asset recognition, the Task Force reached a tentative conclusion that the employer should recognize and measure an asset based on the nature and substance of the collateral assignment arrangement. For instance, an arrangement may represent an interest-free loan to the employee (albeit with continuing risk to the employer) equal to a one-time premium payment made on behalf of the employee. In such instances, an asset would be recognized and measured as a receivable and discounted in accordance with Opinion 12. Other arrangements may entitle the employer to recover its premiums paid plus a variable return, measured as the cash surrender value of the policy at the employee’s date of death. In those instances, an asset would be recognized and measured at an amount equal to the policy’s cash surrender value.

This would be effective for fiscal years beginning after December 15, 2007, with earlier application permitted.

Comment period ends January 22, 2007.

Draft Abstract, EITF Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards”

Issued November 2006

Entities may pay dividends (or dividend equivalents) to employees holding affected securities. Compensation expense associated with a share-based award is recorded over the requisite service period, generally resulting in a corresponding deferred tax asset.

The issue is how a realized tax benefit associated with dividends (or dividend equivalents) that are

(1) paid to employees holding affected securities and

(2) charged to retained earnings under FAS 123(R), Share-Based Payment, should be recognized.

The Task Force reached a tentative conclusion that an entity should recognize, as an increase to additional paid-in capital, a realized tax benefit related to in-scope dividends (or dividend equivalents). Amounts recognized should be included in the pool of excess tax benefits available to absorb potential future tax deficiencies on share-based payment awards (i.e., the “APIC pool”). However, to the extent a tax benefit is not realized at the time the dividends (or dividend equivalents) are paid (e.g., situations in which an entity has a net operating loss carryforward), the income tax benefit should not be recognized until the deduction reduces taxes payable (i.e., until the tax benefit is realized). Unrealized amounts are not included in the APIC pool.

This would be effective for annual reporting periods beginning after September 15, 2007. Early application would be permitted for income tax benefits associated with dividends (or dividend equivalents) paid in periods for which financial statements have not been issued.

Comment period ends January 22, 2007.

Download the Open Issues and Proposed Agenda

Download the Description and Status of Current Issues

Securities and Exchange Commission (SEC)

Proposed Release No. 33-8754, Covered Securities Pursuant to Section 18 of the Securities Act of 1933

Issued November 2006

The SEC proposes for comment an amendment to a Rule under Section 18 of the Securities Act of 1933 (“Securities Act”), as amended, to designate certain securities listed on The NASDAQ Stock Market LLC (“Nasdaq”) as covered securities for purposes of Section 18 of the Securities Act. Covered securities under Section 18 of the Securities Act are exempt from state law registration requirements.

Comments period ended December 22, 2006

Proposed Release No. 33-8762 Management's Report on Internal Control Over Financial Reporting (Corrected to Conform to the Federal Register Version)

Issued December 2006

We are proposing interpretive guidance for management regarding its evaluation of internal control over financial reporting. The interpretive guidance sets forth an approach by which management can conduct a top-down, risk-based evaluation of internal control over financial reporting. The proposed guidance is intended to assist companies of all sizes to complete their annual evaluation in an effective and efficient manner and it provides guidance on a number of areas commonly cited as concerns over the past two years. In addition, we are proposing an amendment to our rules requiring management’s annual evaluation of internal control over financial reporting to make it clear that an evaluation that complies with the interpretive guidance is one way to satisfy those rules. Further, we are proposing an amendment to our rules to revise the requirements regarding the auditor’s attestation report on the assessment of internal control over financial reporting.

Comments period ends February 26, 2007

Proposed Release No. 33-8766 Prohibition of Fraud by Advisers to Certain Pooled Investment Vehicles; Accredited Investors in Certain Private Investment Vehicles

Issued December 2006

The Commission is today proposing new rules designed to provide additional investor protections that would affect pooled investment vehicles, including hedge funds. First, the Commission is proposing a rule that would prohibit advisers to pooled investment vehicles from making false or misleading statements or otherwise defrauding investors or prospective investors in those pooled investment vehicles. Second, the Commission is proposing two rules that would revise the definition of accredited investor as it relates to natural persons. The latter rules would apply solely to the offer and sale of interests in certain privately offered investment pools specified in the rules.

Comments period ends March 9, 2007.

SEC Release 34-53020, Termination of a Foreign Private Issuer's Registration of a Class of Securities Under Section 12(g) and Duty to File Reports Under Section 15(d) of the Securities Exchange Act of 1934 Under the current rules, a foreign private issuer may find it difficult to terminate its Exchange Act registration and reporting obligations despite the fact that there is relatively little interest in the issuer's securities among United States investors. Moreover, currently a foreign private issuer can only suspend, and cannot permanently terminate, a duty to report arising under section 15(d).

The proposed rules would permit:

  • the termination of Exchange Act reporting regarding a class of equity securities under either section 12(g) or section 15(d) by a foreign private issuer that meets specified criteria designed to measure U.S. market interest for that class of securities.
  • a foreign private issuer to terminate, and not merely suspend, its section 15(d) reporting obligations regarding a class of debt securities as long as it meets conditions similar to the current requirements for suspending its reporting obligations relating to that class of debt securities.

Comment period ended on February 28, 2006.

SEC Release 34-53560, Application of the Definition of Narrow-Based Security Index to Debt Securities Indexes and Security Futures on Debt Securities

The Commodity Futures Trading Commission  and the SEC  are proposing to adopt a new rule and to amend an existing rule under the Commodity Exchange Act  and to adopt two new rules under the Securities Exchange Act of 1934 ("Exchange Act").

These proposed rules and rule amendments would exclude from the definition of “narrow-based security index” debt securities indexes that satisfy specified criteria. A future on a debt securities index that is excluded from the definition of “narrow-based security index” would not be a security future and could trade subject to the exclusive jurisdiction of the CFTC. In addition, the proposed rules would expand the statutory listing standards requirements to permit security futures to be based on debt securities, including narrow-based security indexes composed of debt securities.

Comment period ends within 30 days of publication in the Federal Register.

Release No. 34-54122, Concept Release Concerning Management's Reports on Internal Control Over Financial Reporting Issued July 2006

The Commission is publishing this Concept Release to understand better the extent and nature of public interest in the development of additional guidance for management regarding its evaluation and assessment of internal control over financial reporting so that any guidance the Commission develops addresses the needs and concerns of public companies, consistent with the protection of investors.

Comment period ended on September 18, 2006

Release No. 34-54154, Amendments to Regulation SHO

Issued July 2006

The SEC is proposing amendments to Regulation SHO under the Securities Exchange Act of 1934 (Exchange Act). The proposed amendments are intended to further reduce the number of persistent fails to deliver in certain equity securities, by eliminating the grandfather provision and narrowing the options market maker exception. The proposals also are intended to update the market decline limitation referenced in Regulation SHO.

Comment period ended on September 19, 2006

Release No. 34-54165, Commission Guidance Regarding Client Commission Practices Under Section 28(e) of the Securities Exchange Act of 1934 Issued July 2006

The SEC is publishing this interpretive release with respect to the scope of “brokerage and research services” and client commission arrangements under Section 28(e) of the Securities Exchange Act of 1934 (“Exchange Act”). The Commission is soliciting further comment on client commission arrangements under Section 28(e).

Effective date: July 24, 2006

Comments should be received on or before September 7, 2006.

Release No. 34-54575 Amendments to Rule 15c3-1 and Rule 17a-11 Applicable to Broker-Dealers also Registered as Futures Commission Merchants

Issued October 2006

Certain SEC-registered broker-dealers are also registered as futures commission merchants (FCM) with the Commodity Futures Trading Commission (CFTC). The SEC’s net capital rule (Rule 15c3-1) imposes minimum financial (net capital) requirements on broker-dealers and was intended to conform with the CFTC’s adjusted net capital rule. The CFTC amended its rule and adopted certain new net capital requirements applicable to FCMs. Therefore, the SEC is proposing to amend Rule 15c3-1 to reflect the amendments to the CFTC’s rule. In addition, the SEC is proposing to amend certain rules related to subordinated debt agreements to conform those rules to the CFTC’s amended net capital rules. Finally, the SEC is proposing to amend its early-warning provisions (Rule 17a-11) to require broker-dealers also registered as FCMs to notify the SEC when they are required to warn the CFTC or a designated self-regulatory organization that its adjusted net capital has fallen below specified levels.

Comment period ended on November 13, 2006.

Release No. 34-54863 Proposed Amendments to Municipal Securities Disclosure

Issued December 2006

The Commission is publishing for comment proposed amendments to a rule under the Securities Exchange Act of 1934 (“Exchange Act”) relating to municipal securities disclosure which would delete references to the Municipal Securities Rulemaking Board (“MSRB”) as a recipient of material event notices filed by or on behalf of issuers of municipal securities or other obligated persons.

Comment period ended January 8, 2007.

Release No.34-54888 Short Selling in Connection With A Public Offering

Issued December 2006

The SEC is proposing amendments to Regulation M concerning the anti-manipulation rules for securities offerings that would further safeguard the integrity of the capital raising process and protect issuers from manipulative activity that can reduce issuers’ offering proceeds and dilute security holder value. The proposal would prevent a person from effecting a short sale during a limited time period, shortly before pricing, and then purchasing, including entering into a contract of sale for, such security in the offering.

Comment period ends February 12, 2007.

Release No.34-54891 Amendments to Regulation SHO and Rule 10a-1

Issued December 2006

The SEC is proposing to amend the short sale price test under the Securities Exchange Act of 1934 (“Exchange Act”). The proposed amendments are intended to provide a more consistent regulatory environment for short selling by removing restrictions on the execution prices of short sales (“price tests” or “price test restrictions”), as well as prohibiting any self – regulatory organization (“SRO”) from having a price test. In addition, the Commission is proposing to amend Regulation SHO to remove the requirement that a broker-dealer mark a sell order of an equity security as “short exempt,” if the seller is relying on an exception from a price test.

Comment period ends February 12, 2007.

Release No.34-54946 Definitions of Terms and Exemptions Relating to the "Broker" Exceptions for Banks

Issued December 2006

The Board and the Commission jointly are issuing, and requesting comment on, proposed rules that would implement certain of the exceptions for banks from the definition of the term “broker” under Section 3(a)(4) of the Securities Exchange Act of 1934 (“Exchange Act”), as amended by the Gramm-Leach-Bliley Act (“GLBA”). The proposed rules would define terms used in these statutory exceptions and include certain related exemptions. In developing this proposal, the Agencies have consulted with the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”) and the Office of Thrift Supervision (“OTS”). The proposal is intended, among other things, to facilitate banks’ compliance with the GLBA.

Comment period ends March 26, 2007.

Release No.34-54947 Exemptions for Banks Under Section 3(a)(5) of the Securities Exchange Act of 1934 and Related Rules

Issued December 2006

The SEC is publishing for comment proposed rules and rule amendments regarding exemptions from the definitions of “broker” and “dealer” under the Securities Exchange Act of 1934 (“Exchange Act”) for banks’ securities activities. In particular, the Commission is re-proposing a conditional exemption originally proposed in 2004 that would allow banks to effect riskless principal transactions with non-U.S. persons pursuant to Regulation S under the Securities Act of 1933 (“Securities Act”). The Commission also is proposing to amend and redesignate an existing exemption from the definition of “dealer” for banks’ securities lending activities as a conduit lender. In addition, the Commission is proposing to amend a rule that grants a limited exemption from U.S. broker-dealer registration for foreign broker-dealers, conforming the rule to amended definitions of “broker” and “dealer” under the Exchange Act. Finally, the Commission is requesting comment on its intention to withdraw a rule defining the term “bank” for purposes of Sections 3(a)(4) and 3(a)(5) of the Exchange Act, because of judicial invalidation, a time-limited exemption for banks’ securities activities, because of the passage of time, and an exemption from the definition of “broker” and “dealer” for savings associations and savings banks, an exemption no longer necessary because of the passage of the Regulatory Relief Act.

Comment period ends March 26, 2007.

Release No.34-55005 Termination of a Foreign Private Issuer's Registration of a Class of Securities Under Section 12(G) and Duty to File Reports Under Section 13(A) or 15(D) of the Securities Exchange Act of 1934

Issued December 2006

We are reproposing amendments to the rules that govern when a foreign private issuer may terminate the registration of a class of equity securities under section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act") and the corresponding duty to file reports required under section 13(a) of the Exchange Act, and when it may cease its reporting obligations regarding a class of equity or debt securities under section 15(d) of the Exchange Act. Under the current rules, a foreign private issuer may find it difficult to terminate its Exchange Act registration and reporting obligations despite the fact that there is relatively little interest in the issuer's U.S.-registered securities among United States investors. Moreover, currently a foreign private issuer can only suspend, and cannot terminate, a duty to report arising under section 15(d) of the Exchange Act. Reproposed Exchange Act Rule 12h-6 would permit the termination of Exchange Act reporting regarding a class of equity securities under either section 12(g) or section 15(d) of the Exchange Act by a foreign private issuer that meets a quantitative benchmark designed to measure relative U.S. market interest for that class of securities, which does not depend on a head count of the issuer's U.S. security holders. The reproposed benchmark would require the comparison of the average daily trading volume of an issuer's securities in the United States with that in its primary trading market. Because the Commission did not fully address this approach when it originally proposed Rule 12h-6, and because of other proposed changes to Rule 12h-6 not fully discussed in the original rule proposal, we are reproposing Rule 12h-6 and the accompanying rule amendments. These rule amendments would seek to provide U.S. investors with ready access through the Internet on an ongoing basis to material information about a foreign private issuer of equity securities that is required by its home country after it has exited the Exchange Act reporting system.

Comment period ends February 12, 2007

UPDATE

RELEASE NOS. 34-55147; IC-27672;

Universal Internet Availability of Proxy Materials

 

 

 

 

 

 

E-Proxy Rule Amendments

Issued January 2007

As discussed in the December issue of Accounting Roundup, the SEC voted to adopt amendments to its proxy rules that would allow companies to furnish proxy materials to shareholders over the Internet through a “notice-and-access” model. In January, the SEC proposed additional amendments to the proxy rules that would require companies to furnish proxy materials to shareholders by posting the materials on the Internet and providing shareholders with notice of their availability. The intention of the proposed amendments is to provide all shareholders the ability to choose the method in which they receive proxy materials, lower the cost of proxy solicitations from utilization of Internet technology, and ultimately to improve shareholder communication. The SEC believes that universal Internet availability of proxy materials can significantly enhance investors’ ability to make more informed voting decisions.

The proposed rule would be effective for large accelerated filers, not including registered investment companies, on January 1, 2008, and for all other issuers, including registered investment companies, on January 1, 2009.

Comment period ends March 30, 2007.

Issued December 2006

The SEC voted to adopt amendments to its proxy rules that would allow companies to furnish proxy materials to shareholders over the Internet through a “notice-and-access” model. The Commission also voted to propose rule changes that would require companies and soliciting persons to follow the notice-and-access model for all solicitations not related to a business combination transaction in the future.

Comments on the rule amendments should be received by the Commission within 60 days of their publication in the Federal Register.

The press release is available on the SEC’s Web site. According to the press release, the proposed rule amendments will be posted as soon as they are available.

Release No. IC-27395, Investment Company Governance

Issued July 2006

On April 7, 2006, a federal appeals court invalidated certain amendments adopted by the SEC to rules under the Investment Company Act of 1940 (“Act”). The Court found that the Commission had failed to seek comment on the data used to estimate the costs of the amendments, but suspended issuing its mandate in order to give the Commission an opportunity to request further comment. Because the Court’s decision called into question the regularity of our proceedings, the Commission now invites further comment on the amendments, including particularly their costs. The amendments, first proposed on January 15, 2004, would impose two conditions on investment companies (“funds”) relying on certain exemptive rules. First, fund boards would have to be comprised of at least 75 percent independent directors. Second, the boards would have to be chaired by an independent director. In addition to the costs of the two conditions, commenters may address any issue related to the underlying purpose of the two conditions, which is the protection of funds and fund shareholders. As required by section 2(c) of the Investment Company Act, the Commission specifically seeks comment on whether the proposed rule amendments will promote efficiency, competition, and capital formation.

Comment period ended on August 21, 2006

Release No.IC-27600 Investment Company Governance

Issued December 2006

The Commission is reopening the comment period on its June 2006 request for comment regarding amendments to investment company (“fund”) governance provisions. The purpose of the additional comment period is to permit public comment on two papers prepared by the Office of Economic Analysis on this topic that will be made public by including them in the comment file. The comments the Commission receives will be used to inform our further consideration of the matter.

Comment period ends March 2, 2007

Download the Complete list of SEC Proposed Rules
 
This document serves merely as a summary; for more detailed information, readers should consult the original document. No measures should be taken without prior consultation with your professional advisor.

Publish date: January 31, 2007. This page does not reflect changes made by standard-setting bodies after this date.

 
 
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