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Accounting And Auditing

Below is some of the most recent Compliance Week coverage on issues related to accounting and auditing. Coverage focuses on developments emanating from FASB and the PCAOB—on issues as diverse as FIN 48, "fair value," auditor independence and more—but extends to broader financial reporting issues as well. The list below shows the most recent articles first.

FASB, IASB Plan to Resume Talks on Lease Accounting

April 18, 2014

The Financial Accounting Standards Board will resume talks next week with the International Accounting Standards Board to see if the two boards can agree on how to revise their joint standard on lease accounting. The boards plan to focus on lease modifications, contract combinations, and determining the discount rate. More details inside.

FASB Revises Rules for Discontinued Operations

April 11, 2014

Companies have new rules to follow on how to report on discontinued operations. The Financial Accounting Standards Board published a new standard to refine the guidance around what constitutes a discontinued operation, narrowing the definition of such asset disposals and explaining how it should be presented in financial statements. Full details inside.

Investors Seek Less Noise in Disclosures, Says NACD

April 02, 2014

While regulators ponder how to address concerns of disclosure overload, major investors would welcome alternative placement for certain kinds of information, such as on corporate websites instead of in regulatory filings, says Peter Gleason, a managing director for the National Association of Corporate Directors. "They are advocating for more disclosure, but in different places than the filed document," Gleason says.

FASB, IASB Differ on Accounting Model for Leasing

March 20, 2014

After two days of joint meetings, the Financial Accounting Standards Board and the International Accounting Standards Board recently arrived at some common conclusions about how to address short-term leases and the terms associated with lease contracts. Still elusive, however, is agreement on how to recognize the expense associated with leased assets. More inside.

FASB Stands Firm on Fair Value Rules After Review

March 11, 2014

The Financial Accounting Standards Board has no plans to consider significant changes to its fair-value measurement rules after a post-implementation review concluded things are working essentially as intended. Although the review indicated that some investors found the resulting disclosures confusing and that it added cost to the audit, FASB Chairman Russ Golden says the board sees no need to conduct further review. More inside.

FASB Proposes Rules for Evaluating Financial Disclosures

March 05, 2014

The Financial Accounting Standards Board has taken another early step in a long journey to overhaul financial statement disclosures with a proposal for how the board would evaluate disclosure requirements when considering existing or potential new standards.

Review Cites SEC, PCAOB as Fair Value Cost Drivers

February 25, 2014

A study of fair-value accounting rules finds the standard helped to drive up companies' cost of compliance, although the rules, adopted in 2008, broadly give a better sense of a company's financial picture. Even so, the report continued, many investors don't find the information terribly useful. More inside.

What the Future of Goodwill Impairment Might Look Like

February 25, 2014

Goodwill has long been one of the great intangibles on the corporate balance sheet. Now FASB is considering how to overhaul the migraine-inducing chore of testing goodwill for impairment. The implications for corporate accounting—and corporate mergers—could be significant. "Clearly there are some things that can be done to simplify the test," says Mark Beilstein of KPMG. "But there's a tradeoff. Do the benefits outweigh the cost?"

FASB Retreats Back to GAAP on Insurance Accounting

February 24, 2014

In another about face from convergence, the Financial Accounting Standards Board has decided to step back from a joint project with the International Accounting Standards Board on insurance contracts and take a more GAAP-like approach. FASB determined that the feedback to its proposal for a new standard on insurance contracts proved too problematic for non-insurance entities that would be affected. More inside.

FASB in Nearly Full Retreat on Accounting for Financial Instruments

February 19, 2014

Nearly nine years after the Financial Accounting Standards Board set off on a journey to overhaul the accounting for financial instruments, the trail has led back to current rules. The board has scaled back plans and now searches for a way simply to smooth the rough edges of existing standards. "We breathed a huge sigh of relief," says Mike Gullette, vice president of accounting and financial management for the American Bankers Association.

FASB Considers Direct Write-off of Goodwill

February 14, 2014

Public companies exhausted with tracking and testing goodwill on their balance sheets might one day get the ultimate simplification to their accounting woes: just write it off. During a recent meeting, FASB directed its staff to research the idea of allowing direct write-off of goodwill to spare companies the testing and measurement required under current rules. More details inside.

Court Stands Up to Contingency Disclosure Demands

February 05, 2014

A recent court decision on a securities class-action lawsuit may give companies more ammunition to fight demands for increasingly speculative disclosure related to uncertain legal actions. A federal judge ruled that defense contractor SAIC wasn't liable for not disclosing potential legal losses earlier, since the outcome of the case was too uncertain. More details inside.

Lease Uncertainty Breeds IT Uncertainty, Survey Says

February 04, 2014

Uncertainty about what the final standard for lease accounting will contain and when it will be issued is complicating and even delaying some IT systems implementations, according to a recent survey from Deloitte. Respondents said complying with the new standard will be difficult because they have concerns over the effectiveness of their IT systems and the quality of the data that's available. More inside.

FASB Turns Up GAAP Focus as FAF Sends $3M to IASB

January 31, 2014

Confirming its commitment to focus on U.S. Generally Accepted Accounting Principles, the Financial Accounting Standards Board updated its agenda to emphasize GAAP priorities. FASB Chairman Russ Golden said the board will wrap up its major convergence projects and will move forward focusing on GAAP improvements. More inside.

FASB Readies Final Standard on Repurchase Agreements

January 16, 2014

The Financial Accounting Standards Board will soon issue its final word on how companies should account for repurchase agreements. It will require companies to consider whether they retain effective control over an asset and, if so, to account for any transfer as a secured borrowing rather than a sale if the company is obligated to buy it back. More inside.

FASB Opts for 'Known Complexity' in Financial Instruments

January 07, 2014

The Financial Accounting Standards Board is taking a bold step away from convergence on financial instruments and impairments. FASB will stick with the current guidance that calls for bifurcation, or separation of the elements, in hybrid or complex financial instruments—a move that is at odds with the direction the International Accounting Standards Board has advocated. More inside.

SEC Adds Comprehensive Disclosure Review to Its Plate

January 07, 2014

The Securities and Exchange Commission recently filed its review of disclosures and company filings. And while the study was short on specific recommendations, the SEC did promise a more comprehensive review of required disclosures to trim and streamline unnecessary and redundant information. In a statement, SEC Chairman Mary Jo White said she has directed SEC staff to develop "specific recommendations for updating the rules that dictate what a company must disclose in its filings."

SEC: Trim Unnecessary Information From Financial Reports

December 31, 2013

The SEC is telling companies that when it comes to disclosure, less is more. During a recent accounting conference, SEC officials suggested that companies reduce immaterial disclosure, even in the absence of specific rules or guidance to do so. "What we're really looking for is clear, effective disclosure," said Nili Shah, deputy chief accountant at the SEC.

What's in Store for Accounting and Auditing Next Year

December 31, 2013

For accountants and auditors, 2014 will be all about revenue recognition, as the Financial Accounting Standards Board plans to issue its long-awaited standard on the topic. "There will be a lot of changes for a number of companies," says Bob Laux, senior director of financial accounting and reporting at Microsoft. Inside, we look at the accounting and audit developments that will unfold in 2014.

Preparers Should Note Changes in 2014 Taxonomy, FASB Says

December 27, 2013

As preparers dig into the recently issued 2014 U.S. GAAP Financial Reporting Taxonomy to complete their next XBRL filing, they should pay close attention to some changes from the August exposure draft, says Louis Matherne, chief of taxonomy development at the Financial Accounting Standards Board. His hints are inside.

FASB Finalizes Guidance on Public, Private Entities

December 26, 2013

The Financial Accounting Standards Board has published its formal definition of a public business entity, which should surprise exactly no one: any business required to file or furnish financial statements with the Securities and Exchange Commission or similar regulatory agencies. FASB also published its final framework for adopting accounting standards specifically for private businesses. More inside.

FASB Finishes Taxonomy, FERF Research Aids Users

December 20, 2013

The Financial Accounting Standards Board has finalized its 2014 U.S. GAAP Financial Reporting Taxonomy, which now goes to the Securities and Exchange Commission for final acceptance. FASB's annual update led to changes in the taxonomy as a result of updates to accounting standards and other suggested improvements. More details inside.

Seidman Takes New Role in Accounting Leadership

December 11, 2013

Leslie Seidman, former chairman of the Financial Accounting Standards Board, is leading an effort at the Lubin School of Business at Pace University to establish a new "center for excellence" focused on financial reporting.

FASB, IASB to Tackle Lease Issues in January

December 10, 2013

The Financial Accounting Standards Board and the International Accounting Standards Board will meet in January to discuss ways to simplify plans to bring leases onto the balance sheet. They plan to review a wide range of feedback on a joint rule proposal, including calls for the accounting rulemakers to abandon the entire lessor side of lease accounting and focus just on changes for lessees. More inside.

Foundation Says IFRS Becomes Global Preference

December 09, 2013

International Financial Reporting Standards have become the primary global language for financial reporting, according to the IFRS Foundation, with 101 countries requiring IFRS for all more most listed companies and an additional 21 countries, including the United States, permitting certain provisions of IFRS.

FASB Promises Review of Tax Accounting Rules

December 04, 2013

The Financial Accounting Standards Board has promised to re-examine some of the more vexing areas of tax accounting, including the accounting for transfer pricing. A review conducted by the Financial Accounting Foundation found that FAS 109: Accounting for Income Taxes generally met its objectives, but has done little to cut through complexity associated with accounting for income taxes. More details inside.

Private Company Accounting Changes Spark Debate Over Simplification

December 03, 2013

The move to create exceptions to accounting rules for private companies is sparking a larger debate over simplification, with some pushing for more simplification for public companies too and purists on the other side fretting over a dual set of rules. "One of the dangers is comparability. There's a reason for the way things have been for so many years," says Denise Moritz, senior manager at accounting firm WeiserMazars.

Private Entities Win GAAP Options; Debate Continues

November 26, 2013

Private companies have won two critical exceptions to accounting standards, which may eventually affect requirements for public companies as well. The Financial Accounting Standards Board approved exemptions that will give private companies the option of using simpler methods for dealing with goodwill impairments and for hedge accounting involving interest rate swaps. More inside.

Goodwill Impairments Spiked Last Year

November 26, 2013

Writedowns of goodwill are soaring—up 76 percent last year, to a total of $51 billion—but corporations still seem reluctant to use a new method to test when writedowns of goodwill may be warranted. Why not? The new test is still complicated, experts say, and it may not give an answer you like anyway. "There's actually a lot of documentation required to support an assertion that you've passed," says Brian Marshall, a partner with McGladrey. More inside.

Tax Rules Work; Stock Option Expensing Up for Review

November 20, 2013

Rules governing how to account for income taxes are generally working as intended, although they do little to cut through the complexity of tax compliance, says the Financial Accounting Foundation following a recent post-implementation review. It also found that the standard had no significant effect on operating or financial reporting practices. Focus now turns to a planned review of stock option expensing.

FASB Set to Issue Final Standard on Revenue Recognition

November 12, 2013

FASB has cleared the way to finish its standard on revenue recognition, which it plans to release during the first quarter of 2014. The board made final decisions on such issues as variable consideration, licenses, and collectibility and has instructed its staff to put the finishing touches on the draft. The standard will lean heavily on the term "probable" to make decisions on when to recognize revenue in complex situations. Details inside.

FASB Finishes Talks on Revenue Recognition

November 06, 2013

The Financial Accounting Standards Board has wrapped up discussion and is drafting the final language for a new standard on revenue recognition after 11 years of charting a new course. The board voted five to one to instruct FASB staff to draft the final standard and circulate it for a final internal review. FASB says it expects to issue the final standard at some point in the first quarter of 2014. More details inside.

International Users Press to Put Leases on Balance Sheet

November 06, 2013

A user advisory group for the International Accounting Standards Board is urging IASB to push forward with plans to put all leases on the balance sheet, even as some U.S. investors are lobbying the Financial Accounting Standards Board to scale back on its plans to revise lease accounting. The group says it hopes IASB will conclude deliberations by year-end. More inside.

FASB Looks Inward at Improving GAAP

November 01, 2013

As the decade-long focus on convergence winds down, the Financial Accounting Standards Board is recommitting itself to making U.S. accounting standards work for U.S. capital market needs. In a recent speech, Chairman Russ Golden said FASB would focus on ensuring U.S. accounting standards are consistent and relevant. More inside.

FASB Extends EITF Proposals for Public Comment

October 29, 2013

The Financial Accounting Standards Board is looking for feedback on two proposed updates to accounting standards—one on equity compensation, the other on hybrid financial instruments—recommended by the board's Emerging Issues Task Force. The proposed guidance attempts to settle some diversity in practice that has developed in the absence of specific guidance. Details inside.

Will FASB's Going Concern Warning Rule Work in the Real World?

October 08, 2013

The Financial Accounting Standards Board is currently weighing feedback to its latest proposal to require companies to issue new disclosures about going-concern risks. Critics say the proposed standard will be a lightning rod for litigation, contains too many subjective terms, and is too based on judgment rather than facts. "It should be limited to things that are known or knowable," says Rick Day, a partner at audit firm McGladrey.

Even Investors Disagree on How to Flag Bad Loans

October 07, 2013

It's not just the rulemakers who are having trouble agreeing on the best way to account for credit impairments. Investors don't agree on the best approach either. A new poll of global investors found them split on the best method: 47 percent back the International Accounting Standards Board's method, while 44 percent prefer the Financial Accounting Standards Board's. More inside.

Equity Analysts Waver on Lease Accounting Proposal

October 01, 2013

Credit analysts have told the Financial Accounting Standards Board and the International Accounting Standards Board that they generally support putting leases on the balance sheet, but equity analysts had some reservations, according to an IASB staff report. The boards are gathering more feedback as they work to finish a new standard for lease accounting, after their latest proposal was roundly criticized. More inside.

FASB Asked to Focus on Disclosure Framework

September 17, 2013

Those with a stake in the setting of accounting standards are telling the Financial Accounting Standards Board to make work on a new approach to disclosures the priority. A survey of accountants, academics, users of financial statements, and others found that a new disclosure framework is at the top of the wish list. They say they want standards that are simpler and more user friendly. More results inside.

FASB Passes on Providing Easier Accounting for Clawbacks

September 17, 2013

More companies are attaching clawback policies and other discretionary features to their stock compensation awards, which can introduce complex and murky accounting. But don't expect any help from the Financial Accounting Standards Board. FASB recently declined an invitation to issue new guidance to simplify accounting for clawbacks, which means companies will have to find their own way. More details inside.

FASB Charts New Course as Convergence Wanes

September 13, 2013

With the convergence era winding down, new leadership at the Financial Accounting Standards Board is setting a course for long-term co-existence with the International Accounting Standards Board. FASB Chairman Russ Golden, who assumed his post July 1, said it's time for the bilateral convergence movement between FASB and IASB to "evolve" to reflect the influence of national standard setters. More inside.

FASB Panel Says Ditch Lease Accounting Proposal

September 04, 2013

An investor advisory panel has told the Financial Accounting Standards Board it should ditch its overly complicated proposed standard on lease accounting and just require some new disclosures with current accounting instead. The committee told FASB that its distinction between property and equipment leases is not important to investors. More inside.

2014 GAAP Taxonomy Contains Far Fewer Changes

August 30, 2013

Good news: The 2014 U.S. GAAP taxonomy for XBRL that the Financial Accounting Standards Board previewed last week looks a lot like the 2013 GAAP taxonomy. The proposed 2014 taxonomy is now available for inspection, and preparers will be happy to see that it contains far fewer changes than it has in prior years. More details inside.

FAF Chooses Stock Option Expensing for Next Review

August 21, 2013

The Financial Accounting Foundation has decided to take a deep dive into the accounting rules for stock-option expensing, to see whether they are accomplishing the objectives set out by the Financial Accounting Standards Board when it adopted the controversial standard in 2004. FAF is currently working on a review of accounting rules for fair-value measurements and plans to issue the results later this year or early next year. More inside.

Companies Getting a Jump on New Revenue Recognition Standard

August 06, 2013

If you're going to panic, you might as well panic early—that's the strategy of financial reporting executives, already scrambling to prepare for sweeping new standards on recognizing revenue that take effect in 2017. Indeed, SEC rules require companies to digest some of the new standards now. "These are things companies should start to think about soon," says Paul Munter, a partner with audit firm KPMG.

FASB Settles Differences in Unrecognized Tax Benefits

July 19, 2013

Companies have a new accounting rule to follow explaining how they should present unrecognized tax benefits when they also have a net operating loss or a tax credit to carry forward. The Financial Accounting Standards Board adopted the standard to set companies straight after it realized companies were presenting such tax benefits in different ways. Details inside.

Insurance Accounting Proposal Pulls Many Non-Insurers in Too

July 16, 2013

A substantial change in insurance accounting recently proposed by the Financial Accounting Standards Board could resonate well beyond insurance company circles, affecting companies that issue product warranties, financial guarantees, and similar contracts. "You'd think it's about the insurance industry, but it's much broader than that," says Robert Rostan, principal and CFO at corporate training firm Training the Street. More inside.

FASB to Require Troubled Companies to Fly a Red Flag

July 09, 2013

FASB proposed a new accounting standard last week that will require companies to disclose if they think they will have trouble meeting financial obligations in the next 24 months; some fear the going-concern warning could create a death spiral effect. "This is a particularly sensitive disclosure because of the concern that the disclosure itself ends up becoming a self-fulfilling prophecy," says Stanley Keller, a partner with law firm Edwards Wildman Palmer.

FASB, IASB Plan Roundtables on Lease Standard

July 03, 2013

To get a good pulse on how their lease accounting proposal is being received in various parts of the world, the Financial Accounting Standards Board and the International Accounting Standards Board will host a series of roundtable meetings around the globe. FASB's early comment letters, however, are not producing ringing endorsements of the proposal.

This Year's Stealth Headache: New Rules for Offsetting Disclosures

July 02, 2013

Halfway through the 2013 reporting year, the surprise headache for financial reporting executives seems to be new disclosure requirements about how assets and liabilities on the corporate balance sheet are offset and reported as net positions. "This was a sleeper for some," says Sherif Sakr, a partner at Deloitte & Touche. "Some companies perhaps underestimated the effort that would go into the process." More inside.
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