A & A Alert - January 2013

On December 6, 2012, the Private Company Council (PCC), a new body created to improve the standard-setting process for private companies, held its inaugural meeting in Norwalk, Connecticut.

The PCC was established in May 2012 by the Board of Trustees of the Financial Accounting Foundation (FAF) to work with the Financial Accounting Standards Board (FASB) to determine the need for modifications of U.S. Generally Accepted Accounting Principles (GAAP) for private companies. 

At the meeting, the PCC identified four initial areas to research for agenda consideration, as follows:

• Consolidation of variable interest entities
• Accounting for “plain vanilla” interest rate swaps 
• Accounting for uncertain tax positions 
• Recognizing and measuring, at fair value, various intangible assets (other than goodwill) acquired in business combinations

While the PCC will also be considering other items, it was noted during the meeting that these four topics have consistently come up as potential issues for private companies with regards to financial reporting requirements.

The initial agenda items stemmed from recommendations by constituents providing written input to the Blue-Ribbon Panel on Standard Setting for Private Companies in 2010 and by participants in private company roundtables held in 2010 and 2011. The PCC will expand discussions of these topics during 2013 in collaboration with the FAF and the FASB.

Readers should not act upon information presented without individual professional consultation.

The Accounting and Review Services Committee (ARSC) of the AICPA has undertaken a clarity project that intends to make compilation and review standards easier to read, understand and apply.

In May 2010, the ARSC approved a project to revise all existing compilation and review standards in the Codification of Statements on Standards for Accounting and Review Services (AR sections).

This project is similar to the one undertaken by the Auditing Standards Board (ASB) to redraft all auditing sections in Codification of Statements on Auditing Standards.

In connection with this project, the ARSC recently issued an Exposure Draft which proposes changes to Statements on Standards for Accounting and Review Services (SSARSs). 

The ARSC has determined that there would be certain differences between its clarity drafting conventions and those adopted by the ASB. Specifically, the ARSC has determined not to include specific application guidance with respect to governmental entities and smaller, less complex entities. Accordingly, the proposed SSARSs have been drafted in accordance with the ARSC’s clarity drafting conventions, which include the following:

• Establishing objectives for each clarified AR section
• Including a definitions section, where relevant, in each clarified AR section
• Separating requirements from application and other explanatory material
• Numbering application and other explanatory material paragraphs using an A- prefix and presenting them in a separate section that follows the requirements section
• Using formatting techniques, such as bulleted lists, to enhance readability

The ARSC previously issued an Exposure Draft related to compilation of financial statements. The proposed SSARSs Review of Financial Statements and Review of Financial Statements—Special Considerations would be effective for reviews of financial statements for periods ending on or after December 15, 2014. Early implementation would not be permitted.

Comments in response to this Exposure Draft are due April 26, 2013. The full text of the Exposure Draft is available by clicking here.

Readers should not act upon information presented without individual professional consultation.

The FASB has issued a proposed Accounting Standards Update (ASU), Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.

The proposed amendments would clarify the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. 

The main objective in developing the proposal was to address implementation issues about the scope of ASU No. 2011-11. Stakeholders have indicated that the scope in ASU No. 2011-11 is unclear and that diversity in practice may result. Some stakeholders have indicated that standard commercial provisions of many contracts would equate to a master netting arrangement.

The proposed amendment would clarify that the scope of ASU No. 2011-11 would apply to derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to a master netting arrangement or similar agreement.

Entities with other types of financial assets and financial liabilities subject to a master netting arrangement or similar agreement also would be affected as they would no longer be subject to the disclosure requirements in ASU No. 2011-11.

The proposed ASU would require an entity to apply the amendments for annual reporting periods beginning on or after January 1, 2013.

The full text of the Exposure Draft is available by clicking here.

Readers should not act upon information presented without individual professional consultation.