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Accounting Practices - What You Need to Know |
Resources |
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Topics
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News of Noteworthy Events and Trends
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Trend-Setting Quotes
Accounting Standards Codification The FASB's Accounting Standards Codification went live on July 1, 2009.
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Pressure Points Even the most financially-literate board members and the most accounting-savvy investors are likely to face formidable challenges, thanks to the unprecedented pace of change in US accounting standards. Technology, international convergence, and economic uncertainties can all combine to throw the financial reporting process off balance in ways big and small. If the key players in this process fail to keep a constant vigil on both the big picture and the myriad details, the burdens of keeping up with the changes could all-too-easily stretch regulatory oversight and/or best practices to a breaking point. To help you stay ahead of the changes, the Center is keeping close watch on the pressure points, including the following: Private Company Reporting in the U.S. Accounting Standards Codification Comprehensive Overhaul of Disclosure Requirements Joint FASB/IASB Response to Financial Crisis
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Watch for...
The SEC has considered several approaches that would permit or require US companies to use International Financial Reporting Standards (IFRS). The approaches include:
The SEC has said it will make a decision in 2011, but the convergence process has slowed considerably in recent months and it remains to be seen whether the SEC will go so far as to permit the use of IFRS for US issuers and, if so, when and how. A statement issued in 2010 indicates the earliest date the IFRS system of accounting might go into effect is 2015 - not quite as fast as originally contemplated when the SEC's proposed IFRS roadmap was exposed for public comment. This less ambitious timeframe will give the Commission more time to evaluate the effects on investors and others.
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Private Company Reporting in the U.S. The American Institute of Certified Public Accountants and the Financial Accounting Foundation, which is the body that oversees the FASB, have formed a "blue-ribbon panel" to address how U.S. accounting standards can best meet the needs of users of private company financial statements. In January 2011, the panel provided its recommendations on the future of standard-setting for private companies. These recommendations include creation of a new standard-setting board under the oversight of the FAF. The FAF has formed a working group to discuss the recommendations. |
Announcement about working group Announcement about private company panel
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Accounting Standards Codification
Investors in public companies that report under US generally accepted accounting principles (GAAP) can look forward to subtle but important improvements in financial reporting now that the US Accounting Standards Codification is live and operational. Many public companies are weighing the merits of a move toward more plain-English explanations and less technical jargon in the notes to the financial statements. Read our report on the changes, the questions companies are asking, and our viewpoint.
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Special Report - FASB's Accounting Standards Codification
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Although the initiation of the Codification was widely hailed as an improvement, the subsequent updates have proven to be difficult to track and digest, especially through the FASB's website. Some are rather myopic and eclectic in scope and are issued with non-descriptive titles like "various technical corrections." This has prompted the Private Company Financial Reporting Committee to request that the FASB reconsider its method of updating before more sweeping changes are announced. Below are highlights of recent updates. Sept. 21, 2011. The FASB issued Accounting Standards Update No. 2011-09, Disclosures about an Employer's Participation in a Multiemployer Plan. Sept. 15, 2011. The FASB issued Accounting Standards Update No. 2011-08, Testing Goodwill for Impairment. July 25, 2011. The FASB issued Accounting Standards Update No. 2011-07, Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities (a consensus of the FASB Emerging Issues Task Force). July 21, 2011. The FASB issued Accounting Standards Update No. 2011-06, Fees Paid to the Federal Government by Health Insurers (a consensus of the FASB Emerging Issues Task Force). June 16, 2011. The FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. May 12, 2011. The FASB issued Accounting Standards Update No. 2011-04, Fair Value Measurement and Disclosure Requirements in US GAAP and IFRSs. April 29, 2011. The FASB issued Accounting Standards Update No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. April 5, 2011. The FASB issued Accounting Standards Update No. 2011-02, Receivables (Topic 310): A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring. January 20, 2011. The FASB issued Accounting Standards Update No. 2011-01, Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20. December 21, 2010. The FASB issued Accounting Standards Update No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (a consensus of the FASB Emerging Issues Task Force). December 17, 2010. The FASB issued Accounting Standards Update No. 2010-28, Intangibles—Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues Task Force). December 17, 2010. The FASB issued Accounting Standards Update No. 2010-27, Other Expenses (Topic 720): Fees Paid to the Federal Government by Pharmaceutical Manufacturers (a consensus of the FASB Emerging Issues Task Force). October 14, 2010. The FASB issued Accounting Standards Update No. 2010-26, Financial Services—Insurance (Topic 944): Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (a consensus of the FASB Emerging Issues Task Force). September 28, 2010. The FASB issued Accounting Standards Update No. 2010-25, Plan Accounting—Defined Contribution Pension Plans (Topic 962): Reporting Loans to Participants by Defined Contribution Pension Plans (a consensus of the FASB Emerging Issues Task Force). August 27, 2010. The FASB issued Accounting Standards Update No. 2010-24, Health Care Entities (Topic 954): Presentation of Insurance Claims and Related Insurance Recoveries (a consensus of the FASB Emerging Issues Task Force). August 26, 2010. The FASB issued Accounting Standards Update No. 2010-23, Health Care Entities (Topic 954): Measuring Charity Care for Disclosure (a consensus of the FASB Emerging Issues Task Force). August 19, 2010. The FASB issued Accounting Standards Update No. 2010-22, Accounting for Various Topics-Technical Corrections to SEC paragraphs (SEC Update). August 2, 2010. The FASB issued Accounting Standards Update 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies (SEC Update). July 21, 2010. The FASB issued Accounting Standards Update 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. May 11, 2010. The FASB issued Accounting Standards Update 2010-19, Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates (SEC Update). April 29, 2010. The FASB issued Accounting Standards Update 2010-18, Receivables (Topic 310): Effect of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a Single Asset—a consensus of the FASB Emerging Issues Task Force. April 28, 2010. The FASB issued Accounting Standards Update 2010-17, Revenue Recognition—Milestone Method (Topic 605): Milestone Method of Revenue Recognition—a consensus of the FASB Emerging Issues Task Force. April 26, 2010. The FASB issued Accounting Standards Update 2010-16, Entertainment—Casinos (Topic 924): Accruals for Casino Jackpot Liabilities—a consensus of the FASB Emerging Issues Task Force. April 21, 2010. The FASB issued Accounting Standards Update 2010-15, Financial Services—Insurance (Topic 944): How Investments Held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Those Investments—a consensus of the FASB Emerging Issues Task Force.
April 21, 2010.
The FASB issued Accounting Standards Update 2010-14, Accounting for
Extractive Activities—Oil & Gas—Amendments to Paragraph 932-10-S99-1
(SEC Update). April 16, 2010. The FASB issued Accounting Standards Update 2010-13, Compensation—Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades—a consensus of the FASB Emerging Issues Task Force.
April 14, 2010.
The FASB issued Accounting Standards Update 2010-12, Income Taxes (Topic
740): Accounting for Certain Tax Effects of the 2010 Health Care Reform
Acts (SEC Update). March 5, 2010. The FASB issued Accounting Standards Update 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives. February 25, 2010. The FASB issued Accounting Standards Update 2010-10, Consolidation (Topic 810): Amendments for Certain Investment Funds. February 24, 2010. The FASB issued Accounting Standards Update 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. February 2, 2010. The FASB issued Accounting Standards Update 2010-08, Technical Corrections to Various Topics. These corrections do not fundamentally change US GAAP, but the clarifications to the guidance on embedded derivatives and hedging may cause a change in application of that guidance. January 28, 2010. The FASB issued Accounting Standards Update 2010-07, Not-for-Profit Entities (Topic 958): Not-for-Profit Entities: Mergers and Acquisitions. This ASU codifies FASB Statement No. 164, Not-for-Profit Entities: Mergers and Acquisitions, which was released in May 2009. January 21, 2010. The FASB issued Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This ASU requires more information about activity within certain levels of the hierarchy of fair value measurements, and it clarifies certain other disclosure requirements including disclosures about inputs and valuation techniques. January 14, 2010. The FASB issued Accounting Standards Update 2010-05, Compensation—Stock Compensation (Topic 718): Escrowed Share Arrangements and the Presumption of Compensation. This ASU codifies Emerging Issues Task Force (EITF) Topic No. D-110, "Escrowed Share Arrangements and the Presumption of Compensation." Topic D-110 summarizes the view provided by the SEC staff at the June 2009 EITF meeting regarding when an escrowed share arrangement involving shareholders is presumed to be compensatory and which factors should be considered when analyzing whether that presumption has been overcome. January 15, 2010. The FASB issued Accounting Standards Update 2010-04, Accounting for Various Topics—Technical Corrections to SEC Paragraphs. This ASU primarily includes technical corrections to various topics containing SEC guidance. January 8, 2010. The FASB issued Accounting Standards Update 2010-03, Extractive Activities – Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures. This ASU updates the Codification to reflect the oil and gas reserve estimation and disclosure requirements in ASC 932 with the SEC's final rule, Modernization of the Oil and Gas Reporting Requirements. January 6, 2010. The FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification. This ASU addresses implementation issues raised by constituents regarding the provisions about changes in ownership provisions in Topic 810-10. January 5, 2010. The FASB issued Accounting Standards Update 2010-01, ASU 2010-01, Equity (ASC 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (a consensus of the FASB Emerging Issues Task Force). This ASU updates the Codification for the final consensus reached by the FASB's Emerging Issues Task Force (EITF) on Issue 09-E, Accounting for Distributions to Shareholders with Components of Stock and Cash. The guidance is effective for interim and annual periods ending on or after December 15, 2009. January 5, 2010. The FASB issued Accounting Standards Update 2009-017, Consolidations (ASC 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This ASU updates the Codification for FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R) which is effective as of the beginning of an enterprise's first fiscal year beginning after November 15, 2009
January 5, 2010. The FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (ASC 860): Accounting for Transfers of Financial Assets. This ASU updates the Codification to reflect FASB Statement No. 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 which is effective for transfers of financial assets occurring in fiscal years beginning after November 15, 2009.
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Investors were caught by surprise in late 2008 and early 2009 when a credit tightening escalated to a crisis of confidence in the stock markets, resulting in big investment losses and market volatility. Some blamed faulty accounting standards for contributing to the crisis. The perceived shortcomings are being addressed now. |
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Comprehensive Overhaul of Disclosure Requirements
July 8, 2009. FASB Chair Bob Herz announced the addition of a new FASB agenda project aimed at establishing an overarching framework intended to make financial statement disclosures more effective, coordinated, and less redundant.
January 16, 2009. The SEC's 21st Century Disclosure Initiative released a report describing a modernized disclosure system and recommending future Commission action for a transition to the new system. This led to the creation of an investor advisory committee described in the section on Governance.
June 24, 2008. On the 75th anniversary of the US Securities and Exchange Commission, SEC Chair Chris Cox announced the start of an ambitious effort to relook at the way the SEC acquires information from public companies, mutual funds, brokers, and other regulated entities, and the way it makes that information available to investors and the markets. This included the 21st Century Disclosure initiative, which called for a small group of experts to develop a blueprint for future SEC action to improve the usefulness and timeliness of disclosures from the perspective of investors and markets.
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Report of SEC's 21st Century Disclosure Initiative
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Improvements in Financial Reporting August 1, 2008. The SEC's Advisory Committee on Improvements in Financial Reporting (CiFIR) issued its final report. |
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Joint FASB/IASB Response to Financial Crisis
March 24, 2009. The FASB and the IASB announced plans to work together to issue guidance on off balance sheet activities and accounting for financial instruments.
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