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Accounting Practices - What You Need to Know |
Resources |
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News of Noteworthy Events and Trends
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Accounting Standards Codification The FASB's Accounting Standards Codification went live on July 1, 2009.
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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 starting in third quarter 2009. Read our report on the changes, the questions companies are asking, and our viewpoint.
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Links
Special Report - FASB's Accounting Standards Codification
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Recent US GAAP Pronouncements 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. 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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Watch for...
IFRS in the U.S.
The comment deadline for SEC's proposed IFRS roadmap ended April 20, 2009. SEC Chair Mary Schapiro has indicated the SEC will resume consideration of this proposal in 2010. |
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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. The panel will provide recommendations on the future of standard-setting for private companies, including the pivotal question of whether separate accounting standards are needed for private companies.
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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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