ARSC Issues SSAE No. 17

The Auditing and Review Services Committee (ARSC) has issued Statement on Standards for Attestation Engagements (SSAE) No. 17, Reporting on Compiled Prospective Financial Statements When the Practitioner's Independence Is Impaired, to amend paragraph 23 of SASE No. 10 section 301, Financial Forecasts and Projections (AICPA, Professional Standards, vol. 1, AT sec. 301), to permit, but not require, the accountant to disclose the reason(s) for an independence impairment in a report on compiled prospective financial information.

You’ll recall that SSARS No. 19 permits, but does not require, the accountant to disclose the reasons he or she is not independent in a compilation report. The exposure draft for this SSAE was issued in April 2010 because the ARSC determined that the attestation standards should also be revised so that the practitioner, if he or she chooses, can disclose the reasons for independence impairment in the compilation report on compiled prospective financial information.

SSAE No. 17 is effective for compilations of prospective financial information for periods ending on or after December 15, 2010, with early implementation permitted.

You may obtain a hard copy of this SSAE from www.cpa2biz.com.

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SSARS Exposure Draft

The Accounting and Review Services Committee (ARSC) has issued an Exposure Draft Proposed Statement On Standards For Accounting And Review Services, The Use of the Accountant’s Name in a Document or Communication Containing Unaudited Financial Statements That Have Not Been Compiled or Reviewed (Amends Statement on Standards for Accounting and Review Services No. 19, Compilation and Review Engagements [AICPA, Professional Standards, vol. 2, AR sec. 60 par. .51-.55]). You have until April 29, 2011 to comment on this proposed amendment.

The amendment would be effective for unaudited financial statements that have not been compiled or reviewed for periods ending on or after December 15, 2011.

The proposed SSARS would create new paragraphs in AR section 60, Framework for Performing and Reporting on Compilation and Review Engagements to cover the accountant’s responsibilities when he or she permits the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed.

This proposed SSARS would establish:

• a requirement that prior to permitting the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed the accountant should read the financial statements and other information in the document and consider whether such financial statements and other information appears free from obvious material misstatements and from material inconsistencies with other knowledge or information that the accountant may have obtained.
• a nonreporting option when the accountant permits the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed provided that the accountant requests that the client clearly indicate that the unaudited financial statements were not compiled or reviewed by the accountant.

You may obtain a copy of the proposed SSARS from the AICPA website http://www.aicpa.org/.

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ASB Issues SAS on Reports on Application of Requirements of an Applicable Financial Reporting Framework

The Auditing Standards Board has issued Statement on Auditing Standards, Reports on Application of Requirements of an Applicable Financial Reporting Framework. This SAS supersedes SAS No. 50, Reports on the Application of Accounting Principles (AICPA, Professional Standards, vol. 1, AU sec. 625). It is effective for engagements that end on or after December 15, 2012.

This SAS covers the reporting accountant’s responsibilities when asked to issue a written report on either the application of the requirements of an applicable financial reporting framework to a specific transaction or the type of report that may be issued on a specific entity’s financial statements. It also applies to oral advice provided by the reporting accountant that the reporting accountant concludes is intended to be used by a principal to the transaction as an important factor considered in reaching a decision on the application of the requirements of an applicable financial reporting framework to a specific transaction or on the type of report that may be issued on a specific entity’s financial statements.

Because there are differing interpretations that may exist concerning whether and, if so, how existing accounting policies in an applicable financial reporting framework apply to new transactions or how new accounting policies in an applicable financial reporting framework apply to existing transactions, management and others may consult with accountants on the application of the requirements of an applicable financial reporting framework to those transactions or to increase their knowledge of specific financial reporting issues.

You should be aware that this SAS does not apply to:

• a continuing accountant with respect to the specific entity whose financial statements the continuing accountant has been engaged to report on,
• engagements either to assist in litigation involving accounting or auditing matters or to provide expert testimony in connection with such litigation,
• professional advice provided to another accountant in public practice,
• to communications such as position papers prepared by an accountant for the purpose of presenting views on an issue involving the application of the requirements of an applicable financial reporting framework, provided that these communications are not intended to provide guidance on the application of these requirements to a specific transaction.

You may download clarified auditing standards from the AICPA website at www.aicpa.org/InterestAreas/AccountingAndAuditing/Resources.

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ASB Issues Clarified SAS on Analytical Procedures

The Auditing Standards Board has issued another clarified auditing statement, Analytical Procedures (Redrafted). This SAS supersedes SAS No. 56, Analytical Procedures (AICPA, Professional Standards, vol. 1, AU sec. 329) and is effective for audits of financial statements for periods ending on or after December 15, 2012.

This SAS covers the auditor’s use of analytical procedures as substantive procedures (substantive analytical procedures) and his or her responsibility to perform analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion on the financial statements. This clarified SAS refers to two other clarified SASs, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (Redrafted) and Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained (Redrafted). These two SASs contain information on the use of analytical procedures as risk assessment procedures and the nature, timing, and extent of audit procedures in response to assessed risks.

You’ll recall that clarified SASs contain “objectives.” These objectives have to do with the objectives of the auditor. In this clarified SAS those objectives are:

• to obtain relevant and reliable audit evidence when using substantive analytical procedures and
• to design and perform analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion about whether the financial statements are consistent with the auditor’s understanding of the entity.

You may download clarified auditing standards from the AICPA website www.aicpa.org/InterestAreas/AccountingAndAuditing/Resources.

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Revision to SSARS No. 1

The Accounting and Review Services Committee (ARSC) has revised Interpretation No. 30 to SSARS No. 1 as amended. The revision provides guidance when the accountant reports on compiled or reviewed financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and the required comparative financial information is not provided.

The question asked in the interpretation, “May an accountant apply the reporting guidance in AR section 100 when engaged to report on financial statements presented in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB)?” The answer, “Yes,” basically because the IASB has been designated by the Council of the AICPA as the body to establish international financial reporting standards for both private and public entities pursuant to Rule 202.

You’ll find this interpretation particularly useful because it contains examples of emphasis of matter paragraphs, modification of the third paragraph of the standard report when compiling financial statements that omit substantially all disclosure but are otherwise in conformity with IFRS, and a review report when you have been engaged to review the historical financial statements in accordance with ISRE 2400.

This revised interpretation also answers a question concerning IFRS’s requirement to disclose comparative information in respect of the previous comparative period for all amounts presented in the current year’s financial statement. Failure to do so would be a departure from GAAP. The interpretation contains an example of a paragraph that may be added to the accountant’s compilation or review report that covers this issue.

The revised interpretation will be conformed for the issuance of SSARS No. 19, Compilation and Review Engagements.

The revised interpretation may be downloaded at
http://www.aicpa.org/InterestAreas/AccountingAndAuditing/Resources

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ASB Reissues Proposed SAS

The ASB has reissued an exposure draft, Proposed Revised Statement On Auditing Standards Financial Statements Prepared In Accordance With A Financial Reporting Framework Generally Accepted In Another Country. It will supersede SAS No. 51, Reporting on Financial Statements Prepared for Use in Other Countries. The exposure draft was issued November 9, 2010. The comment period ends January 31, 2011.

The ASB issued an exposure draft Reporting on Financial Statements Prepared in Accordance With a Financial Reporting Framework Generally Accepted in Another Country in 2009. However, after revising that exposure draft as a result of issues raised in comment letters, the Board decided to reexpose the SAS.

In the proposed revised SAS, when financial statements are prepared in accordance with a financial reporting framework generally accepted in another country, and such financial statements are intended for use in the other country, the proposed revised SAS would require the inclusion of an emphasis of matter paragraph that will highlight the foreign financial reporting framework in any report also intended for use in the United States, while permitting an unqualified opinion.

In addition the concept of limited use in the previous exposure draft has been eliminated in the proposed revised SAS.

Effective Date
The proposed revised SAS would be effective for audits of financial statements for periods ending on or after December 15, 2012.

The reissued exposure draft is available on the AICPA website, http://www.aicpa.org/.

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SQCS No. 8 Replaces SQCS No. 7

As part of its clarity drafting conventions the ASB has issued Statement on Quality Control Standards (SQCS) No. 8, A Firm’s System of Quality Control (Redrafted). This SQCS supersedes SQCS No. 7. It was issued November 2010 and is effective as of January 1, 2012. Early application is permitted.

As with many of the redrafted standards SQCS No 8, does not change or expand SQCS No. 7 in any significant respect. Instead certain requirements that are duplicative of broader requirements in SQCS No. 7 have been moved to application and other explanatory material. This is consistent with International Standard on Quality Control No. 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements.

Documentation

You should be aware that Paragraph 46 of SQCS No. 8 contains a requirement that procedures established for dealing with differences of opinion should enable a member of the engagement team to document that member’s disagreement with the conclusions reached after appropriate consultation.

You’ll recall that this requirement was included in SAS No. 108, Planning and Supervision (AICPA, Professional Standards, vol. 1, AU sec. 311, par. .32). The ASB believes that this requirement is more appropriately placed at the firm level for all engagements.

A summary of SQCS No. 8 is available on the AICPA website, http://www.aicpa.org/InterestAreas/AccountingAndAuditing.

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Original Auditing Standards: Where are they?

Most of the news on auditing standards lately has been on Clarified Auditing Standards. As you know the Auditing Standards Board (ASB) has been working on redrafting, revising, and converging audit, attest, and quality control standards with international standards. But the clarified auditing statements are not effective until December 15, 2012. So meanwhile where do you find the current standards?

Since the AICPA revamped their website it is more difficult to find the standards. So for your information here’s the link:

http://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx.

On this page you’ll find a list of the SASs from No. 1 to 120, with links to their respective Auditing Sections (AU) in the professional standards. The list is current as of June 1, 2010.

Proposed ASU on Transfers and Servicing

The FASB has issued an exposure draft on Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements designed to improve the accounting for repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The comment period ends January 15, 2011.

As you are no doubt aware, in a typical repo transaction, an entity transfers financial assets to a counterparty in exchange for cash with an agreement for the counterparty to return the same or equivalent financial assets for a fixed price in the future. Under Topic 860, Transfers and Servicing, an entity may or may not recognize a sale upon the transfer of financial assets subject to repo agreements, based, in part, on whether the entity has maintained effective control over the transferred financial assets.

The proposed Update is designed to simplify the accounting for these transactions by removing from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets, as well as implementation guidance related to that criterion.

Proposed ASUs are available on the FASB website, www.fasb.org.

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SEC Work Plan on IFRS Progress Report

The SEC Staff has published its first progress report on the “Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers.” As you are aware the SEC has been studying whether to allow U.S. issuers in the U.S. to use IFRS. The SEC directed the SEC Staff to come up with a work plan to determine whether, when, and how current financial reporting system for U.S. issuers should be transitioned to a system that incorporates IFRS. The Work Plan was published in February 2010 and covers the following area:

Characteristics of IFRS and standard-setting process:

• Sufficient development and application of IFRS for the U.S. domestic reporting system.
• The independence of standard setting for the benefit of investors.

Transition considerations:

• Investor understanding and education regarding IFRS.
• Examination of the U.S. regulatory environment that would be affected by a change in accounting standards.
• The impact on issuers, both large and small, including changes to accounting systems. changes to contractual arrangements, corporate governance considerations, and litigation contingencies.
• Human capital readiness.

The update draws no major conclusions. However, you will find some areas of particular interest in the progress report including concerns about the funding of the IASB which is funded by voluntary contributions. In addition industry regulators are concerned about the general lack of industry-specific standards and practices in IFRS. Work is also being done to analyze federal and state tax impacts, audit regulation and standard setting and broker-dealer and investment company reporting. Another issue has to do with the method of any incorporation of IFRS because of the incorporation of ‘U.S. GAAP’ references currently in U.S. laws, contractual documents, regulatory requirements and guidelines, and similar documents.

You may download the Work Plan Progress Report at www,sec.gov/spotlight/gloabalaccountingstandards/workplanprogress102910.pdf.

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Compilation and Review of Personal Financial Statements

Those of you who may be engaged to compile or review personal financial statements will find an exhibit issued by the AICPA to their Guide, Compilation and Review Engagements of interest.

The exhibit covers compilations and reviews of personal financial statements. It points out that AR section 80, Compilation of Financial Statements, and AR section 90, Review of Financial Statements (AICPA, Professional Standards, vol. 2) are applicable to compilations and reviews of personal financial statements in the same manner as to compilations and reviews of financial statements of commercial entities. The exhibit provides specific guidance regarding how those AR sections are applied in compilations and reviews of personal financial statements.

It reminds us that FASB ASC Section 274 says that personal financial statements should present assets at their estimated current values and liabilities at their estimated current amounts at the date of the financial statements.

It contains illustrations of engagement letters for compilations and reviews of personal financial statements; client representation letters; as well as illustrations of the accountant’s compilations and review reports.

This exhibit may be downloaded from the AICPA website at http://www.aicpa.org under InterestAreas/AccountingAndAuditing/Resources/CompReview.

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Blue-Ribbon Panel Picks Differential GAAP

The Blue–Ribbon Panel on Private Company Standards (the Panel) met for the fourth time October 8, 2010 in New York. Previously the Panel has considered seven alternative standard–setting models and structures for private companies including one that retained the current model and two that incorporated IFRS for SMEs. They eliminated four of the models and retained three. The models were further delineated between a restructured FASB Board and a separate private company standards board.

At the October meeting after thoughtful discussion a majority of panel members favored differential GAAP and a separate board.

On October 19, 2010 at their fall meeting the AICPA Governing Council approved a resolution supporting work of blue ribbon panel on private company financial reporting. An overwhelming voice vote supported the resolution. The Council declared the profession's readiness to implement differential GAAP for private companies as determined by a separate standard-setting board.

Those recommendations will be included in a report to the Financial Accounting Foundation (FAF). The separate board would consist of people with private company experience and report to the FAF, which oversees the FASB and GASB.

How will differential GAAP affect your practice?
Tell us how you think it will affect your practice by adding a comment.

The minutes of the Blue-Ribbon Panel's meetings are available on FASB website, http://www.fasb.org/ under Standards.

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FAF/AICPA/NASBA Blue-Ribbon Panel on Standard Setting for Private Companies is Seeking Input from Accountants

The American Institute of Certified Public Accountants (AICPA), the Financial Accounting Foundation (FAF; the parent organization of the Financial Accounting Standards Board (FASB)), and the National Association of State Boards of Accountancy (NASBA) have established a “blue ribbon" panel (the Panel) to address how accounting standards can best meet the needs of U.S. users of private company financial statements. The Panel will conclude its work and issue a report, with any recommendations on the future of standard setting for private companies, to the FAF Board of Trustees (the Trustees) in approximately one year. The Panel’s report will be made available to the public and the Trustees’ resulting action plan is expected to be exposed for public comment prior to that plan being finalized.

The Panel will comprehensively review the current system of standard setting for private companies in the U.S., including the following matters:

• Who are the actual users of private company financial statements and how do they use GAAP financial statements in their decision making?
• What is the key, decision-useful information that the various users need from GAAP financial statements?
• Are current GAAP financial statements meeting those needs? Why or why not?
• Are the benefits of GAAP financial statements outweighing the costs of preparing those statements for private companies?
• How does standard setting for private companies in the U.S. compare to standard setting in other countries, both those that have adopted IFRS for Small and Medium-Size Entities and those that have not?
• To the extent that current GAAP is not meeting user needs in a cost-beneficial manner, what are some possible alternatives for private company standards (e.g., separate, stand-alone standards; base-level standards for all entities with additional disclosure requirements for public companies) and what are the implications for standard-setter structure and/or processes?

The Panel is currently seeking input from accountants regarding these matters at: http://www.fasb.org/cs/ContentServer?site=FASB&c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176157332360 . The time to have our voices heard is now!

New Proposed ASU on Leases

Back in March 2009 the FASB and the IASB issued a discussion paper, Leases: Preliminary Views. After considering the responses to this discussion paper, the two Boards have issued a Proposed Accounting Standards Update Leases (Topic 840). This proposed ASU was issued August 17, 2010. The comment period ends December 15, 2010.

The main proposal in the proposed ASU is that lessees and lessors should apply a right-of-use model in accounting for all leases (including leases of right-of-use assets in a sublease) other than leases of biological and intangible assets, leases to explore for or use natural resources and leases of some investment properties. This means that:

(a) a lessee would recognize an asset representing its right to use the leased (‘underlying’) asset for the lease term (the ‘right-of-use’ asset) and a liability to make lease payments.

(b) a lessor would recognize an asset representing its right to receive lease payments and, depending on its exposure to risks or benefits associated with the underlying asset, would either recognize a lease liability while continuing to recognize the underlying asset (a performance obligation approach); or derecognize the rights in the underlying asset that it transfers to the lessee and continue to recognize a residual asset representing its rights to the underlying asset at the end of the lease term (a derecognition approach).

Assets and liabilities recognized by lessees and lessors would be measured on a basis that:

(a) assumes the longest possible lease term that is more likely than not to occur, taking into account the effect of any options to extend or terminate the lease.

(b) uses an expected outcome technique to reflect the lease payments, including contingent rentals and expected payments under term option penalties and residual value guarantees, specified by the lease.

(c) is updated when changes in facts or circumstances indicate that there would be a significant change in those assets or liabilities since the previous reporting period.

For contracts that combine service and lease components, the right to receive lease payments and the liability to make lease payments would exclude payments arising from distinct service components and for the draft IFRS, non-distinct service components for lessors that apply the derecognition approach.

For leases of 12 months or less, lessees and lessors would be able to apply simplified requirements.

The exposure draft also contains proposed disclosures based on stated objectives. This includes disclosures about the amounts recognized in the financial statements arising from leases and the amount, timing and uncertainty of cash flows arising from those contracts.

ASUs are available on the FASB website, www.fasb.org under Standards.,br/>
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Proposed ASU on Disclosure of Certain Loss Contingencies

The FASB issued Proposed Accounting Standards Update Contingencies (Topic 450) Disclosure of Certain Loss Contingencies on July 20, 2010. At that time the comment period was to have ended August 20, 2010. The FASB has extended the comment period to Sept. 20, 2010 as a result of feedback from early respondents. For public entities, the new guidance would be effective for fiscal years ending after December 15, 2010, and interim and annual periods in subsequent fiscal years. For nonpublic entities, the new guidance would be effective for the first annual period beginning after December 15, 2010, and for interim periods of fiscal years after the first annual period.

The FASB issued this proposed Update because investors and other users of financial reporting have expressed concerns that disclosures about loss contingencies under the existing guidance in Topic 450 do not provide adequate and timely information to assist them in assessing the likelihood, timing, and magnitude of future cash outflows associated with loss contingencies.

The amendments in this proposed Update would apply to all entities, both public and nonpublic, except that nonpublic entities would not be required to provide a tabular reconciliation of accrued loss contingencies.

Objective
This proposed Update would establish the following disclosure objective: An entity shall disclose qualitative and quantitative information about loss contingencies to enable financial statement users to understand (a) the nature of the loss contingencies (b) their potential magnitude and (c) their potential timing (if known).

To achieve this objective, an entity would consider the following principles in determining disclosures that are appropriate for its individual facts and circumstances for loss contingencies that meet the disclosure threshold:

a. During early stages of a loss contingency’s life cycle, an entity would disclose information that is available to enable users to understand the loss contingency’s nature, potential magnitude, and potential timing (if known). In early stages information may be limited and so disclosure may be limited. In subsequent reporting periods, disclosure would be more extensive as more information becomes available.
b. An entity may aggregate disclosures about similar contingencies (for example, by class or type) so that the disclosures are understandable and not too detailed.

Disclosures
The amendments in this proposed Update would require disclosure of certain remote loss contingencies. This expands the population of loss contingencies that are required to be disclosed to achieve more timely disclosure of remote loss contingencies with a potentially severe impact.

When assessing the materiality of loss contingencies to determine whether disclosure is required, an entity would not consider the possibility of recoveries from insurance or other indemnification arrangements.

The proposed amendments would retain the current qualitative disclosures. In addition to the quantitative disclosures required under GAAP, the amendments would require disclosure of publicly available quantitative information, other relevant nonprivileged information, and, in some cases, information about possible recoveries from insurance and other sources.

A public entity would be required to provide tabular reconciliations, by class, of recognized (accrued) loss contingencies that present the activity in the account during the reporting period.

Proposed ASUs are available on the FASB website, http://www.fasb.org/.

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Blue Ribbon Panel Asking for Feedback

As you are no doubt aware, the Blue Ribbon Panel, a joint effort by the AICPA; the Financial Accounting Foundation (FAF) FASB’s parent organization; and the National Association of State Boards of Accountancy (NASB) has been discussing alternate models for private company financial reporting. The panel considered seven alternative models at its July meeting. They eliminated models that were based on IFRS and a model that effectively would have maintained the status quo. The three models that remain would result in differences in GAAP for private companies, where warranted, compared with GAAP for public companies. The three are:

• U.S. GAAP with Exclusions for Private Companies—with enhancements
• U.S. GAAP—Baseline GAAP with Public Company Add-Ons
• Separate, Stand-Alone GAAP Based on Current U.S. GAAP

Another recommendation to come out of the panel’s discussion is consideration of a separate board for private companies under the FAF. FASB would still set public company standards and the new board would be made up of individuals that are focused on private companies. This “private companies board” would decide whether, what and how GAAP should apply to private companies starting with the FASB standards.

Now the panel is asking for your feedback. They are asking users of private company financial statements, preparers and practitioners to respond to a series of questions. The questions will help the panel in (1) discussing how accounting standards can best meet the needs of U.S. users of private company financial statements and (2) making recommendations. The questions are on fasb.org and must be submitted by Sept. 15. A summary of the responses will be distributed to panel members and participating observers. The summary will be included as part of the observer notes (a publicly available meeting handout) for the panel’s next meeting, Oct. 8 at the AICPA’s New York City office.

Take advantage of this opportunity to tell the panel what you think about private company accounting standards. And while you’re at it, tell us what you think about a separate accounting standards board for private companies by leaving a comment.

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Commission Studying the Future of Accounting Education

Now's your chance to tell a new commission what you think needs to be taught to future accountants. The American Accounting Association (AAA) and the AICPA have formed a new commission to study possible future paths of higher education for students who plan on becoming accountants. The "Pathways Commission" will ask for input from all areas the accounting community. This includes individuals and representatives from organizations that impact the various current accounting education pathways.

According to Bruce Behn, University of Tennessee professor and chair of the commission, the commission's goal is to facilitate an open, transparent discussion to be supported by both technolgy and public discussions.

The commission recognizes the difficulty of sustaining the momentum for change in the dynamic environment of accounting practice and education. For this reason the commission's efforts are structured to continue into the future.

The commission was formed to study accounting pathways because a number of forces are affecting accounting education including:

• Shortages of qualified teachers with accounting doctorates,
• The need to revise the accounting curricula regularly in light of fast-paced business changes,
• University budget constraints that threaten to make the cost of education prohibitive, and
• The need for training in specialized areas to meet the profession's demands.

The commission will hold its first meeting Oct. 15-17 in Washington, D.C.

More information on the commission may be found at http://www.pathwayscommission.org/.

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ASU No. 2010

The FASB issued ASU No. 2010–20, Receivables (Topic 310) Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses in July 2010.

The objective of this ASU is to provide financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. It is intended to provide additional information to assist financial statement users in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. Currently, a high threshold for recognition of credit impairments impedes timely recognition of losses.

Amendments in this Update:

• Apply to all entities, both public and nonpublic. Affect all entities with financing receivables, excluding short-term trade accounts receivable or receivables measured at fair value or lower of cost or fair value.
• The extent of the effect depends on the relative significance of financing receivables to an entity’s operations and financial position.

Disclosures

This Update requires an entity to provide disclosures that facilitate financial statement users’ evaluation of the following:

• The nature of credit risk inherent in the entity’s portfolio of financing receivables
• How that risk is analyzed and assessed in arriving at the allowance for credit losses
  The changes and reasons for those changes in the allowance for credit losses.

To achieve the above objective, an entity should provide disclosures on a disaggregated basis. The amendments in this Update define two levels of disaggregation—portfolio segment and class of financing receivable.

Effective date

For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. Therefore, for calendar year issuers, the year end information will be presented for 2010, but activity for the year will not be presented until 1st quarter 2011.

For nonpublic entities the disclosures are effective for annual reporting periods ending on or after December 15, 2011.

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PCAOB Proposed AS Related to Confiramtions and Related Amendments

If you or your firm audit public companies then you'll be interested in the PCAOB's latest proposed Auditing Standard. The PCAOB released Proposed Auditing Standard Related to Confirmation and Related Amendments to PCAOB Standards on July 13, 2010. The comment period ends September 13, 2010.

The proposed auditing standard, Confirmation,

• Supersedes the Board's standard, AU section 330, The Confirmation Process, and related amendments to the Board's auditing standards.
• Is applicable to all registered firms conducting audits in accordance with PCAOB standards.

The new standard:

• Requires confirmation procedures for specific accounts.
• Incorporates procedures in response to risk of material misstatement.
• Updates the standard to reflect significant advances in technology.
• Defines a confirmation response to include electronic or other medium.
• Enhances requirements when confirmation responses include disclaimers and restrictive language.

In drafting the proposed standard the Board considered International Standard on Auditing (ISA) 505, External Confirmations, issued by the International Auditing and Assurance Standards Board (IAASB) and the Proposed Statement on Auditing Standards, External Confirmations (the ASB's proposed SAS), of the ASB of the AICPA.

The proposed auditing standard may be downloaded from the PCAOB’s website, www.pcaob.com.

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Proposed SAS Interim Financial Information (Redrafted)

The ASB has issued another Proposed SAS as part of its Clarity Project. The Proposed SAS Interim Financial Information (Redrafted) will supersede SAS No. 116, Interim Financial Information (AICPA, Professional Standards, vol. 1, AU sec. 722). It was issued July 8, 2010. The comment period ends October 8, 2010.

The proposed SAS would be effective for reviews of interim financial information for interim periods of fiscal years beginning on or after December 15, 2012.

Changes from existing standards include:

• Change of the term "accountant" to "auditor" because the scope of this proposed SAS is limited to a review of interim financial information performed by the auditor of the financial statements of the entity.
• Consistent with the proposed SAS Revised Applicability of Statement on Auditing No. 116, Interim Financial Information, states that the proposed SAS is applicable when the auditor audited the entity’s latest annual financial statements and the appointment of an auditor to audit the current year financial statements is not effective prior to the beginning of the period covered by the review. This change in applicability will affect current practice in that the auditor may apply AU section 722 even when the auditor does not expect to be engaged to audit the current year financial statements and will allow for appropriate transition between auditors when there is a change in auditors.
• The proposed SAS requires the auditor to issue a written report unless the review of the interim financial information is required by a third party and the third party does not require that the auditor performing the interim review issue a written review report. However, the proposed SAS permits oral reports for entities that are subject to external requirements to report in a manner that is substantially similar to the reporting required of issuers, pursuant to PCOAB AU section 722, Interim Financial Information (AICPA, PCAOB Standards and Related Rules, PCAOB Standards, Interim Standards). This change in requirements will affect current practice by limiting the circumstances in which an oral report is permitted.
• The proposed SAS requires the auditor, before accepting the engagement, (i) to review the interim financial information to determine whether the financial reporting framework to be applied in the preparation of the interim financial information is acceptable and (ii) to obtain the agreement of management that it acknowledges and understands its responsibility for certain specified matters.
• The proposed SAS requires a statement that the review of interim financial information was conducted in accordance with auditing standards generally accepted in the United States of America.

The Proposed SAS may be downloaded from the AICPA website, http://www.aicpa.org/.

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FASB Staff Draft on Financial Statement Presentation

The FASB and the IASB took an unusual step on July 1, 2010 by issuing a Staff Draft of an Exposure Draft on Financial Statement Presentation that prescribes the basis for presentation of general purpose financial statements to ensure consistency with an entity’s financial statements for previous periods and to promote comparability with the financial statements of other entities. It sets out overall requirements for the presentation of financial statements, requirements for the structure of financial statements, and principles for classification and disaggregation of information in the statements.

The draft reflects the cumulative, tentative decisions made by the Boards concluding with their joint meeting in April 2010. Work on the project is continuing, and the proposals are subject to change before the Boards decide to publish an Exposure Draft for public comment.

This Staff Draft reflects the Boards’ decision to engage in additional outreach activities before finalizing and publishing an Exposure Draft. Those activities will focus primarily on two areas: (1) the perceived benefits and costs of the proposals and (2) the implications of the proposals for financial reporting by financial services entities.

While the Boards are not formally inviting comments on this staff draft they welcome input from interested parties. They expect to publish an Exposure Draft for public comment in early 2011.

Scope
An entity shall apply this proposed guidance in preparing and presenting general purpose financial statements in accordance with U.S. GAAP. It applies equally to all entities except a not-for-profit entity and a benefit plan within the scope of the FASB Accounting Standards Codification™ Topics 960, Plan Accounting—Defined Benefit Pension Plans; 962, Plan Accounting—Defined Contribution Pension Plans; and 965, Plan Accounting—Health and Welfare Benefit Plans. In addition investment companies and other entities identified in Codification paragraph 230-10-15-4 are not required to present a statement of cash flows.

This proposed guidance does not change the accounting principles and reporting practices in Codification Topic 270, Interim Reporting.

The Staff Draft is available on the FASB website, www.fasb.org.

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New Proposed ASU on Revenue Recognition

The joint project on revenue recognition of the FASB and the IASB has resulted in a recently released Exposure Draft. The Proposed Accounting Standards Update, Revenue Recognition (Topic 605), Revenue from Contracts with Customers was issued June 24, 2010 with a comment period ending October 22, 2010. The Proposed ASU was issued to improve both U.S. GAAP and IFRSs standards that cover revenue recognition by removing inconsistencies and weaknesses in existing revenue recognition standards and practices; providing a more robust framework for addressing revenue recognition issues; improving comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and simplifying the preparation of financial statements by reducing the number of requirements to which entities must refer.

Who is affected?
The proposed guidance would affect any entity that enters into contracts to provide goods or services that are an output of the entity’s ordinary activities, unless those contracts are within the scope of other requirements of U.S. GAAP or IFRSs.

You should be aware that the proposed guidance would supersede most of the guidance on revenue recognition in Topic 605. In addition, the existing requirements for the recognition of a gain or loss on the sale of some nonfinancial assets that are not an output of the entity’s ordinary activities (for example, property, plant, and equipment within the scope of Topic 360 or IAS 16, Property, Plant and Equipment, or IAS 40, Investment Property) would be amended to be consistent with the proposed revenue recognition and measurement requirements.

Main Proposals
The Proposed ASU specifies the principles that an entity would apply to report useful information about the amount, timing, and uncertainty of revenue and cash flows arising from its contracts to provide goods or services to customers. The core principle would require an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it receives, or expects to receive, in exchange for those goods or services.

It also specifies the accounting for some costs. An entity would recognize the costs of obtaining a contract as expenses when incurred. If the costs incurred in fulfilling a contract are not eligible for capitalization in accordance with other standards an entity would recognize an asset only if those costs relate directly to a contract; generate or enhance resources of the entity that will be used in satisfying performance obligations in the future; and are expected to be recovered.

The Proposed ASU also covers identifying the contract(s) with a customer; determining the transaction price;allocating the transaction price to the separate performance obligations; and recognizing revenue when a performance obligation is satisfied

The Proposed ASU requires disclosures to help users of financial statements understand the amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. An entity would be required to disclose more information about its contracts with customers than is currently required, including more disaggregated information about recognized revenue and more information about its performance obligations remaining at the end of the reporting period.

Effective Date
The Boards have not designated an effective date for this Proposed ASU.
The Proposed ASU is available for download at www.fasb.org

Tell us how you think it will affect your practice by adding a comment.

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ASU No. 2010 -18 on Receivables

ASU No. 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 was issued April 2010 and is effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010.

This ASU was issued to provide guidance on accounting for acquired loans that have evidence of credit deterioration upon acquisition.

Why Issued?
Diversity in practice has developed on whether a loan that is part of a pool of loans accounted for as a single asset should be removed from that pool upon a modification that would constitute a troubled debt restructuring. The objective of the amendments in this Update is to address the diversity in practice regarding such modifications.

Any entity that acquires loans subject to Subtopic 310-30, that accounts for some or all of those loans within pools, and that subsequently modifies one or more of those loans after acquisition is affected by this ASU.

ASUs are available on the FASB website, http://www.fasb.org/ under Standards.

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ASU No. 2010 -17 on Revenue Recognition, the Milestone Method

ASU No.2010–17, Revenue Recognition–Milestone Method (Topic 605) Milestone Method of Revenue Recognition, a consensus of the FASB Emerging Issues Task Force was issued April 2010.

The objective of this ASU is to provide guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions.

Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a drug study or achieving a specific result from the research or development efforts. An entity often recognizes these milestone payments as revenue in their entirety upon achieving the related milestone, commonly referred to as the milestone method. Authoritative guidance on the use of the milestone method did not previously exist. Therefore, constituents have raised questions on when and whether the use of this method is appropriate.

This ASU provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. Vendors that provide research or development deliverables in an arrangement in which one or more payments are contingent upon achieving uncertain future events or circumstances are affected by this ASU.

It is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. A vendor may elect, but is not required, to adopt the amendments in this Update retrospectively for all prior periods.

ASUs are available on the FASB website, http://www.fasb.org/ under Standards.

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ASU 2010-16 on Entertainment Casinos

ASU No. 2010-16, Entertainment–Casinos (Topic 924), Accruals for Casino Jackpot Liabilities, a consensus of the FASB Emerging Issues Task Force was issued April 2010 and is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The amendments should be applied by recording a cumulative-effect adjustment which is the difference between the amounts recognized in the statements of financial position before initial application of the amendments in the Update and the amounts recognized in the statement of financial position at initial application of those amendments.

The objective of this ASU is to address diversity in practice in the accounting for casino base jackpot liabilities. It addresses diversity in practice regarding whether an entity accrues liabilities for a base jackpot before it is won, or the entity is not required to award the base jackpot. Some entities do not accrue liabilities for a base jackpot before it is won because they could avoid the payment while other entities accrue liabilities for a base jackpot ratably over the period of play expected to precede payout.

Entities that generate revenue from gaming activities that involve base jackpots are affected by this ASU.

This ASU clarifies that (1) an entity should not accrue jackpot liabilities (or portions thereof) before a jackpot is won, if the entity can avoid paying that jackpot (2) jackpots should be accrued and charged to revenue when an entity has the obligation to pay the jackpot and (3) it applies to both base and progressive jackpots.

ASUs are available on the FASB website, http://www.fasb.org/ under Standards.

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ASU 2010-15 on Financial Services

n April 2010 the FASB issued ASU No. 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). The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. Early adoption is permitted and the amendments in this ASU should be applied retrospectively to all prior periods upon the date of adoption.

This ASU was issued to address practice questions on how investments held through the separate accounts of an insurance entity affect the consolidation analysis under Subtopic 810-10, Consolidation—Overall. It explains that separate accounts represent assets that are typically maintained by a life insurance entity for purposes of funding obligations to individual contract holders under fixed-benefit or variable annuity contract, personal plans, and similar contracts. The contract holder generally assumes the investment risk, and the insurance entity receives a fee for investment management, certain administrative expenses, and mortality and expense risk assumed. The accounting for separate accounts is outlined in Subtopic 944-80 Financial Services – Insurance – Separate Accounts. That Subtopic requires that the portion of separate account assets representing contract holder funds be measured at fair value and reported in the insurance entity’s financial statements as a summary total, with an equivalent summary total reported for related liabilities if all of the criteria in 944-80-25-2 are met.

Who is Affected?
Insurance entities that have separate accounts that meet the definition of a separate account in paragraph 944-80-25-2 when evaluating whether to consolidate an investment held through the separate account or through a combination of investments in the separate and general accounts are affected by this ASU. The accounting for situations in which an insurer’s general account has a controlling financial interest in an investment is not affected by the amendments in this Update and should follow existing GAAP on consolidations.

The amendments in this Update are specific to insurance entities that have separate accounts and should not be analogized for other entities in no-separate-account arrangements or other investment situations.

ASUs are available on the FASB website, www.fasb.org under Standards.

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Change in Qualifications for the CFF Credential

Many of you may have the experience and qualifications to hold certification in forensic accounting. Since May 2008, the AICPA has had a such a credential. The credential, Certified in Financial Forensics (CFF), combines specialized forensic accounting expertise with the core knowledge and skills that make CPAs among the most trusted business advisers. This credential encompasses fundamental and specialized forensic accounting skills that CPA practitioners apply in a variety of service areas. If, in your practice, you supply services encompassing bankruptcy, insolvency and reorganization; computer forensic analysis; economic damages calculations; family law; fraud prevention, detection and response; financial statement misrepresentation; and valuations then you may be interested in holding the CFF.

To qualify, you must be an AICPA member in good standing, have at least five years of experience in practicing accounting, and meet minimum requirements in relevant business experience and continuing professional education.

Qualifications for the CFF are changing beginning September 1, 2010. After that date you must pass the CFF Examination to attain the CFF Credential. This exam is scheduled for September 29th through October 29th2010. Registration for the exam will begin September 1st and last through October 1st.

You can download the CFF application by going to the AICPA website http://www.aicpa.org/. Look under Interest Area, Forensic and Valuation Services.

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Proposed SSAE, Reporting on Compiled Prospective Financial Statements When the Practitioner’s Independence Is Impaired.

The AICPA Accounting and Review Services Committee (ARSC) has issued a Proposed Statement on Standards for Attestation Engagements (SSAE) Reporting on Compiled Prospective Financial Statements When the Practitioner’s Independence Is Impaired. The proposed SSAE is a result of SSARS No. 19 which, as you are aware, permits, but does not require, the accountant to disclose the reasons he or she was not independent when performing a compilation of historical financial statements.

The ARSC determined that the attestation standards should also be revised so that the practitioner, if he or she chooses, can disclose the reasons for an independence impairment in the compilation report on compiled prospective financial information. The proposed SSAE would amend paragraph .23 of AT section 301, Financial Forecasts and Projections (AICPA, Professional Standards, vol. 1), to permit, but not require, the accountant to disclose the reason(s) for an independence impairment in a report on compiled prospective financial information.

The proposed SSAE was issued June 3, 2010. The comment period ends September 10, 2010

The proposed SSAE would be effective for compilations of prospective financial statements for periods ending on or after December 15, 2010, with early implementation permitted.

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Proposed SAS, Filings With The U.S. Securities And Exchange Commission Under The Securities Act Of 1933

The AICPA Auditing Standards Board has issued another proposed SAS in its Clarity Project. The Proposed SAS, Filings With The U.S. Securities And Exchange Commission Under The Securities Act Of 1933 supersedes SAS No. 37, Filings Under Federal Securities Statutes, (AU sec. 711). The proposed SAS was issued June 1, 2010 with a comment period ending August 2, 2010. It is effective for audits of financial statements for periods ending on or after December 15, 2012.

You’ll recall that the ASB is converging its standards with the International Standard on Auditing (ISA) when an ISA corresponds to the proposed SAS. In the case of this proposed statement there is no ISA that corresponds to the proposed SAS.

As with many of the “clarified” statements this proposed SAS does not change or expand the SAS it supersedes in any significant respect. It does reflect a more principles-based approach to standard setting, so certain requirements that are duplicative of broader requirements in SAS No. 37 have been moved to application and other explanatory material.

You might find the ASB staff prepared supplementary material on this proposed SAS useful. It compares the proposed SAS with AU Section 711 and 9711 and is available on the AICPA website at www.aicpa.org/InterestAreas/AccountingAndAuditing/Resources.

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Modified Timeline for Convergence of FASB/IASB Major Standards

The IASB and the FASB recently issued a joint statement on their convergence work.

In November 2009 the two Boards reaffirmed their commitment to improving International Financial Reporting Standards (IFRSs) and US GAAP and achieving their convergence. In that statement they affirmed June 2011 as the target date for completing the major projects in the 2006 Memorandum of Understanding (MoU), as updated in 2008. Then in their March 2010 report they described the progress they had made to date, explained some of the challenges they face in improving and converging their standards in certain areas, and reported changes made to certain project-specific milestone targets.

They also recognized the challenges that arise from seeking effective global stakeholder engagement on a large number of projects. As a result of concerns expressed by various stakeholders about their ability to provide high-quality input on the large number of major Exposure Drafts planned for publication in the second quarter of 2010, the two Boards are now in the process of developing a modified strategy to take account of these concerns. This strategy would:

• Prioritize the major projects in the MoU to permit a sharper focus on issues and projects that will bring about significant improvement and convergence between IFRS and US GAAP.
• Stagger the publication of Exposure Drafts and related consultations to enable the broad-based and effective stakeholder participation in due process.
• Limit to four the number of significant or complex Exposure Drafts issued in any one quarter.
• Issue a separate consultation document seeking stakeholder input about effective dates and transition methods.

The modified strategy retains the target completion date of June 2011 for many of the projects identified by the original MoU. The target completion dates for a few projects have extended into the second half of 2011. To see more of theFASB's activities go to their website, http://www.fasb.org/.

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Proposed ASU on Comprehensive Income

The FASB issued the Proposed Accounting Standards Update Comprehensive Income (Topic 220), Statement of Comprehensive Income on May 26, 2010. The comment period ends September 30, 2010

Under the amendments in this proposed Update an entity would be

• Required to report total comprehensive income and its components in two parts— net income and other comprehensive income—in a continuous statement of financial performance.
• Required to display a total for each part
• Required to display each component of net income and each component of other comprehensive income in that statement of financial performance.

The amendments in this proposed Update would not

• Change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.
• Change the option for an entity to show components of other comprehensive income gross or net of the effect of income taxes in the statement of comprehensive income as long as the tax effect for each component is disclosed in the notes to the financial statements or is displayed parenthetically on the statement of comprehensive income.
• Affect how earnings per share are calculated or reported.

The amendments in this proposed Update would be applied on a fully retrospective basis to improve comparability between reporting periods.

Early adoption would be permitted, because compliance with the proposed amendments is already permitted. The amendments do not require any transition disclosures.

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Proposed ASU on Financial Instruments

As you may recall the FASB and the IASB have been working on a number of joint projects. One of these projects is Accounting for Financial Instruments. As a result of this project FASB issued the Proposed Accounting Standards Update. Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities, Financial Instruments (Topic 825) and Derivatives and Hedging (Topic 815) on May 26, 2010. The comment period ends September 30, 2010,

Under this proposal,

• Most financial instruments would be measured at fair value in the statement of financial position each reporting period.
• For derivatives and financial instruments for which an entity’s strategy is trading the instruments, fair value would continue to be required, with all changes in fair value recognized in net income each reporting period.
• Changes in the fair value of equity securities, certain hybrid instruments, and financial instruments that can be contractually prepaid in such a way that the holder would not recover substantially all of its investment also would be recognized in net income each reporting period regardless of an entity’s business strategy with respect to those financial instruments.
• Financial instruments for which an entity’s business strategy is to hold for collection or payment(s) of contractual cash flows, the proposed guidance would recognize the utility to financial statement users of both fair value and amortized cost information by requiring a reconciliation from amortized cost to fair value on the face of the statement of position.
• Financial liabilities would be accounted for similar to financial assets, thus reflecting how financial assets and liabilities are managed together.
• Hedge accounting criteria would be simplified.

The FASB has scheduled a free webcast on Financial Instruments on June 30, 2010. You may register for it on the FASB website, http://www.fasb.org/.

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Consideration of Laws and Regulations

The Auditing Standards Board recently issued a clarified auditing standard, SAS Consideration of Laws and Regulations in an Audit of Financial Statements. This Statement supersedes SAS No. 54, Illegal Acts by Clients (AICPA, Professional Standards, vol. 1, AU sec. 317).

It addresses the auditor’s responsibility to consider laws and regulations in an audit of financial statement and does not apply to other assurance engagements in which the auditor is specifically engaged to test and report separately on compliance with specific laws or regulations.

The Statement addresses:

• The effect of laws and regulations on financial statements
• The responsibility for compliance with laws and regulations (both management's and the auditor’s responsibility).

Of particular interest to auditors is that the Statement discusses the auditor’s responsibilities in relation to compliance with the two categories of laws and regulations:

(1) The provisions of those laws and regulations generally recognized to have a direct effect on the determination of material amounts and disclosures in the financial statements, such as tax and pension laws and regulations.
(2) The provisions of other laws and regulations that do not have a direct effect on the determination of the amounts and disclosures in the financial statements but compliance with which may be fundamental to the operating aspects of the business; fundamental to an entity’s ability to continue its business; or necessary for the entity to avoid material penalties.

This SAS is effective for audits of financial statements for periods ending on or after December 15, 2012.

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SSAE No. 16 Reporting on Controls at a Service Organization

The ASB has issued Statement on Standards for Attestation Engagements (SSAE) No. 16, Reporting on Controls at a Service Organization. With the issuance of this standard the requirements and guidance for service auditors and user auditors moves from SAS No. 70, Service Organizations (AU section 324) to SSAEs. Recall that the entity that outsources a task or function is known as a user entity, and the entity that performs a service for user entities is known as a service organization. Examples of service organizations include investment advisers that invest assets for user entities or a data center that provides applications and technology that enable user entities to process financial transactions.

SSAE No. 16 contains the requirements and guidance for a service auditor reporting on a service organization’s controls. It enables a service auditor to perform two types of engagements:

• A type 2 engagement in which the service auditor reports on the fairness of the presentation of management’s description of the service organization’s system and the suitability of the design and operating effectiveness of the controls to achieve the related control objectives included in the description throughout a specified period.
• A type 1 engagement in which the service auditor reports on the fairness of the presentation of management’s description of the service organization’s system and the suitability of the design of the controls to achieve the related control objectives included in the description as of a specified date.

SSAE No. 16 is effective for service auditors' reports for periods ending on or after June 15, 2011. Earlier implementation is permitted.

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Blue-Ribbon Panel Holds First Meeting

The first meeting of the panel was held April 12, 2010 in the New York offices of the AICPA. The key portion of the meeting featured the viewpoints of those panel members who use private company financial statements, including three lenders, a venture capitalist, a private equity manager, a surety, and a business owner.

Most members agreed that U.S. GAAP is seen as a gold standard in financial reporting, and that consistency of GAAP is key. In addition they said that financial statements are only a part of decision making and that management’s character plays an important role in those decisions. Panel members said in using financial statements, they make adjustments to fit their own needs and they would be willing to make further changes if GAAP were modified. But having too many exceptions and variances erodes the notion of what is considered to be generally accepted, they said.

At the panel’s next meeting preparers and auditors will share their viewpoints. In addition, representatives from the International Accounting Standards Board and the Canadian Accounting Standards Board will speak with the panel about IFRS for SMEs and Canadian GAAP for Private Enterprises.

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First Meeting of the Blue-Ribbon Panel on Private Company Financial Reporting April 12, 2010

The first meeting of the Blue-Ribbon Panel on Private Company Financial Reporting will be held on Monday April 12, 2010 in New York City. A public portion of the meeting will take place from 10:30 a.m. to 4:30 p.m. This portion of the meeting will be accessible via live audio stream. You may access the audio by going to the FASB website, fasb.org. and clicking on “Listen to Webcast of April 12, 2010 Meeting of “Blue Ribbon Panel” on Standard Setting for Private Companies” under “Recent Activity and News.”

In the first half of the public portion of the meeting, various people will provide an overview of the history on the debate of private company standards within the U.S. financial reporting system, provide a briefing on world actions on private company financial reporting, and provide a briefing on the current U.S. standard-setting process. There will also be an expert discussion by James Castellano, former chairman of the AICPA’s Private Company Financial Reporting Task Force and 2002 AICPA Board of Directors chairman.

In the second half of the public portion of the meeting, panel members will discuss their views on the following issues:

• Who are the actual users of private company financial statements?
• What is the key, decision-useful information that the various users need from U.S. GAAP financial statements? Is there information you don’t need or can’t get?
• Are current U.S. GAAP financial statements meeting those needs? Why or why not?
• Do you routinely “adjust” the U.S. GAAP financial statements to meet your needs?
• Are you concerned with the cost/benefit issues preparers experience in preparing U.S. GAAP financial statements?

The next meeting is scheduled for May 15, 2010.

How do you feel about the work of the Blue-Ribbon Panel? Is there a need for a separate set of standards for private companies? Tell us how you think it will affect your practice by adding a comment.

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