Flashline - Week ending November 29, 2012 (No. 2012-47)

Flashline 11/29/2012 by Assurance services

PwC's weekly alert highlighting current financial reporting developments (including accounting, auditing and regulatory matters). This week's topics include:

  • Dataline: COSO's proposed Internal Control Compendium, updated Framework, and Illustrative Tools
  • PwC shares views on FASB's disclosure framework discussion paper
  • SEC Chairman Mary Schapiro to step down
  • PCAOB approves 2013 budget and related strategic plan
  • FASB proposes to clarify scope of disclosures that apply to balance sheet offsetting of assets and liabilities
  • FASB meetings and project updates
  • IASB proposes amendments to IAS 28 re: equity method of accounting
  • IASB proposes limited amendments to its financial instruments guidance under IFRS 9
  • IASB Update — November 2012
  • IFRIC Update — November 2012
  • IAASB eNews — November 2012
  • IOSCO publishes principles for ongoing disclosure for asset-backed securities

PwC

Dataline: COSO's proposed Internal Control Compendium, updated Framework, and Illustrative Tools

On September 18, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issue an exposure draft of its proposed Internal Control over External Financial Reporting: Compendium of Approaches and Examples (the Compendium) for public comment through December 4, 2012. In conjunction with the release of the Compendium, COSO has made available two other documents: (1) the revised version of the previously exposed Internal Control — Integrated Framework (the updated Framework) which incorporates revisions arising from consideration of comments received from more than 200 organizations and professionals and (2) the proposed Illustrative Tools: Assessing Effectiveness of a System of Internal Control (the Illustrative Tools).

Dataline 2012-18 highlights the noteworthy changes to the updated Framework, including requirements set out for effective internal control. It also summarizes the purpose of the Compendium and Illustrative Tools and highlights key considerations for companies, including transition to the updated Framework.

PwC shares views on FASB's disclosure framework discussion paper

PwC submitted comments on the FASB's Discussion Paper — Invitation to Comment on Disclosure Framework (the DP). We support the board's efforts to improve the effectiveness of disclosures in financial statements. We encourage the board to continue its outreach to investors and other stakeholders as it decides which alternatives to pursue in developing a proposal.

Generally, we support the board's effort to improve the relevance and comparability of financial reporting by developing a proposed framework for setting disclosure requirements. We believe the best approach to achieve the objective of relevant, effective financial statement disclosures is for the board to identify the potential disclosures for each FASB Codification Topic (emphasizing that all the listed disclosures may not be required). Reporting entities should then use well-reasoned judgments to select disclosures that are relevant for their facts and circumstances.

Our response letter further outlines our observations and recommendations to the board.

Securities and Exchange Commission (SEC)

SEC Chairman Mary Schapiro to step down

After nearly four years in office, SEC Chairman Mary Schapiro announced that she will step down on December 14, 2012. Chairman Schapiro is one of the longest-serving SEC Chairman. She was appointed by President Barack Obama in January 2009 in the midst of the financial crisis. During her tenure, she worked to bolster the SEC’s enforcement and examination programs, and led one of the busiest rulemaking periods in decades.

Public Company Accounting Oversight Board (PCAOB)

PCAOB approves 2013 budget and related strategic plan

This week, the PCAOB approved its 2013 fiscal-year budget of approximately $245.6 million and its 2012-2016 strategic plan. The board approved its strategic plan for 2012-2016 to serve as the foundation for the 2013 budget as required by the SEC’s PCAOB budget rule. The 2013 budget is subject to approval by the SEC. A summary of the 2013 budget will be available on the PCAOB website once it is submitted to the SEC for consideration. The strategic plan also will be available at the same time.

Financial Accounting Standards Board (FASB)

FASB proposes to clarify scope of disclosures that apply to balance sheet offsetting of assets and liabilities

The FASB issued for public comment a proposed Accounting Standards Update (ASU) that aims to clarify the scope of transactions that are subject to the disclosures about offsetting as set out in ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities . Specifically, the proposed ASU limits the scope of the required disclosures to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. Comments on the proposal are requested by December 21.

FASB meetings and project updates

Meeting summary: The FASB did not hold any board meetings this week.

Next open board meeting: The FASB’s next board meeting will be held on December 12. Topics to be discussed will be announced next week.

Project updates: The FASB has updated the following project summaries:

International Accounting Standards Board (IASB)

IASB proposes amendments to IAS 28 re: equity method of accounting

The IASB has published for public comment an exposure draft of proposed amendments to IAS 28, Investments in Associates and Joint Ventures. The objective of the proposed amendments is to provide additional guidance on the application of the equity method, a method of accounting whereby the investment is initially recognized at cost and subsequently adjusted to reflect the change in the investor’s share of the investee’s net assets. Specifically, it aims to provide guidance on how investors should recognize their share of the changes in the net assets of an investee that are not recognized in profit or loss or other comprehensive income of the investee, and that are not distributions received (‘other net asset changes’).

Comments on the exposure draft are requested by March 22, 2013.

IASB proposes limited amendments to its financial instruments guidance under IFRS 9

This week, the IASB issued its exposure draft proposing limited amendments to IFRS 9 (2010), Financial instruments. The proposed amendments are intended to:

  • Address application issues that have arisen since the original issuance of IFRS 9 with regard to financial assets measured at amortized cost
  • Consider the interaction with the IASB’s insurance project
  • Reduce differences between IFRS 9 and the FASB’s proposed classification and measurement approach

The IASB finalized its guidance on classification and measurement of financial assets in 2009 and financial liabilities in 2010, while the FASB has continued to develop its approach. A year ago, the FASB and IASB agreed to conduct joint discussions on the topic. Those meetings were completed earlier this year. The exposure draft represents the IASB's proposed changes to its existing guidance resulting from the joint discussions. The FASB is currently drafting its exposure draft that it plans to issue for public comment in the first quarter of 2013.

Comments on the IASB’s exposure draft are requested by March 28, 2013.

Note: PwC has also issued an In brief article providing an overview of the IASB’s proposed amendments and what’s next.

IASB Update — November 2012

This edition of IASB Update, issued by the IASB staff, provides a summary of the IASB’s November 19-21 meeting. The FASB joined the IASB for some of the sessions. The IASB and FASB continued their discussions on their projects on (1) revenue recognition, (2) accounting for financial instruments: impairment, and (3) insurance contracts.

The topics discussed at the IASB-only sessions were (1) levies charged by public authorities on entities that operate in a specific market, (2) financial instruments: impairment, (3) conceptual framework, (4) insurance contracts, (5) offsetting disclosures—amendments to IFRS 7 (update), (6) due process documents, and (7) an overview of the Enhanced Disclosure Task Force Report.

IFRS Interpretations Committee

IFRIC Update — November 2012

The November 2012 edition of IFRIC Update provides a summary of the IFRS Interpretations Committee's November 13-14 meeting. The meeting included discussion of the following current agenda items:

  • IAS 1, Presentation of Financial Statements — Disclosures about going concern
  • IAS 16, Property, Plant and Equipment, IAS 38, Intangible Assets, and IFRIC 12, Service Concession Arrangements —Variable payments for the separate acquisition of PP&E and intangible assets
  • IAS 19, Employee benefits — Employee benefit plans with a guaranteed return on contributions or notional contributions
  • IAS 37, Provisions, Contingent Liabilities and Contingent Assets — Interpretation on Levies

Also covered were agenda decisions, issues considered for annual improvements, and discussion of other work in progress.

International Federation of Accountants (IFAC)

IAASB eNews — November 2012

This edition of IFACs International Auditing and Assurance Standards Board (IAASB) eNews features the following items:

  • Focus on Auditor Reporting—Feedback on June 2012 Invitation to Comment
  • IAASB Proposes Standard Enhancing Auditor Responsibilities for Disclosures Beyond the Financial Statements
  • IAASB Staff Q&A Publication Addresses Proportionate Application of ISQC 1
  • Directions in Auditing and Assurance: Challenges and Opportunities
  • Upcoming IAASB Meeting
  • Other Relevant IFAC Initiatives

International Organization of Securities Commissions (IOSCO)

IOSCO publishes principles for ongoing disclosure for asset-backed securities

IOSCO has published a final report on Principles for Ongoing Disclosure for Asset Backed Securities ("ABS Ongoing Disclosure Principles"), which contains principles designed to provide guidance to securities regulators who are developing or reviewing their regulatory regimes for ongoing disclosure for asset-backed securities (ABS). The objective of the ABS Ongoing Disclosure Principles is to enhance investor protection by facilitating a better understanding of the issues that should be considered by regulators in relation to ongoing disclosure regimes for ABS.

Edited by:

Brad Mescher
Director
Phone: 1-973-236-7261
Email: brad.mescher@us.pwc.com

Saira Gilani
Senior Manager
Phone: 1-973-236-5811
Email: saira.s.gilani@us.pwc.com

Flashline is a weekly alert highlighting current financial-reporting developments (including accounting, auditing and regulatory matters) and is produced by the National Professional Services Group of PwC. This publication has been prepared for general information on matters of interest only, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this material was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PwC, its members, employees and agents shall not be responsible for any loss sustained by any person or entity who relies on this publication.