Flashline - Week ending January 24, 2013 (No. 2013-04)

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

• Dataline: Boards conclude redeliberations on key revenue measurement and recognition issues
• President Obama nominates Mary Jo White to run the SEC
• SEC staff releases updated Financial Reporting Manual
• FASB meetings and project updates
• EITF observer — January 2013
• IASB proposes modifications to recoverable amount disclosures for non-financial assets
• IASB releases financial statement disclosure survey results
• IFRS Foundation seeks comments on proposed IFRS Taxonomy 2013
• ARSC withdraws compilation and association exposure draft
• IFAC issues guidance to help accountants improve business reporting processes
• PAIB eNews — January 2013
• GASB publishes final standard on reporting for government combinations and disposals of government operations

PwC

Dataline: Boards conclude redeliberations on key revenue measurement and recognition issues

The FASB and IASB (“the boards”) met in November and December 2012 to continue redeliberating their joint revenue recognition project. The boards reached tentative decisions on key remaining measurement and recognition issues, including the constraint for recognizing revenue from variable consideration, collectibility, licenses, allocation of transaction price, and contract acquisition costs.

Other key issues still to be redeliberated include scope, disclosures, and transition. Those issues will be discussed in early 2013. A final standard is planned for the second quarter of 2013 with an effective date no earlier than January 1, 2015. Full retrospective application, with certain reliefs, will be required unless the boards change their current position.

Dataline 2013-02 summarizes the boards’ redeliberations and tentative decisions made at their November and December 2012 meetings as well as the potential implications for certain industries.

Securities and Exchange Commission (SEC)

President Obama nominates Mary Jo White to run the SEC

President Obama has nominated Mary Jo White to be the next chair of the SEC. If confirmed by the U.S. Senate, Ms. White will replace Elisse Walter as chairman.

Ms. White is a former U.S. Attorney who specialized in investigating and prosecuting white collar crimes, securities and financial institution fraud, and other crimes in the Southern District of New York. Since leaving her post as a U.S. Attorney in 2002, she’s been a partner at the law firm of Debevoise & Plimpton LLP.

SEC staff releases updated Financial Reporting Manual

The SEC's Division of Corporation Finance has published an updated version of its Financial Reporting Manual. Some of the notable updates relate to (1) significance testing for related businesses, (2) auditor responsibility for cumulative period from inception amounts for a development stage company, and (3) PCAOB requirements for auditors of non-issuer financial statements.

The manual serves as an internal, informal reference document to provide general guidance to SEC staff when reviewing for compliance with SEC reporting rules. Though non-authoritative, the manual is a helpful source for companies and auditors to reference for general information on SEC reporting matters.

Financial Accounting Standards Board (FASB)

FASB meetings and project updates

Meeting summary: The FASB met on January 23 and discussed its project on investment companies. See the FASB’s website for a summary of decisions reached at the meeting.

Next open board meeting: The FASB has the following meetings scheduled for next week:

• January 30: Joint FASB/IASB meeting: The FASB and IASB will discuss their joint projects on (1) revenue recognition, (2) insurance contracts, and (3) leases.
• January 31: FASB meeting: The FASB will discuss its projects on (1) going concern and (2) nonpublic entities: clarification of a fair value disclosure requirement. It will also decide whether to ratify the EITF consensuses and consensuses-for-exposure reached at the January 17 EITF meeting.

See the FASB’s website for further information on the meetings.

Emerging Issues Task Force (EITF)

EITF observer — January 2013

At the EITF's January 17 meeting, the Task Force discussed seven issues. It reached final consensuses on the following two issues:

• Issue 11-A, "Parent's Accounting for the Cumulative Translation Adjustment (CTA) upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity"
• Issue 12-D, "Accounting for Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation is Fixed at the Reporting Date"

The Task Force reached consensuses-for-exposure on the following two issues:

• Issue 13-A, "Inclusion of the Fed Funds Effective Swap Rate as a Benchmark Interest Rate for Hedge Accounting Purposes"
• Issue 13-C, "Presentation of a Liability for an Unrecognized Tax Benefit When a Net Operating Loss (NOL) Carryforward or Tax Credit Carryforward Exists"

Further discussion at a future EITF meeting is expected on the remaining three issues.

The FASB will discuss the consensuses and consensuses-for-exposure at its January 31 board meeting and decide whether to ratify them.

Read PwC's EITF observer  for a synopsis of the discussions and decisions reached at the January 17 EITF meeting.

International Accounting Standards Board (IASB)

IASB proposes modifications to recoverable amount disclosures for non-financial assets

The IASB published for public comment an exposure draft proposing modifications to the disclosures required by IAS 36, Impairment of Assets, when the recoverable amount of non-financial assets is determined based on fair value less costs of disposal.

When the IASB issued IFRS 13, Fair value measurement, it made consequential amendments to the disclosure requirements of IAS 36 when the recoverable amount is based on fair value less costs of disposal. The IASB recently realized that one of the amendments was drafted more widely than intended. The exposure draft proposes to correct this and introduces additional disclosures about fair value measurements when there has been impairment or a reversal of impairment.

Comments on the exposure draft are requested by March 19, 2013.

IASB releases financial statement disclosure survey results

The IASB released highlights of a survey conducted recently on financial information disclosures, ahead of its public discussion forum on Disclosures in Financial Reporting to be held next week. Respondents to the survey (including both users and preparers) identified various factors that contribute to ineffective financial statement disclosures. Some of the highlights are listed below:

• Many respondents agreed that improvements could be made to the way financial information is disclosed.
• Most preparers of financial statements identified the primary problem as disclosure requirements being too extensive with not enough being done to exclude immaterial information.
• Many users of financial statements felt that preparers could do more to improve the communication of relevant information within the financial statements.

IFRS Foundation seeks comments on proposed IFRS Taxonomy 2013

The IFRS Foundation has published for public comment an exposure draft titled IFRS Taxonomy 2013 (“the 2013 Taxonomy”). The 2013 Taxonomy reflects IFRS standards and interpretations as issued at January 1, 2013. It consolidates all IFRS Taxonomy interim releases that were published in 2012. In addition, the exposure draft includes concepts that reflect some industry practices derived from an analysis of financial statements from the banking, insurance, and extractive (mining and energy) industries.

Comments on the exposure draft are requested by March 18, 2013.

American Institute of Certified Public Accountants (AICPA)

ARSC withdraws compilation and association exposure draft

The AICPA’s Accounting and Review Services Committee (ARSC) voted to withdraw its compilation and association exposure draft in response to two main concerns highlighted by comment letters from stakeholders. The first concern was that compilation services should be positioned as a nonattest service consistent with the positioning of preparation of financial statements. The second concern was confusion between the proposed compilation standard and the proposed association standard, with many respondents recommending that they be combined and simplified.

ARSC will immediately begin work on a proposal that will respond to the concerns raised by stakeholders. A new exposure draft is expected to be issued in the late spring or early summer timeframe.

International Federation of Accountants (IFAC)

IFAC issues guidance to help accountants improve business reporting processes

IFAC's Professional Accountants in Business (PAIB) Committee has published a new International Good Practice Guidance publication titled Principles for Effective Business Reporting Processes. This principles based guidance is directed at all organizations wishing to enhance their reporting processes—no matter their size or structure, or whether they are private or public, as all organizations need effective reporting processes to provide high-quality reports for their internal and external stakeholders.

PAIB eNews — January 2013

This issue of IFAC's PAIB Committee eNews addresses:

• Business Reporting Process Guidance Released by PAIB Committee
• Reminder: Comment Period Coming to a Close for Strategy and Work Plan
• PAIB Committee Submits Comment Letters on Relevant Issues
• ACCA Virtual Conference Includes IFAC Presentation on Sustainability and Accountancy
• PUMA Environmental P&L Methodology Receives Independent Approval
• COSO Seeking New Board Chair
• Recent News, Events, and Publications of Interest

Governmental Accounting Standards Board (GASB)

GASB publishes final standard on reporting for government combinations and disposals of government operations

The GASB published GASB Statement No. 69, Government Combinations and Disposals of Government Operations, which is intended to improve accounting and financial reporting for U.S. state and local governments’ combinations and disposals of government operations.

The requirements of GASB 69 are effective for periods beginning after December 15, 2013, and should be applied on a prospective basis. Early application of the standard is encouraged.

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. It is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. To access additional content on financial reporting issues, register for CFOdirect Network (www.cfodirect.pwc.com), PwC’s online resource for financial executives.