Flashline - Week ending February 21, 2013 (No. 2013-08)

Flashline 02/22/2013 by Assurance services

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

This week's topics include:

  • Dataline: FASB's new guidance on the reporting of amounts reclassified from accumulated other comprehensive income
  • In brief: FASB proposes a new model for classification and measurement of financial instruments
  • In brief: Boards conclude key revenue redeliberations with decisions on disclosures and transition
  • In brief: Accounting implications of recent events in Venezuela
  • In brief: South Sudan considered highly inflationary in 2013
  • FASB seeks comments on two EITF consensuses-for-exposure
  • FASB meetings and project updates
  • Final minutes of the January 17 EITF meeting
  • IFRS Foundation issues updated 'Due Process Handbook'
  • IFRS Foundation publishes revised version of the IFRS Foundation Constitution
  • SEC staff outlines various U.S. federal securities law issues applicable to foreign private issuers
  • GAQC releases updated illustrative HUD reports
  • ASB begins 'attestation standards' clarity project

PwC

Dataline: FASB’s new guidance on the reporting of amounts reclassified from accumulated other comprehensive income

The FASB issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, on February 5, 2013. The standard is effective for public entities for annual periods, and interim periods within those periods, beginning after December 15, 2012 (e.g., Q1-2013 for calendar year public companies). Non-public companies will adopt the standard one year later, but would be exempt from certain interim disclosure requirements.

The standard is intended to improve the reporting of reclassifications out of accumulated other comprehensive income of various components. Among other things, an entity is required to present either parenthetically on the face of the financial statements or in the notes, significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. However, an entity would not need to show the income statement line item affected for certain components that are not required to be reclassified in their entirety to net income, such as amounts amortized into net periodic pension cost.

Dataline 2013-03 looks at the key provisions of the new standard and offers our observations on applying it.

In brief: FASB proposes a new model for classification and measurement of financial instruments

On February 14, the FASB issued a revised proposal for the classification and measurement of financial instruments. Classification and measurement is one part of the FASB and IASB’s broader financial instruments project. The other parts consist of impairment and hedge accounting. The IASB previously finalized its classification and measurement approach, but in late 2012, proposed targeted amendments to its guidance.

The FASB’s proposal calls for a mixed measurement approach for financial assets and financial liabilities — either fair value or amortized cost. It is intended to be responsive to the considerable feedback the FASB received on its 2010 exposure draft, which proposed fair value measurement for all financial instruments. Comments on the FASB's proposal are due by May 15, 2013.

This In brief article provides an overview of the proposal.

In brief: Boards conclude key revenue redeliberations with decisions on disclosures and transition

The FASB and IASB reached decisions at their February 20 meeting on disclosure requirements, transition, and effective date for the revenue recognition standard. These decisions substantively conclude the boards' redeliberations on this project. Any remaining “sweep” issues will be discussed at future meetings.

This In brief article summarizes the key decisions reached at the boards' February 20 meeting.

In brief: Accounting implications of recent events in Venezuela

On February 8, the Venezuela government announced that effective February 13, 2013 its currency would be devalued 32% and that the government-regulated rate mechanism referred to as the Transaction System for Foreign Currency Denominated Securities (SITME) market would be eliminated. The Venezuelan government also created a new department referred to as the Superior Body for the Optimization of the Exchange System to oversee foreign currency exchange policies.

This In brief article highlights the key financial reporting impacts of these developments.

In brief: South Sudan considered highly inflationary in 2013

At its November 2012 meeting with the SEC staff, the Center for Audit Quality’s SEC Regulations Committee’s International Practices Task Force (IPTF) discussed whether South Sudan’s economy should be considered highly inflationary. The SEC staff affirmed that South Sudan’s economy should be treated as highly inflationary for US GAAP purposes no later than the first reporting period (including annual and interim periods) beginning on or after January 1, 2013.

This In brief article describes why South Sudan is considered highly inflationary and highlights some of the financial reporting implications.

Financial Accounting Standards Board (FASB)

FASB seeks comments on two EITF consensuses-for-exposure

The FASB has issued for public comment two proposed Accounting Standards Updates (ASU) that contain the consensuses-for-exposure reached at the January 2013 EITF meeting. The proposed ASUs are:

Comments on the proposed ASUs are due on April 22, 2013.

See the January 2013 edition of PwC’s EITF observer for an overview of each Issue. Also, see the EITF section below for the final minutes of the EITF’s January 2013 meeting.

FASB meetings and project updates

Meeting summaries: The FASB held the following board meetings over the past week:

  • FASB and IASB joint board meeting — February 20:: The boards discussed their joint projects on (1) revenue recognition and (2) leases. See the FASB’s website for a summary of the decisions reached at the meeting. Also see above for PwC’s In brief article on the boards’ revenue project decisions.
  • FASB board meeting — February 20: The board discussed its project on insurance contracts. See the FASB’s website for a summary of the decisions reached at the meeting.

Next open board meetings: The next scheduled FASB meeting is on February 27, 2013. The FASB will discuss its project on insurance contracts. See the FASB’s website for further information on the meeting.

  • February 20: FASB and IASB joint board meeting: The boards will discuss their joint projects on (1) revenue recognition and (2) leases.
  • February 20: FASB meeting: The FASB will discuss its project on insurance contracts.

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

Emerging Issues Task Force (EITF)

Final minutes of the January 17 EITF meeting

The FASB staff has published the final minutes of the January 17 EITF meeting. At the 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"

Note: Also see the FASB section above for the proposed ASUs for these two Issues published for public comment this week.

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.

Also, see the January 2013 edition of PwC’s EITF observer for a synopsis of the discussions and decisions reached at the EITF's meeting.

International Accounting Standards Board (IASB)

IFRS Foundation issues updated 'Due Process Handbook'

The IFRS Foundation, responsible for the governance and oversight of the IASB, has published an updated version of the IASB and IFRS Interpretations Committee Due Process Handbook. The Handbook describes the steps followed by the IASB and the Interpretations Committee in developing or revising International Financial Reporting Standards (IFRSs) and Interpretations. The revised Handbook represents the results of the first major review that has been undertaken since 2006. The revised Handbook fully incorporates the necessary due process enhancements recommended by the 2012 Monitoring Board Governance Review and Trustees’ Strategy Review, as well as recommendations from the Trustees’ Review of the Efficiency and Effectiveness of the IFRS Interpretations Committee.

IFRS Foundation publishes revised version of the IFRS Foundation Constitution

The Trustees of the IFRS Foundation have published a revised version of the IFRS Foundation Constitution. The revisions to the Constitution were approved by the Trustees at their meeting in January 2013, following a public consultation of a drafting review proposing changes to the Constitution to reflect the separation of the role of Chairman of the IASB and Chief Executive Officer of the IFRS Foundation. This change is in line with the conclusions of the Monitoring Board Governance Review, which was published in February 2012.

Securities and Exchange Commission (SEC)

SEC staff outlines various U.S. federal securities law issues applicable to foreign private issuers

The staff of the SEC Division of Corporation Finance has published a document titled Accessing the U.S. Capital Markets — A Brief Overview for Foreign Private Issuers, which presents a general outline of various U.S. federal securities law issues applicable to Foreign Private Issuers, as well as additional matters these issuers may wish to take into account when considering having their securities trade in the U.S. capital markets. It is not a comprehensive manual on the regulation of foreign issuers under the U.S. federal securities laws and the information presented may not be current.

American Institute of Certified Public Accountants (AICPA)

GAQC releases updated illustrative HUD reports

The AICPA’s Governmental Audit Quality Center (GAQC) issued a GAQC Alert to announce the release of updated reports for audits performed under the Consolidated Audit Guide for Audits of HUD Programs (HUD Guide). The GAQC has been working for the last several months to develop updated illustrative auditor reports that reflect the new AICPA clarity auditing standards.  The GAQC Alert addresses:

  • The background and process for the development and issuance of the report illustrations;
  • A summary of the key changes in the updated HUD reports and an understanding that such reports include an illustrative financial statement report, illustrative reports to meet the requirements of Government Auditing Standards, and illustrative reports for reporting on compliance and internal control over compliance relating to HUD programs;
  • An understanding that the reports may be used both by auditors using the previous version of Chapter 2, Reporting Requirements and Sample Reports, of the HUD Guide and also those that have early implemented the recently issued update to Chapter 2 of the HUD Guide; and
  • The HUD process going forward.

Auditing Standards Board (ASB)

ASB begins 'attestation standards' clarity project

To address concerns about the clarity, length, and complexity of its standards, the Auditing Standards Board (ASB) is clarifying the professional standards it issues. The objective of the ASB’s “clarity project” is to clarify and converge AICPA audit, attest, and quality control standards with those of the International Auditing and Assurance Standards Board (IAASB). The ASB, which has substantially completed clarifying Statements on Auditing Standards (SASs), has moved on to clarifying Statements on Standards for Attestation Engagements, also commonly known as the attestation standards. The attestation standards establish requirements for performing and reporting on examinations, reviews, and agreed-upon procedures that address subject matter other than financial statements, for example, a schedule of investment returns, the effectiveness of an entity’s controls over the security of a system, the fairness of the presentation of a statement of greenhouse gas emissions, and the privacy of personal information.

The ASB will discuss a revised draft of the proposed general attestation standards at its May 2013 meeting, at which time it will be asked to vote to expose those standards for comment.

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.