Audit committee issues

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Update on current board issues: July 2012

Audit committee issues

SEC staff releases final report on Global Accounting Standards Work Plan

On July 13 the SEC's Office of the Chief Accountant released its final staff report on the work plan related to global accounting standards. The 137-page report does not include a final policy decision as to whether IFRS should be incorporated into the US financial reporting system or how such incorporation might occur, according to a PwC In brief on the report's release.

Just prior to the SEC release of the IFRS report, SEC Chair Mary Schapiro told BloombergBNA that the regulator has no exact timeline for deciding on IFRS but that the commission would seek public comment and deliberate. 

The report, which the SEC asked for in February 2010, also states that additional analysis is necessary before any decision by the SEC concerning the incorporation of IFRS into the financial reporting system is made.

The report's executive summary includes seven summary findings on the development of IFRS, the interpretive process, the International Accounting Standards Board's (IASB) use of national standard setters, global application and enforcement, governance of the IASB, status of funding for the IFRS Foundation, and investor understanding.

For more on the SEC staff report, please read PwC's In brief: SEC Staff releases final report on IFRS Work Plan.

FASB removes loss contingencies project

The Financial Accounting Standards Board (FASB) voted July 9 to remove the controversial loss contingencies project from its agenda after five years.

According to a recent PwC's In brief: FASB votes to discontinue loss contingencies project, the board decided against pursuing changes to required disclosures of loss contingencies due to:

  • Improved compliance with existing disclosure requirements as a result of increased SEC focus on loss contingencies
  • Constituent feedback opposing the changes proposed in the exposure drafts issued by the FASB in 2008 and 2010
  • The FASB's disclosure framework project, where the FASB will take a broad look at all disclosures. The board may decide to consider improvements to loss contingency disclosures within the scope of that project.
  • Feedback from FASB advisory committees that the project on loss contingencies is a low priority

The FASB added the project to its agenda in 2007 to address concerns expressed by the users of financial statements that disclosures about loss contingencies -- particularly litigation contingencies -- do not provide adequate and timely information to assist them in assessing the likelihood, timing, and amount of future cash outflows associated with loss contingencies.

After the standard setter issued exposure drafts in 2008 and 2010, there was opposition because the imposition of additional disclosures regarding litigation contingencies could be prejudicial to the reporting entity.