KPMG's Defining
Issues
Click below to read Defining Issues, a publication of KPMG's Department
of Professional Practice. Defining Issues provides developments
in financial reporting, including developments that impact audit
committees.
- NEW: Proposed Disclosures about Financial Assets, December 2008 No. 08-56
- Assets and Liabilities from Contingencies in a Business Combination, December 2008 No. 08-54
- 2008 AICPA National Conference on SEC and PCAOB Developments, December 2008 No. 08-53
- FASB to Propose Changes in Impairment Accounting for Some Financial Instruments and Clarification of Credit Derivative Scope Exception, December 2008 No. 08-52
- Warrants and Convertible Instruments with “Down-Round” Protection, December 2008 No. 08-51
- How Current Market
Conditions Affect
Accounting and Funding
for Defined Benefit Plans, December 2008 No. 08-49
- Proposed Roadmap for
Mandatory IFRS Filings
by U.S. Public Companies, November 2008 No. 08-47
- FASB to Develop Staff
Position on Preacquisition Contingencies, October 2008 No. 08-44
- SEC Studying Mark-to-Market Accounting for Report to Congress, October 2008 No. 08-43
- FASB Views on Financial-Statement Presentation, October 2008 No. 08-42
- Going-Concern and Subsequent-Events Accounting Requirements to Become FASB Standards, October 2008 No. 08-41
- Additional One-Year Deferral of Interpretation 48 for Nonpublic Entities, October 2008 No. 08-40
- A Potential SEC “Company File System", October 2008 No. 08-39
- Guidance Issued on Fair Value Measurements in Inactive Markets, October 2008 No. 08-38
- Fair Value Measurements in Inactive Markets, October 2008 No. 08-37
- Nonpublic Entities to Remain Subject to Interpretation 48, October 2008 No. 08-36
- Proposal on Reporting Discontinued Operations, September 2008 No. 08-35
- Effective Date for Proposed Loss-Contingency Disclosures to Be at Least a Year Later, September 2008 No. 08-34
- Disclosures about Credit Derivatives and Guarantees, Effective Date of Statement 161 Clarified, September 2008 No. 08-33
- Proposals on Transfers of Financial Assets and Variable Interest Entities, September 2008 No. 08-32
- EITF Approves Consensus, September 2008 No. 08-31
- SEC to Propose Roadmap for Potential Mandatory IFRS Filings, August 2008 No. 08-30
- Proposed Changes to Earnings per Share Computations, August 2008 No. 08-29
- SEC Roundtable Compares Application of IFRS and U.S. GAAP, August 2008 No. 08-28
- SEC Advisory Committee Issues Final Recommendations, August 2008 No. 08-27
- Applying the Two-Class EPS Method to Share-Based Payments, June 2008 No. 08-26
- Proposed Loss-Contingency Disclosures, June 2008 No. 08-24
- New Accounting for Financial Guarantee Insurance, May 2008 No. 08-20
- SEC Proposes Mandatory XBRL Submissions
- GAAP Hierarchy Brought into GAAP
- New Accounting for Many Convertible Bonds
- Proposed Accounting for Trading Inventories
- New Guidance on Estimating the Useful Lives of Intangible Assets
- FASB Moves Toward Elimination of QSPEs
- SEC Staff Suggests MD&A Disclosures About Fair-Value Measurements
- Separate Accounting for the Conversion Options of Many Convertible Bonds
- Proposed Disclosures about Postretirement Benefit Plan Assets
- New Disclosures about Derivative Instruments and Hedging Activities
- SEC Advisory Committee Publishes Proposals
- FASB Staff Positions on Statement 157’s Applicability, SOP 07-1’s Effective Date
- Further Delay of 404(b) Requirements Proposed for Non-accelerated Filers
- FASB Defers Interpretation 48 for Nonpublic Entities
- New Guidance on Applying the “Shortcut Method” of Hedge Accounting
- SEC Extends Permissibility of “Simplified” Method for Some Share Option Grants
- Proposals to Change U.S. Standard-Setting Process
- Easier Filing Requirements for Smaller Public Companies
- SEC Roundtables on Using IFRS in the U.S.
- Proposed Deferral of Interpretation 48 for Nonpublic Entities
- AICPA Conference on SEC and PCAOB Developments
- FASB’s Preliminary Views on Financial Instruments with Characteristics of Equity
- XBRL U.S. GAAP Taxonomies Released for Public Review and Comment
- New Accounting for Business Combinations and Noncontrolling Interests
- EITF Approves Two Consensuses
- Proposal on Determining the Useful Lives of Intangible Assets
- FEI Financial Reporting Issues Conference
- SEC Eliminates U.S. GAAP Reconciliation for Foreign Private Issuers Using IFRS
- Partial Deferral of Statement 157’s Effective Date
- How the IFRS Movement Will Affect Financial Reporting in the U.S.
- SEC Staff Guidance on Loan Commitments Recorded at Fair Value Through Earnings
- Effective Date of Interpretation 48 to Be Postponed for Nonpublic Entities
- FASB Retains Effective Date of Statement 157, Will Delay Effective Date of SOP 07-1s
- The Accounting Implications of Illiquid Markets
- SEC Announces XBRL
Milestone
- EITF Reaches Three Tentative Conclusions
- SEC Seeks Input on Allowing Domestic Companies to Use IFRS
- SEC Advisory Committee to Study Ways to Reduce Complexity in Financial Reporting System
- FASB Requests Views on a Project to Develop an Insurance-Accounting Model
- Proposed Guidance on Applying the “Shortcut Method” of Hedge Accounting
- SEC Approves Information-Gathering Release on U.S. Registrants' Use of IFRS in Filings
- FASB to Propose Separate Accounting for the Conversion Options of Many Convertible Bonds
- SEC Proposals on Reporting by Smaller Public Companies
- SEC Guidance on Internal Control Over Financial Reporting
- SEC Proposes to Eliminate U.S. GAAP Reconciliations by IFRS Filers
- PCAOB Auditing Standard on Internal Control Over Financial Reporting
- SEC Announcement on IFRS in Filings
- Challenges for U.S. Standard Setters
- FASB Retains Effective Date for Tax Uncertainties Interpretation
Proposed Disclosures about Financial Assets
This edition of KPMG's Defining Issue reports on a fast-track proposed FASB Staff Position that would require companies to provide additional disclosures about financial assets that are not measured at fair value through earnings. If adopted, the new disclosures will be effective for annual and interim periods ending after December 15, 2008. Comments on the proposal are due January 15, 2009.
Assets and Liabilities from Contingencies in a Business Combination
This edition of KPMG's Defining Issue reports on a proposed FASB Staff Position’s potential amendments to Statement 141R that would likely result in fewer assets and liabilities reflecting contingencies acquired in business combinations being recognized at fair value than would occur under the Statement if it became effective without the amendments, even though the amendments would likely result in recognizing more assets and liabilities acquired in business combinations at fair value than is the case in current practice.
2008 AICPA National Conference on SEC and PCAOB Developments
This edition of KPMG's Defining Issue reports on the 2008 AICPA National Conference on SEC and PCAOB Developments.
FASB to Propose Changes in Impairment Accounting for Some Financial Instruments and Clarification of Credit Derivative Scope Exception
This edition of KPMG's Defining Issue reports on the FASB’s decisions to propose changes in the other-than-temporary-impairment model for beneficial interests in securitized financial assets and new disclosure requirements for some debt instruments that, if adopted, would be effective for December 31 financial statements, and to propose a clarification of the credit derivative scope exception in Statement 133 that would become effective in 2009. The Board also undertook a project that could allow companies to reverse a previously recognized impairment charge for some debt securities and formally agreed to proceed with a comprehensive joint project with the IASB to reduce complexity in reporting financial instruments.
Warrants and Convertible Instruments with “Down-Round” Protection
This edition of KPMG's Defining Issue reports on the effects of adopting EITF 07-5 on issuers’ accounting for warrants and convertible instruments with provisions that protect holders from declines in the stock price (“down-round” provisions). When the requirements are adopted, warrants with such provisions will no longer be recorded in equity, and many of the convertible instruments that contain such provisions will have to be “bifurcated,” with the conversion option separately accounted for as a derivative under Statement 133. EITF 07-5 is effective beginning January 1, 2009, for calendar-year-end companies.
How Current Market
Conditions Affect
Accounting and Funding
for Defined Benefit Plans
This edition of KPMG's Defining Issue briefly explores the ways current market conditions can affect sponsors’ year-end financial reporting and 2009 funding for defined benefit pension and other postretirement plans, focusing on the way market conditions are likely to affect the discount rate used to measure plan liabilities, the expected long-term rate of return on assets, and the potential need to enhance support for year-end calculations. It also describes some circumstances that could result in curtailments and settlements, disclosure requirements, and the interaction between financial reporting and the funding requirements of the Pension Protection Act of 2006.
Proposed Roadmap for
Mandatory IFRS Filings
by U.S. Public Companies
This edition of KPMG's Defining Issue reports on the SEC’s proposed “roadmap” for phasing in mandatory IFRS filings by U.S. public companies beginning for years ending on or after December 15, 2014.
FASB to Develop Staff
Position on Preacquisition
Contingencies
This edition of KPMG's Defining Issue reports on the FASB’s decision to amend the accounting and disclosure requirements for preacquisition contingencies in Statement 141R on business combinations. The amendment will clarify and modify requirements on initial and subsequent measurement, derecognition, and disclosure of preacquisition contingencies in business combinations, but will not change the requirements for contingent consideration. The decision was made at the FASB’s meeting on October 29 and will result in developing a proposed FASB Staff Position planned to go through its due-process stages and become final by mid-January 2009.
SEC Studying Mark-to-Market Accounting for Report to Congress
This edition of KPMG's Defining Issue describes the SEC’s project to study mark-to-market accounting as it applies to financial institutions that is scheduled to be reported to Congress by January 2, 2009, as mandated by the emergency legislation on the financial crisis that became law earlier this month. To gather information from interested parties, the SEC issued a request for public comment and planned two roundtables, the first of which took place earlier this week and the second of which is scheduled for November 21.
FASB Views on Financial-Statement Presentation
This edition of KPMG's Defining Issue describes the preliminary views of the FASB and IASB on significant changes in the structure and presentation of the basic financial statements. If the preliminary views go forward during the remaining due-process steps, the statement of financial position would no longer be organized primarily by assets, liabilities, and equity, and the income statement would no longer be organized primarily by revenues and expenses. Instead, the information in the statements of financial position, comprehensive income, and cash flows would be organized under “business,” “financing,” “income taxes,” “discontinued operations,” and “equity,” the latter not included in the statement of comprehensive income. Information would be disaggregated more than is the case today, and a new schedule would reconcile the information in the cash-flow statement to the information in the comprehensive-income statement.
Going-Concern and Subsequent-Events Accounting Requirements to Become FASB Standards
This edition of KPMG's Defining Issue describes two proposed FASB Statements that would move going-concern and subsequent-events accounting requirements now in auditing standards into the FASB Codification. The requirements for the going-concern assessment would be modified to achieve alignment with International Financial Reporting Standards, the requirements for subsequent-events accounting only partially so. The going-concern proposal would extend the period over which management assesses whether the going-concern assumption is appropriate. The deadline for comments on the proposals is December 8.
Additional One-Year Deferral of Interpretation 48 for Nonpublic Entities
This edition of KPMG's Defining Issue describes the FASB’s decision to propose an additional one-year delay of the effective date of Interpretation 48, on accounting for uncertainty in income taxes, for all nonpublic entities that have not already applied the Interpretation’s provisions, a reversal of a Board decision on the same subject earlier this month. Assuming the proposed FASB Staff Position is adopted, the effective date of Interpretation 48 for nonpublic entities that have not already applied Interpretation 48 in a full set of annual financial statements would be for periods beginning after December 15, 2008.
A Potential SEC "Company File System"
This edition of KPMG's Defining Issue reports on the SEC’s developing plan to transition from the current EDGAR-based reporting system to a “company file system” that would be used to collect core information about companies that would be updated instead of resubmitted repetitively. The company file system is central to the SEC’s 21st Century Disclosure Initiative intended to modernize its filing and disclosure system and make it more useful and efficient. The target for producing a comprehensive plan for the initiative is December 31, 2008.
Guidance Issued on Fair Value Measurements in Inactive Markets
This edition of KPMG's Defining Issue describes a just-issued FASB Staff Position that clarifies the application of Statement No. 157 in an inactive market and illustrates how an entity would determine fair value when the market for a financial asset is not active. The Staff Position augments the guidance in a Questions and Answers document that was recently released jointly by the SEC Chief Accountant’s Office and FASB Staff. The Staff Position is effective immediately.
Fair Value Measurements in Inactive Markets
This edition of KPMG's Defining Issue describes a proposed Staff Position issued by the FASB to clarify the application of Statement No. 157 in an inactive market and to illustrate how an entity would determine fair value in an inactive market. The proposed Staff Position is intended to provide additional guidance on fair-value measurement issues similar to those in the Questions and Answers document jointly released three days earlier by the SEC Office of the Chief Accountant and the FASB Staff. Comments on the proposed Staff Position are due by October 9, 2008, and a final Staff Position is expected shortly thereafter.
Nonpublic Entities to Remain Subject to Interpretation 48
This edition of KPMG's Defining Issue describes the FASB’s decision that nonpublic entities should remain within the scope of Interpretation 48 on accounting for income tax uncertainties, but with reduced disclosure obligations, and its decision to propose deferring the Interpretation’s effective date for nonpublic entities with pass-through tax status at the parent-company level. Assuming the coming proposals are adopted, the effective date of Interpretation 48 for nonpublic pass-through entities would be for annual financial statements reporting on periods beginning after December 15, 2008. The effective date for nonpublic companies that are not pass-through entities continues to be for annual financial statements of fiscal years beginning after December 15, 2007.
Proposal on Reporting Discontinued Operations
This edition of KPMG's Defining Issue describes a proposed FASB Staff Position that would result in companies reporting fewer activities as discontinued operations in the income statement. Companies would also have to disclose information about components disposed of or held for sale, regardless of whether the component is reported as discontinued or continuing operations.
Effective Date for Proposed Loss-Contingency Disclosures to Be at Least a Year Later
This edition of KPMG's Defining Issue describes the FASB’s decision that the effective date of its final Statement on disclosures about loss contingencies would be no sooner than for fiscal years ending after December 15, 2009, a year later than the originally proposed effective date. Had the published proposal been adopted unchanged, its disclosures would have been required for annual financial statements issued for fiscal years ending after December 15, 2008, and interim and annual periods in subsequent years.
Disclosures about Credit Derivatives and Guarantees, Effective Date of Statement 161 Clarified
This edition of KPMG's Defining Issue describes twa new FASB Staff Position that would require sellers of credit derivatives, including credit derivatives embedded in hybrid instruments, to disclose additional information about exposure to potential loss from credit-risk-related events. The new disclosures are similar to what is already required of guarantors, but the Staff Position also requires both sellers of credit derivatives and guarantors to disclose the current status of performance risk. The disclosures are effective for annual and interim reporting periods ending after November 15, 2008.
Proposals on Transfers of Financial Assets and Variable Interest Entities
This edition of KPMG's Defining Issue describes two proposed FASB Statements and a proposed FASB Staff Position that would significantly change accounting for transfers of financial assets, the criteria for determining whether to consolidate a variable interest entity (VIE), and associated disclosures. Proposed amendments to Statement 140 and Interpretation 46R would eliminate the term “qualifying special-purpose entity” and its defining criteria from GAAP, causing companies and other reporting entities to evaluate former qualifying special-purpose entities for consolidation and subjecting transfers to former qualifying special-purpose entities to modified sale-accounting criteria. Interpretation 46R’s approach to determining a VIE’s primary beneficiary would be modified, and companies would be required to more frequently reassess whether an entity is a VIE and whether the company is the primary beneficiary.
EITF Approves Consensus
This edition of KPMG's Defining Issue describes the EITF’s Consensus on fair-value measurements of liabilities that contain third-party guarantees and proposed Consensuses on accounting for “defensive intangible assets,” equity-method investments after the effective dates of Statements 141R and 160, and instruments and embedded features with settlement amounts based on a consolidated subsidiary’s stock. This edition also covers the EITF’s progress on revenue recognition for a single deliverable or unit of accounting with multiple payment streams..
SEC to Propose Roadmap for Potential Mandatory IFRS Filings
This edition of KPMG's Defining Issue describes the SEC's decision to propose a “roadmap” that identifies measures of progress that will be monitored between now and 2011 when the SEC plans to consider requiring U.S. public companies to file their financial statements using International Financial Reporting Standards as issued by the IASB.
Proposed Changes to Earnings per Share Computations
This edition of KPMG’s Defining Issues describes a proposed FASB Statement that would cause companies to change their basic and diluted earnings per share computations. The effect of those changes on reported EPS would vary depending on a number of factors and could result in either higher or lower EPS for a particular reporting period as compared to current requirements.
SEC Roundtable Compares Application of IFRS and U.S. GAAP
This edition of KPMG’s Defining Issues describes the recommendations in the final report of the SEC’s Advisory Committee on Improvements to Financial Reporting. Its major recommendations to reduce accounting complexity include reducing industry-specific accounting guidance, applying a “judicious approach” to new requirements to apply fair-value measurements, and reducing exceptions, “bright lines,” and accounting alternatives.
SEC Advisory Committee Issues Final Recommendations Issue No. 8-27
This edition of KPMG’s Defining Issues describes the recommendations in the final report of the SEC’s Advisory Committee on Improvements to Financial Reporting. Its major recommendations to reduce accounting complexity include reducing industry-specific accounting guidance, applying a “judicious approach” to new requirements to apply fair-value measurements, and reducing exceptions, “bright lines,” and accounting alternatives. The Committee also presented recommendations to revise guidance on materiality and error correction that are intended to reduce occasions for restatement of prior-period financial statements, to develop an integrated disclosure framework for useful disclosures based on consistent objectives, and to promote the “pre-eminence” of investor perspectives in standard setting.
Applying the Two-Class EPS Method to Share-Based Payments, June 2008 No. 08-26
This edition of of KPMG’s Defining Issues describes a new FASB Staff Position that may lower the reported earnings per share of companies that issue share-based payments entitling employees to receive dividends even if the awards do not vest. The Staff Position holds that unvested share-based-payment awards that contain nonforfeitable rights to dividends or dividend equivalents are “participating securities” as defined in EITF 03-6 and therefore should be included in computing earnings per share using the two-class method.
Proposed Loss-Contingency Disclosures, June 2008 No. 08-24
This edition of KPMG’s Defining Issues reports on a proposed FASB Statement that would require companies to disclose more information about loss contingencies, including a table showing the effect of recognized loss contingencies on the financial statements. The proposed Statement would be effective for fiscal years ending after December 15, 2008.
New Accounting for Financial Guarantee Insurance, May 2008 No. 08-20
This edition of of KPMG’s Defining Issues reports on new FASB Statement 163, which prescribes accounting for insurers of financial obligations, bringing consistency to recognizing and recording premiums and to loss recognition. A premium-receivable asset and an unearned-premium-revenue liability must be recognized at the inception of the contract, and a claim liability for expected losses in excess of the unearned-premium-revenue liability must be recognized based on the likelihood of default on the insured financial obligation.
SEC Proposes Mandatory XBRL Submissions
This edition of of KPMG’s Defining Issues reports on the SEC’s decision to approve issuing a proposal that would require companies to submit XBRL-formatted financial statements as exhibits to their filed financial statements, phasing in the requirement over three years based on company size and whether the company uses U.S. GAAP or IFRS as issued by the IASB. The requirement would apply to annual and quarterly reports, transition reports, and registration statements, and companies that maintain Web sites would have to make the information available there.
GAAP Hierarchy Brought into GAAP
This edition of of KPMG’s Defining Issues reports on new FASB Statement 162 that adopts a hierarchy of authoritative accounting guidance for nongovernmental entities, an action that is not expected to change practice, but is expected to facilitate designating the coming codification of accounting standards as authoritative. The Statement makes the hierarchy explicitly and directly applicable to preparers of financial statements, a step that recognizes preparers’ responsibilities for selecting the accounting principles for their financial statements. The effective date is 60 days following the SEC’s approval of the PCAOB’s related amendments to remove the GAAP hierarchy from auditing standards, where it has resided for some time.
New Accounting for Many Convertible Bonds
This edition of of KPMG’s Defining Issues reports on a new FASB Staff Position that requires issuers of convertible debt that may be settled wholly or partly in cash when converted to account for the debt and equity components separately. The requirements for separate accounting are to be applied retrospectively to previously issued convertible instruments as well as prospectively to newly issued instruments, negatively affecting both net income and earnings per share for issuers of the instruments.
Proposed Accounting for Trading Inventories
This edition of of KPMG’s Defining Issues reports on a proposed FASB Staff Position that would require companies to determine their trading inventories based on their trading activities and to account for their trading inventories at fair value, both initially and afterward, with changes in fair value recognized in earnings. Companies would also have to disclose information about the effect of reclassifying inventories from trading to nontrading and vice versa.
New Guidance on Estimating the Useful Lives of Intangible Assets
This edition of of KPMG’s Defining Issues reports on a new FASB Staff Position that requires companies estimating the useful life of a recognized intangible asset to consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, to consider assumptions that market participants would use about renewal or extension as adjusted for Statement 142’s entity-specific factors.
FASB Moves Toward Elimination of QSPEs
This edition of of KPMG’s Defining Issues reports on the FASB’s tentative decision to remove the qualifying-special-purpose-entity (QSPE) concept from U.S. GAAP and its exception from consolidation, a step that would dramatically increase the population of variable interest entities that companies must evaluate for consolidation and change accounting for transfers of financial assets. The step would be accompanied by changes in the accounting model for variable interest entities.
SEC Staff Suggests MD&A Disclosures About Fair-Value Measurements
This edition of of KPMG’s Defining Issues reports on published SEC staff views about disclosures relating to fair-value measurements that public companies should consider for inclusion in the Management’s Discussion and Analysis section of upcoming quarterly reports on Form 10-Q.
Separate Accounting for the Conversion Options of Many Convertible Bonds
This edition of of KPMG’s Defining Issues reports on a soon-to-be-released FASB Staff Position that will require issuers of convertible debt that may be settled wholly or partly in cash upon conversion to account for the debt and equity components separately. The new requirements, which will be applied retrospectively to previously issued convertible instruments as well as to new instruments, will increase reported interest expense for these instruments.
Proposed Disclosures about Postretirement Benefit Plan Assets
This edition of of KPMG’s Defining Issues reports on a proposed FASB Staff Position that would require employers of public and nonpublic entities to disclose more information about assets held in postretirement benefit plans, including concentrations of risk, fair-value measurements by major category of plan assets, and the fair-value techniques and inputs used to measure plan assets. The proposal would also require nonpublic entities to disclose net periodic benefit cost.
New Disclosures about Derivative Instruments and Hedging Activities
This edition of of KPMG’s Defining Issues reports on new FASB Statement 161, which will require companies to disclose the fair value of derivative instruments and their gains or losses in tabular format and information about credit-risk-related contingent features in derivative agreements, counterparty credit risk, and the company’s strategies and objectives for using derivative instruments.
SEC Advisory Committee Publishes Proposals
This edition of of KPMG’s Defining Issues describes the progress report of the SEC’s advisory committee on improving financial reporting and its proposals for consideration by the SEC, including recommendations to eliminate industry-specific accounting guidance and alternative accounting treatments, to establish both new SEC guidance on materiality and error correction and a framework for accounting judgments, to improve the standard-setting processes, and to phase in mandatory XBRL filings.
FASB Staff Positions on Statement 157’s Applicability, SOP 07-1’s Effective Date
This edition of of KPMG’s Defining Issues reports on recently issued FASB Staff Positions that delay for one year the applicability of Statement 157’s fair-value measurement requirements to some nonfinancial assets and liabilities, exclude most lease accounting fair-value measurements from Statement 157’s scope, and defer the effective date of the AICPA Statement of Position that defines “investment company” for purposes of applying the industry-specific guidance in an AICPA guide.
Further Delay of 404(b) Requirements Proposed for Non-accelerated Filers
This edition of of KPMG’s Defining Issues reports on the FASB’s decision to permit nonpublic entities to defer applying Interpretation 48’s requirements on accounting for uncertainty in income taxes until preparation of their annual financial statements for years beginning after December 15, 2007, unless they have already issued a complete set of annual financial statements fully reflecting the Interpretation’s requirements or are nonpublic subsidiaries of public entities that report in U.S. GAAP. The FASB Staff Position incorporating these decisions is expected to be issued soon.
FASB Defers Interpretation 48 for Nonpublic Entities
This edition of of KPMG’s Defining Issues reports on the FASB’s decision to permit nonpublic entities to defer applying Interpretation 48’s requirements on accounting for uncertainty in income taxes until preparation of their annual financial statements for years beginning after December 15, 2007, unless they have already issued a complete set of annual financial statements fully reflecting the Interpretation’s requirements or are nonpublic subsidiaries of public entities that report in U.S. GAAP. The FASB Staff Position incorporating these decisions is expected to be issued soon.
New Guidance on Applying the “Shortcut Method” of Hedge Accounting
This edition of of KPMG’s Defining Issues describes new guidance that amends Statement 133’s criteria for using the shortcut method of hedge accounting in two circumstances: when the transaction price of the interest rate swap is zero at the inception of a hedging relationship but its fair value is not, and when the settlement of the hedged item occurs subsequent to the swap’s trade date.
SEC Extends Permissibility of “Simplified” Method for Some Share Option Grants
This edition of of KPMG’s Defining Issues describes the SEC staff’s decision, presented in new Staff Accounting Bulletin 110, to continue to accept the “simplified” method for estimating the expected term of a “plain vanilla” share option grant under specified conditions. The expected term used to value a share option grant under the simplified method is the mid-point between the vesting date and the contractual term of the share option.
Proposals to Change U.S. Standard-Setting Process
This edition of of KPMG’s Defining Issues describes proposals by the Trustees of the Financial Accounting Foundation (FAF) to reduce the FASB’s membership from seven to five, give the FASB chairman more agenda-setting powers, and increase the intensity of the FAF’s oversight. These and other proposals originated in the FAF’s most recent periodic review of the standard-setting structure and are intended to enhance the operating efficiency of both the FASB and the GASB, the standard setter for governmental bodies. Comments on the Trustees’ proposals are due by February 10, 2008.
Easier Filing Requirements for Smaller Public Companies
This edition of of KPMG’s Defining Issues describes new SEC rules that allow a wider group of smaller public companies to qualify for scaled reporting requirements, facilitate compliance with Rules 144 and 145, and create two exemptions from the Exchange Act’s registration requirements for compensatory employee stock options.
SEC Roundtables on Using IFRS in the U.S.
This edition of of KPMG’s Defining Issues describes recent SEC Roundtables at which panelists generally agreed that the SEC should establish a timetable ending in a specific date at which U.S. public companies would be required to file IFRS financial statements, opposed granting the option to file using IFRS for an unlimited period, and strongly supported the goal of globally-accepted, high-quality IFRS.
Proposed Deferral of Interpretation 48 for Nonpublic Entities
This edition of of KPMG’s Defining Issues reports on the FASB’s proposal to permit nonpublic entities, including nonpublic not-for-profit organizations, that have not already applied Interpretation 48 on accounting for uncertainty in income taxes to defer its application until fiscal years beginning after December 15, 2007. Comments on the proposal are due by January 18, 2008.
AICPA Conference on SEC and PCAOB Developments
This edition of of KPMG’s Defining Issues describes highlights from the AICPA conference on SEC and PCAOB developments, at which speakers from the SEC, FASB, IASB, and PCAOB identified challenges, initiatives, and goals that would serve the long-term interests of the financial-reporting community. They emphasized the need to simplify accounting standards, converge U.S. GAAP and international accounting standards, and move domestic companies to XBRL and IFRS reporting in SEC filings.
FASB’s Preliminary Views on Financial Instruments with Characteristics of Equity
This edition of of KPMG’s Defining Issues describes the FASB’s preliminary preference for the “basic ownership approach” to distinguishing between instruments that should be classified as equity or as liabilities or assets. The approach classifies as equity only claims to the company’s assets that have no priority over other claims, and is one of three approaches presented in the FASB’s Preliminary Views document.
XBRL U.S. GAAP Taxonomies Released for Public Review and Comment
This edition of of KPMG’s Defining Issues reports the release of draft revised U.S. GAAP XBRL taxonomies for public review and comment. The materials released by XBRL US are expected to be augmented soon by guidance on how to apply the XBRL taxonomies to U.S. GAAP financial statements.
New Accounting for Business Combinations and Noncontrolling Interests
This edition of of KPMG’s Defining Issues describes new FASB Statements 141R and 160, which require most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity. Both Statements are effective for periods beginning on or after December 15, 2008, and earlier adoption is prohibited.
EITF Approves Two Consensuses
This edition of of KPMG’s Defining Issues describes the EITF’s Consensuses on accounting for collaborative arrangements and accounting for sales of real estate that include buy-sell provisions. This edition also covers the EITF’s reversal of its previous tentative conclusion on applying the two-class earnings-per-share method to master limited partnerships and its discussion of the framework for determining whether an instrument or embedded feature is considered indexed to an entity’s own stock for purposes of determining whether to classify it as a liability (or an asset) or equity.
Proposal on Determining the Useful Lives of Intangible Assets
This edition of of KPMG’s Defining Issues describes a newly proposed FASB Staff Position that would require companies developing renewal and extension assumptions in determining the useful lives of recognized intangible assets to consider their historical experience in renewing or extending similar intangible assets. Companies that have no such experience would have to develop renewal and extension assumptions based on the assumptions that market participants would use.
FEI Financial Reporting Issues Conference
This edition of of KPMG’s Defining Issues reports selected highlights from the FEI’s recent conference on financial reporting issues, which presented a broad update on accounting and SEC developments, including perspective from Robert Pozen on the work of the SEC Advisory Committee on Improvements to Financial Reporting.
Partial Deferral of Statement 157’s Effective Date
This edition of of KPMG’s Defining Issues describes the FASB’s decisions to propose a one-year deferral of Statement 157’s fair-value measurement requirements for nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis, clarify disclosure requirements about the fair-value measurements of pension plan assets by plan sponsors, and develop additional guidance on how Statement 157 applies to measurements of liabilities. The immediate result of these decisions will be three proposed FASB Staff Positions.
SEC Eliminates U.S. GAAP Reconciliation for Foreign Private Issuers Using IFRS
This edition of of KPMG’s Defining Issues reports on the SEC’s decision to allow foreign private issuers to file financial statements using IFRS as published by the IASB without a reconciliation to U.S. GAAP. The permission will be available beginning with financial statements for years ending after November 15, 2007.
How the IFRS Movement Will Affect Financial Reporting in the U.S.
This edition of of KPMG’s Defining Issues analyzes the major forces that make a requirement to file IFRS financial statements with the SEC more likely and what a transition to an IFRS-only regime would look like and mean for U.S. public companies.
SEC Staff Guidance on Loan Commitments Recorded at Fair Value Through Earnings
This edition of of KPMG’s Defining Issues describes the new SEC Staff Accounting Bulletin 109, which requires fair-value measurements of derivative and other written loan commitments that are recorded through earnings to include the future cash flows related to the loan’s servicing rights and also requires that internally developed intangible assets be excluded from the measurements.
Effective Date of Interpretation 48 to Be Postponed for Nonpublic Entities
This edition of of KPMG’s Defining Issues describes the FASB’s decision to propose a one-year delay of the effective date of Interpretation 48, on accounting for uncertainty in income taxes, for nonpublic entities that have not already applied the Interpretation’s provisions. Assuming the proposed FASB Staff Position is adopted, the effective date of Interpretation 48 for nonpublic entities that have not already applied Interpretation 48 would be for periods beginning after December 15, 2007.
FASB Retains Effective Date of Statement 157, Will Delay Effective Date of SOP 07-1s
This edition of of KPMG’s Defining Issues describes the FASB’s decisions against a comprehensive delay of the effective date of Statement 157 on fair value measurements and for an indefinite delay of the effective date of Statement of Position 07-1, which defines “investment company” for purposes of applying the specialized industry accounting in the AICPA guide. It also describes the staff directive to analyze selectively deferring the effective date of Statement 157.
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