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Accounting Research Manager(TM)
Weekly Summary of Developments
January 29 - February 2, 2007
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Accounting Research Manager subscriber,

The Accounting Research Manager database now contains this week's weekly summary of developments. Click the link below to access and print the fully-formatted Weekly Summary:

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If you do not have immediate Internet access to the Accounting Research Manager database, below is the text of this week's Weekly Summary.

Accounting and SEC Headlines

EITF Materials Issued -- Research and Development Activities and Other Matters for the March 15, 2007 EITF Meeting
Financial Assets and Liabilities -- Guidance Revised and Added in Our Interpretations of FASB Statement 140
AICPA National Conference on Current SEC and PCAOB Developments -- Newsletter Issued
Discontinued Operations -- FASB Decides to Change Definition of Discontinued Operations at January 24, 2007 Meeting
Computing Diluted EPS -- FASB Proposes Computational Guidance under the Two-Class Method
IASB Update -- IASB Discusses Insurance Accounting and Other Matters at Its January 23-25, 2007 Meeting

Auditing Headlines

Dating of the Auditor's Report -- AICPA Issues Practice Alert
Government Auditing Standards -- GAO Issues 2007 Revision of Government Auditing Standards (Yellow Book)
Auditing the Fair Value of Share Options Granted to Employees -- PCAOB Issues Interpretive Guidance

Government Headlines

Pollution Remediation Obligations -- GASB Issues Statement 49
Government Auditing Standards -- GAO Issues 2007 Revision of Government Auditing Standards (Yellow Book)

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ACCOUNTING AND SEC HEADLINES:
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EITF Materials Issued -- Research and Development Activities and Other Matters for the March 15, 2007 EITF Meeting
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The FASB has issued the following materials for the EITF meeting scheduled for March 15, 2007:

-Issue No. 06-10, "Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements" (Comment Letters)
-Issue No. 06-11, "Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards" (Comment Letters on Draft Abstract)
-Agenda Committee Report

The meeting materials issued for this meeting includes the results of the EITF agenda committee that met on January 29, 2007. While the EITF agenda committee recognized that there is diversity in practice by airlines when recognizing revenue associated when a customer is charged a ticket change fee, the committee decided that the EITF should not add this topic to its agenda. However, the EITF agenda committee decided to add two new issues to its agenda: (1) Issue 07-A, "Accounting for Advance Payments for Goods or Services to Be Used in Future Research and Development Activities," and (2) Issue 07-B, "Accounting for Convertible Instruments that Require or Permit Partial Cash Settlement upon Conversion." Both of these issues are scheduled to be discussed by the EITF at its March 15, 2007 meeting.

Financial Assets and Liabilities -- Guidance Revised and Added in Our Interpretations of FASB Statement 140
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We have revised and updated the interpretations in our publication, Financial Assets and Liabilities -- Sales, Transfers, and Extinguishments: Interpretations of FASB Statement 140. In this update, we made numerous changes to reflect the issuance of FASB Statement No. 157, Fair Value Measurements. We also updated Interpretations 4-16, "Related EITF Issues," and 50-2, "Embedded Call Options," to document that on September 7, 2006, the SEC staff nullified EITF Abstracts, Topic D-63, "Call Options 'Embedded' in Beneficial Interests Issued by a Qualifying Special-Purpose Entity," because there is no continuing need for the guidance. The SEC staff believes the issues raised in Topic D-63 have been resolved in Statement 140.

We updated Interpretation 16-2, "Determining Whether a Modification or Exchange of a Debt Instrument Is an Extinguishment," to address changes in the treatment of embedded conversion options. These changes are introduced by EITF Issue No. 06-6, "Debtor's Accounting for a Modification (or Exchange) of Convertible Debt Instruments," which amends EITF Issue No. 96-19, "Debtor's Accounting for a Modification or Exchange of Debt Instruments," and supersedes EITF Issue No. 05-7, "Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues."

We have also updated the section entitled, "Recent Developments," for recent deliberations at the FASB on a variety of relevant projects.

AICPA National Conference on Current SEC and PCAOB Developments -- Newsletter Issued
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We have prepared a newsletter that documents the significant accounting and reporting matters discussed at the AICPA's SEC and PCAOB Conference held on December 11-13, 2006. This annual conference addresses common financial reporting issues that companies should be considering when preparing their financial statements. We believe this newsletter may be of interest to nonpublic companies and their auditors as well because a number of general interest accounting topics were discussed at the conference. Our newsletter compliments our Literature Update dated December 15, 2006, that was issued immediately after this conference:For detail, please contact info@zy-cpa.com.

Discontinued Operations -- FASB Decides to Change Definition of Discontinued Operations at January 24, 2007 Meeting
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As reported in its "Action Alert" publication, the FASB met on January 24, 2007, and addressed the following projects or topics:

-Financial Statement Presentation
-Fair Value Option

As part of its financial statement presentation project, the FASB decided at this meeting to propose a change to the current definition of discontinued operations in FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Specifically, a discontinued component of an entity would be reported in the discontinued operation section of the basic financial statements only if that component is an "operating segment," as defined in FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information. The FASB also decided that an entity would be required to disclose in the notes to the financial statements disaggregated financial information for both (1) a component reported as a discontinued operation in the basic financial statements and (2) a discontinued component that was reported in the business section because it was not an operating segment. The expanded disclosure is intended to meet the needs of those users that find the Statement 144 definition of discontinued operations decision useful. The FASB also decided to increase certain other disclosures and that the existing required disclosures about discontinued components should be required for all periods presented. The FASB did not conclude whether to issue a separate Exposure Draft on discontinued operations or to wait until the rest of its financial statement presentation project was completed.

The FASB also continued to address certain issues in its Fair Value Option project as the FASB moves towards issuing a final standard. For example, the FASB concluded that it would not include a scope exception for an investment whose transfer is considered in substance the sale of real estate under FASB Statement No. 66, Accounting for Sales of Real Estate,or EITF Issue No. 98-8, "Accounting for Transfers of Investments That Are in Substance Real Estate."

The Action Alert also notes that the following projects or topics are scheduled to be discussed by the FASB at its February 7, 2007 meeting:

-Application of FIN 46R to Investment Companies
-Implementation Guidance for FIN 48

Computing Diluted EPS -- FASB Proposes Computational Guidance under the Two-Class Method
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The FASB has issued proposed FASB Staff Position (FSP) FAS 128-a, "Computational Guidance for Computing Diluted EPS under the Two-Class Method." This proposed FSP provides computational guidance for diluted earnings per share (EPS) when applying the two-class method described in FASB Statement No. 128, Earnings per Share.The existing literature provides clear examples of the application of the two-class method in computing basic EPS, but does not specifically address or illustrate the application of the two-class method in computing diluted EPS. As a result, questions have been raised about computing diluted EPS when an entity has common stock, participating securities, and potential common stock. Although Statement 128 has been effective for nearly 10 years, constituents have raised questions as a result of: (a) the consensuses reached in EITF Issue No. 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128," which expand the definition of a participating security and thereby increase use of the two-class method for computing EPS, and (b) the recently issued proposed FSP EITF 03-6-a, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities," that addresses whether instruments granted in share-based payment transactions may be participating securities prior to vesting and, therefore, need to be included in basic EPS using the two-class method.

Comments on this proposed FSP are due March 27, 2007.

IASB Update -- IASB Discusses Insurance Accounting and Other Matters at Its January 23-25, 2007 Meeting
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As reported in its "IASB Update" publication, the IASB met on January 23-25, 2007, and discussed the following projects or topics:

-Business Combinations (Phase II)
-Financial Instruments
-Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation
-Liabilities and Equity
-IFRS 2 Share-Based Payment
-Insurance
-Financial Statement Presentation
-Accounting Standards for Small and Medium-Sized Entities
-IAS 24 Related Party Disclosures
-IAS 37 Redeliberations
-Fair Value Measurements
-Intangible Assets
-Short-Term Convergence: Income Taxes
-Update on IFRIC Activities
-Management Commentary

Among other topics, the IASB continued its discussion of accounting for universal life contracts. Universal life contracts give the insurer considerable freedom to vary the rate at which it credits interest to policyholder accounts. At this meeting, the IASB tentatively decided that each cash flow scenario used in measuring a universal life contract should include interest credited at the rate that the insurer estimates will apply in that scenario, rather than the contractually required minimum.

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AUDITING HEADLINES:
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Dating of the Auditor's Report -- AICPA Issues Practice Alert
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The AICPA's professional issues task force has issued Practice Alert 2007-1, Dating of the Auditor's Report and Related Practical Guidance. The purpose of this Practice Alert is to provide guidance to practitioners regarding application of certain provisions of Statement on Auditing Standards (SAS) No. 103, Audit Documentation, primarily relating to dating the auditor's report. SAS 103 was issued in December 2005, and among other things, amends AU section 530, "Dating of the Independent Auditor's Report," to require that the auditor's report not be dated earlier than the date on which the auditor has obtained sufficient appropriate audit evidence to support the opinion on the financial statements.

Government Auditing Standards -- GAO Issues 2007 Revision of Government Auditing Standards (Yellow Book)
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The Government Accountability Office (GAO) has issued Government Auditing Standards, 2007 Revision (commonly known as the "Yellow Book"). The 2007 revision of the Yellow Book supersedes the 2003 version. This version contains the final 2007 revisions to the standards, except for the quality control and peer review sections in chapter 3. Concurrent with the electronic issuance of this revision of the Yellow Book, the GAO is exposing for comment redrafted sections on quality control and peer review in response to the wide range of comments received on those sections.

Auditing the Fair Value of Share Options Granted to Employees -- PCAOB Issues Interpretive Guidance
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We have added a GAAS Update Service that provides discussion and analysis of PCAOB staff questions and answers (Q&As) on issues related to the implementation of the auditing standards of the PCAOB in circumstances in which a company has granted share options to employees that must be accounted for as compensation cost in conformity with FASB Statement No. 123 (Revised 2004), Share-Based Payment. The Q&As address various issues including: (a) the auditor's evaluation of the company's process for estimating the fair value of employee share option grants; (b) the pertinent factors that affect the auditor's assessment of risk at the financial statement and significant account levels for fair value measurements related to employee share options; (c) the factors the auditor should use to evaluate the reasonableness of a company's selection of an option-pricing model for calculating the fair value of employee share options; and (d) the steps the auditor should take when a company changes the valuation technique or model chosen to value employee share options.

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GOVERNMENT HEADLINES:
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Pollution Remediation Obligations -- GASB Issues Statement 49
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We have added a Governmental GAAP Update Service that discusses GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. This standard was issued in December 2006, and represents a continuation of the GASB's effort to further recognize the full cost of government operations and the reporting of all economic assets and liabilities in the government-wide financial statements of a state or local government entity. Governments are often faced with the responsibility to clean up or remediate pollution, such as asbestos and Environmental Protection Agency superfund sites. Until the issuance of GASB 49, there was no authoritative accounting standard that provided specific guidance on the measurement and recognition of such obligations or responsibilities.

Government Auditing Standards -- GAO Issues 2007 Revision of Government Auditing Standards (Yellow Book)
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As discussed above in our Auditing Summaries, the Government Accountability Office (GAO) has issued Government Auditing Standards, 2007 Revision (commonly known as the "Yellow Book"). The 2007 revision of the Yellow Book supersedes the 2003 version. This version contains the final 2007 revisions to the standards, except for the quality control and peer review sections in chapter 3. Concurrent with the electronic issuance of this revision of the Yellow Book, the GAO is exposing for comment redrafted sections on quality control and peer review in response to the wide range of comments received on those sections.

Some of the documents listed above may not be accessible under your current subscription. For information about upgrading your subscription to include additional content, click here:
For detail, please contact info@zy-cpa.com