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Accounting Research Manager(TM)
Weekly Summary of Developments
March 12-16, 2007
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Accounting Research Manager subscriber,

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Accounting and SEC Headlines

EITF Meeting Results -- Consensuses and Tentative Conclusions Reached at March 15, 2007 EITF Meeting
EITF Materials Issued -- Comment Letters for the March 15, 2007 EITF Meeting
Derivatives and Hedging -- Guidance Revised and Added in Our Interpretations of FASB Statement 133
Accounting Changes and Error Corrections -- FASB Issues Proposal That Would Amend Statement 154
Accounting for Leases -- FASB to Discuss Accounting for Leases and Other Matters at March 21, 2007 Meeting
International Financial Reporting -- IASB Issues Agenda for Its Meeting on March 20-22, 2007

Auditing Headlines

Engagement Standards -- Guidance Added on Risk Assessment Standards
Internal Control -- New Exhibits Added on Internal Control Communications for Audits of Nonpublic Entities

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ACCOUNTING AND SEC HEADLINES:
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EITF Meeting Results -- Consensuses and Tentative Conclusions Reached at March 15, 2007 EITF Meeting
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As described in detail in our "EITF Flash Report," the EITF discussed the following issues at its March 15, 2007 meeting:

-Issue No. 06-10, "Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements";
-Issue No. 06-11, "Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards";
-Issue No. 07-1, "Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property";
-Issue No. 07-2, "Accounting for Convertible Debt Instruments That Require or Permit Partial Cash Settlement upon Conversion"; and
-Issue No. 07-3, "Accounting for Advance Payments for Goods or Services to Be Used in Future Research and Development Activities."

The EITF reached a consensus on Issue 06-10. Under this consensus, ?a liability should be recognized for the postretirement benefit provided to an employee in a collateral assignment split-dollar life insurance arrangement using the guidance in FASB Statement No.? 106,? Employer's Accounting for Postretirement Benefits Other than Pensions, or APB Opinion No. 12, Omnibus Opinion - 1967, if the substantive arrangement with the employee indicates that the employer has agreed to either: (a) maintain a life insurance policy during the employee's retirement or (b) provide the employee with a death benefit. If ratified by the FASB at its meeting on March 28, 2007, Issue 06-10 ?will be? effective for fiscal years beginning after December 15, 2007, including interim periods within those fiscal years.

The EITF reached a tentative conclusion on Issue 07-3. Under this tentative conclusion, an entity would defer and capitalize nonrefundable advance payments made for research and development activities until the related goods are delivered or the related services are performed. If ratified by the FASB at its meeting on March 28, 2007, the tentative conclusion for Issue 07-3 will be exposed for comment.

The EITF discussed the tentative conclusion on Issue 06-11 that was reached at the November 2006 EITF meeting. However, prior to reaching a consensus on ?Issue 06-11 ?they ?decided that additional information? should be accumulated and discussed at a future meeting. Similarly, prior to reaching tentative conclusions on Issue 07-1 and Issue 07-2, the EITF decided that additional information should be accumulated and discussed at a future meeting. As it relates to Issue 07-2, a working group is going to be established to facilitate future discussions on the issue.

Several announcements were made by the SEC? observer at this meeting. The SEC ?observer announced certain changes to EITF Abstracts, Topic D-98, "Classification and Measurement of Redeemable Securities." The EITF did not object to these changes. The SEC ?observer also announced ?the SEC staff's ?intention to issue EITF Abstracts, Topic D-109, "Determining the Nature of a Host Contract Related to a Hybrid Financial Instrument Issued in the Form of a Share under FASB Statement No. 133." However, the EITF requested that the SEC staff seek additional input on the proposed Topic D-109 before it is issued. Finally, the SEC observer informally communicated? the SEC staff's view on a specific hedging issue. For additional information on this issue and the other issues discussed at the EITF meeting, see our "EITF Flash Report."

EITF Materials Issued -- Comment Letters for the March 15, 2007 EITF Meeting
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The FASB has issued several comment letters ?on ?EITF Issue No.? 07-2, "Accounting for Convertible Debt Instruments That Require or Permit Partial Cash Settlement upon Conversion," an issue scheduled for discussion at the March 15, 2007 EITF meeting. For additional discussion on the results of this EITF meeting, see the preceding discussion.

Derivatives and Hedging -- Guidance Revised and Added in Our Interpretations of FASB Statement 133
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We have revised and updated the interpretations in our publication, Derivatives and Hedging - Interpretations of Statement 133. Specifically, we added or updated numerous interpretations as a result of the following:

-FASB Statement No. 157, Fair Value Measurements;
-Derivatives Implementation Group (DIG) Issue No. G26, "Cash Flow Hedges: Hedging Interest Cash Flows on Variable-Rate Assets and Liabilities That Are Not Based on a Benchmark Interest Rate"; and
-EITF Issue No. 06-7, "Issuer's Accounting for a Previously Bifurcated Conversion Option in a Convertible Debt Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement No. 133."

We also updated the section entitled, "Recent Developments," for recent deliberations at the FASB on a variety of relevant projects, and Appendix II, "Index of Accounting Literature Cited."

Accounting Changes and Error Corrections -- FASB Issues Proposal That Would Amend? Statement 154
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The FASB has issued proposed FASB Staff Position (FSP) FAS 154-a, "Considering the Effects of Prior-Year Misstatements When Quantifying Misstatements in Current-Year Financial Statements." This proposed FSP effectively extends the applicability of SEC Staff Accounting Bulletin (SAB) Topic 1N, "Financial Statements -- Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements" (SAB 108), to all nongovernmental entities, which includes private entities as well as not-for-profit entities. As such, this proposed FSP would require private entities and not-for-profit entities to evaluate the materiality of a misstatement on current-year financial statements ?using both the rollover and iron curtain approaches. The proposed FSP would be effective for financial statements issued for fiscal years ending after June 15, 2007. Upon adoption, an entity would,? in certain situations, have the option to adopt the guidance in the proposed FSP using a cumulative-effect adjustment.

Accounting for Leases? -- FASB to Discuss Accounting for Leases and Other Matters at March 21, 2007 Meeting
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As reported in its "Action Alert" publication, the FASB will meet on March 21, 2007, and address the following projects or topics:

-Accounting for Leases
-Statement 133 Implementation Issue - Hedging Functional-Currency Equivalent Proceeds to Be Received from a Forecasted Foreign-Currency-Denominated Debt Issuance
-Financial Statement Presentation
-Business Combinations: Applying the Acquisition Method
-Agenda Decision: Intangible Assets

The discussion on accounting for leases is expected to focus on: (a) the assets and liabilities that arise in a simple lease contract and (b) an analysis of the potential models that could hypothetically be used to account for leases. Matters that are expected to be focused on during the financial statement presentation discussion include the presentation of other comprehensive income items and whether the concept of cash equivalents should be maintained and, if so, in what form. The discussion on business combinations is expected to include redeliberating certain guidance in the related June 2005 exposure draft, including the conclusions related to: (a) the accounting for contingent consideration, bargain purchases in transactions involving noncontrolling interests, and spin-offs; and (b) the disclosures for valuation allowances. The agenda decision related to intangible assets will focus on whether the FASB should add a project to its agenda that would provide guidance on how the useful life of renewable intangible assets should be determined based on the guidance in FASB Statement No. 142, Goodwill and Other Intangible Assets. Finally, the discussion on the Statement 133 implementation issue will focus on the comments received on proposed Derivatives Implementation Group Issue No. H17, "Hedging Functional-Currency-Equivalent Proceeds to Be Received from a Forecasted Foreign-Currency-Denominated Debt Issuance."

International Financial Reporting -- IASB Issues Agenda for Its Meeting on March 20-22, 2007
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The IASB has issued the agenda for its March 20-22, 2007 meeting when it is scheduled to discuss the following projects or topics:

-Annual Improvements Process
-Business Combinations (Phase II)
-Conceptual Framework
-Earnings per Share
-Financial Instruments - Due Process Document
-Financial Statement Presentation
-IFRIC Update
-Leases
-Liabilities - Amendments to IAS 37
-Post-Employment Benefits
-Technical Plan

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AUDITING HEADLINES:
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Engagement Standards -- Guidance Added on Risk Assessment Standards
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We have added various sections to, and updated other sections of, the "Audit Engagements" chapter of Engagement Standards as a result of the following:

-Eight Statements on Auditing Standards (SAS) issued by the AICPA related to the auditor's risk assessment process (collectively referred to as the "Risk Assessment Standards");
-AICPA SAS No. 112, Communicating Internal Control Related Matters Identified in an Audit;
-AICPA SAS No. 113, Omnibus Statement on Auditing Standards -- 2006;
-AICPA SAS No. 114, The Auditor's Communication with Those Charged with Governance;
-SEC Staff Accounting Bulletin (SAB) Topic 1N, "Financial Statements -- Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements" (SAB 108);
-PCAOB Staff Questions and Answers, "Adjustments to Prior-Period Financial Statements Audited by a Predecessor Auditor"; and
-PCAOB Staff Audit Practice Alert No. 1, "Matters Related to Timing and Accounting for Option Grants.

Internal Control -- New Exhibits Added on Internal Control Communications for Audits of Nonpublic Entities
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We have added the following exhibits to the GAAS Practice Manual and Audit Procedures:

-AU325_Exhibit_1, "Auditor's Communication to Client with Significant Deficiencies or Material Weaknesses"; and
-AU325_Exhibit_2, "Auditor's Communication to Client with No Material Weaknesses."

These new exhibits include examples of the auditor's communication to the client that are in accordance with Statement on Auditing Standards (SAS) No. 112, Communicating Internal Control Related Matters Identified in an Audit, which is effective for audits of financial statements of nonpublic entities for periods ending on or after December 15, 2006.

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