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Accounting Research Manager®
Weekly Summary of Developments
April 25-29, 2011
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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

Goodwill Impairment -- FASB Issues Proposal on Goodwill Impairment
Internal Control Reporting -- SEC Staff Publishes Study and Recommendations on Section 404(b)
International Convergence -- FASB and IASB Report Substantial Convergence Progress
Derivatives and Hedging -- Publication Updated
Financial Assets and Liabilities -- Publication Updated
SEC Reporting -- Topical Index of SEC Accounting and Auditing Enforcement Releases Updated
Investment Properties -- FASB Discusses Investment Properties
Financial Instruments -- FASB Discusses Financial Instruments
Service Organizations -- AICPA Issues Audit and Accounting Guide
Risk Alerts -- AICPA Issues Audit Risk Alerts

Auditing and Internal Controls Headlines

Independent Auditor -- Clarified SAS Discussed
Service Organizations -- AICPA Issues Audit and Accounting Guide
Risk Alerts -- AICPA Issues Audit Risk Alerts

Government Headlines

Financial Reporting -- GASB Research Brief Discussed

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ACCOUNTING AND SEC HEADLINES:
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Goodwill Impairment -- FASB Issues Proposal on Goodwill Impairment
For detail, please contact info@hkcmcpa.us

The FASB has issued for public comment an Exposure Draft of a proposed Accounting Standards Update (ASU) intended to simplify how an entity is required to test goodwill for impairment. The proposed ASU, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment, would allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test.

Current guidance requires an entity to test goodwill for impairment, on at least an annual basis, by first comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of impairment loss, if any. Under the proposed guidance, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The proposed ASU includes a number of factors to be considered in conducting the qualitative assessment.

If approved, the amendments to the FASB Accounting Standards Codification™ (Codification) in the proposed ASU would be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption would be permitted.

Comments on this proposed ASU are due June 6, 2011. For this proposed ASU, the FASB is piloting a new electronic constituent feedback form intended to make comments easier to submit. Constituents wishing to provide traditional comment letters via the current process can continue to do so.

Internal Control Reporting -- SEC Staff Publishes Study and Recommendations on Section 404(b)
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The staff in the Office of the Chief Accountant of the SEC has published, “Study and Recommendations on Section 404(b) of the Sarbanes-Oxley Act of 2002 For Issuers With Public Float Between $75 and $250 Million” (the Study), as required by Section 989G(b) of the “Dodd-Frank Wall Street Reform and Consumer Protection Act.” The Study identifies SEC staff recommendations on how the SEC could reduce the burden of complying with Section 404(b) of the Sarbanes-Oxley Act of 2002 for companies whose public float is between $75 million and $250 million, while maintaining investor protections for such companies. Section 404(b) requires a registrant to provide an attestation report on management’s assessment of internal controls over financial reporting by the registrant’s external auditor.

The Study includes the following two SEC staff recommendations:

-Maintain existing investor protections for accelerated filers to comply with the auditor attestation provisions of Section 404(b); and
-Encourage activities that have the potential to further improve the effectiveness and efficiency of Section 404(b) implementation, including having the PCAOB monitor its inspection results and consider publishing observations on the performance of audits.

International Convergence -- FASB and IASB Report Substantial Convergence Progress
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On April 21, 2011, the IASB and the FASB (the Boards) published an updated progress report on their joint work to improve IFRS and U.S. generally accepted accounting principles, and to bring about their convergence.

Since their November 2009 report, the Boards have:

-Completed five projects. In the next few weeks the IASB will issue new standards on consolidated financial statements (including disclosure of interests in other entities), joint arrangements, and post-employment benefits. Both Boards will issue new requirements in relation to fair value measurement and the presentation of other comprehensive income.

-Given priority to the three remaining Memorandum of Understanding (MoU) projects, as well as insurance accounting. The Boards report having made substantial progress toward completion of the three remaining MoU projects covering financial instruments accounting, leasing, and revenue recognition, as well as their joint project to improve and align insurance accounting standards.

-Provided for further time to finalize their convergence work. The Boards have agreed to extend the timetable for the remaining priority convergence projects beyond June 2011 to permit further work and consultation with stakeholders to ensure open and inclusive due process. The convergence projects are targeted for completion in the second half of 2011. However, the U.S. insurance standard, which has not yet been exposed, is targeted for completion in 2012.

The progress report provides further details on the timeline for the completion of the remaining projects.

Derivatives and Hedging -- Publication Updated
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We have revised our publication, Derivatives and Hedging - Interpretations of U.S. GAAP, to reflect amendments of the Codification through ASU No. 2011-01, Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20, and FASB Editorial and Maintenance Update No. 2011-03.

We have updated the section, “Recent Developments,” to discuss the FASB’s issuance of all of the following:

-Proposed ASU, Balance Sheet (Topic 210): Offsetting;
-Discussion Paper, Selected Issues about Hedge Accounting (Including IASB Exposure Draft, Hedge Accounting); and
-Supplementary Document, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities: Impairment.

See our Literature Update for complete details.

Financial Assets and Liabilities -- Publication Updated
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We have updated our publication, Financial Assets and Liabilities - Sales, Transfers, and Extinguishments: Interpretations of U.S. GAAP, to reflect amendments of the Codification through ASU 2011-01 and FASB Editorial and Maintenance Update No. 2011-03.

We have added a section, “Recent Developments,” which discusses the FASB’s current projects involving the following proposed ASUs as they relate to the content in this publication:

-Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements; and
-Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities.

See our Literature Update for complete details.

SEC Reporting -- Topical Index of SEC Accounting and Auditing Enforcement Releases Updated
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We have updated our Topical Index of the SEC’s Accounting and Auditing Enforcement Releases (AAERs) to reflect releases by the SEC through April 15, 2011 (release number 3270). The SEC periodically issues AAERs to reflect civil lawsuits pursued by the Division of Enforcement in federal court and notices and orders concerning the institution and (or) settlement of administrative proceedings. Our Topical Index includes 11 categories (each of which has additional sub categories). For example, one of the 11 categories is revenue recognition issues. This category has various sub categories including bill and hold sales, lease accounting, and sale and leaseback transactions. This Topical Index is designed to be a research tool to enable users to quickly locate how the SEC and its staff have addressed and documented accounting issues in the numerous AAERs issued by the SEC over the years.

See our Literature Update for complete details.

Investment Properties -- FASB Discusses Investment Properties
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As reported in its "Summary of Board Decisions" publication, the FASB met on April 27, 2011, and discussed investment properties. The FASB decided that an investment property entity, when accounting for a lease for which it is the lessee, would measure right-of-use assets relating to investment properties at fair value with changes in fair value recognized in net income. Right-of-use assets relating to noninvestment property assets would be carried at amortized cost. The FASB also decided that noninvestment property assets held by investment property entities would be accounted for under other applicable U.S. GAAP.

Financial Instruments -- FASB Discusses Financial Instruments
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As reported in its "Summary of Board Decisions" publication, the FASB met on April 20, 2011, and discussed the accounting for financial instruments. Specifically, the FASB discussed the classification and measurement of debt instruments that qualify for the amortized cost category at initial recognition but are subsequently identified for sale. The FASB decided that in such circumstances an entity should continue to classify and measure the financial assets at amortized cost (less impairments) and recognize resulting gains, if any, only when the sale is complete. The FASB also decided that in developing an overall impairment model for financial instruments, impairment for financial assets subsequently identified for sale should be recognized in earnings in an amount equal to the entire difference between the instrument’s amortized cost basis and its fair value.

Service Organizations -- AICPA Issues Audit and Accounting Guide
For detail, please contact info@hkcmcpa.us

The AICPA has published an Audit and Accounting Guide (AAG), Reporting on Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality, or Privacy (SOC 2). According to the AICPA, this AAG was issued to assist accountants in performing examinations under AT section 101, Attest Engagements (AICPA, Professional Standards), to report on a service organization’s controls over its system relevant to security, availability, processing integrity, confidentiality, or privacy. Topics covered in this AAG include:

-Overview and background of service organizations;
-Planning a service auditor's engagement;
-Performing the engagement; and
-Reporting on a service organization's controls.

Risk Alerts -- AICPA Issues Audit Risk Alerts
The AICPA has issued the following Audit Risk Alerts:

-Audit Risk Alert, Not-for-Profit Entities Industry Developments - 2011; and
For detail, please contact info@hkcmcpa.us

-Audit Risk Alert, Employee Benefit Plans Industry Developments - 2011.
For detail, please contact info@hkcmcpa.us

AICPA Audit Risk Alerts provide users with a detailed overview of recent industry, technical, regulatory, or professional developments. Topics covered in each Alert typically include: (a)regulatory activities; (b)economic and industry developments or trends; (c)recent auditing and attestation pronouncements and related guidance; (d)recent AICPA independence and ethics pronouncements; and (e)future or emerging issues to monitor.

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@hkcmcpa.us

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AUDITING AND INTERNAL CONTROLS HEADLINES:
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Independent Auditor -- Clarified SAS Discussed
For detail, please contact info@hkcmcpa.us

We have added a GAAS Update Service that provides discussion and analysis of a clarified Statement on Auditing Standards (SAS), Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards, which was finalized as part of the AICPA's Clarity Project. The clarified SAS contains conceptual principles that shape the overall objectives of an audit, and broad overarching requirements that govern an audit’s conduct, and will supersede the following sections contained in SAS 1, Codification of Auditing Standards and Procedures:

-AU Section 110, Responsibilities and Functions of the Independent Auditor, as amended;
-AU Section 210, Training and Proficiency of the Independent Auditor, as amended;
-AU Section 220, Independence; and
-AU Section 230, Due Professional Care in the Performance of Work, as amended.

In addition, this clarified SAS would supersede SAS 95 (AU Section 150), Generally Accepted Auditing Standards, as amended, and SAS 102 (AU Section 120), Defining Professional Requirements in Statements on Auditing Standards.

The clarified SAS is effective for audits of financial statements for periods ending on or after December 15, 2012.

The AICPA’s Clarity Project is intended to make existing U.S. generally accepted auditing standards (GAAS) easier to understand, apply, and move toward converging U.S. GAAS with International Standards on Auditing issued by the International Auditing and Assurance Standards Board. For further information on the AICPA's Clarity Project, see our previously published discussion and analysis in our publication "A Closer Look."

Service Organizations -- AICPA Issues Audit and Accounting Guide
For detail, please contact info@hkcmcpa.us

As discussed above in our Accounting and SEC Summaries, the AICPA has published an Audit and Accounting Guide (AAG), Reporting on Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality, or Privacy (SOC 2). According to the AICPA, this AAG was issued to assist accountants in performing examinations under AT section 101, Attest Engagements (AICPA, Professional Standards), to report on a service organization’s controls over its system relevant to security, availability, processing integrity, confidentiality, or privacy. Topics covered in this AAG include:

-Overview and background of service organizations;
-Planning a service auditor's engagement;
-Performing the engagement; and
-Reporting on a service organization's controls.

Risk Alerts -- AICPA Issues Audit Risk Alerts

As discussed above in our Accounting and SEC Summaries, the AICPA has issued the following Audit Risk Alerts:

-Audit Risk Alert, Not-for-Profit Entities Industry Developments - 2011; and
For detail, please contact info@hkcmcpa.us

-Audit Risk Alert, Employee Benefit Plans Industry Developments - 2011.
For detail, please contact info@hkcmcpa.us

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GOVERNMENT HEADLINES:
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Financial Reporting -- GASB Research Brief Discussed
For detail, please contact info@hkcmcpa.us

We have added a Governmental GAAP Update Service that discusses the GASB release of a Research Brief, "The Timeliness of Financial Reporting by State and Local Governments Compared with the Needs of Users" (the Brief). The Brief details how fast governments release financial report information and compares the releases with the expectations of users. Topics discussed in this update regarding the Brief include:

-Comparison to users' expectations;
-Making sense of the numbers; and
-Discussion of an example of a large government comprehensive annual financial report.

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@hkcmcpa.us