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Thrifty Oversight
The House Banking Committee approved a bill to abolish the Thrift Depositor Oversight Board. Originally created under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the board was responsible for the overall strategies, policies and goals of the Resolution Trust Corporation (RTC), which closed failed thrifts and sold off their assets. According to John D. Hawke Jr., treasury undersecretary for domestic finance, the oversight board no longer is needed because the RTC ceased operations in 1995.

Let Them Know Youre There
The Census Bureau is mailing economic census forms to 5 million businesses this December for its 1997 economic census. The census will introduce the North American Industry Classification (NAICS) to industries. The bureau is expected to mail copies of the Accountants Guide to the Economic Census to assist CPAs who are called on to prepare census forms for their clients. For more on the subject, visit the Census Bureau at http://www.census.gov/econ97 .

Recognizing Cross-Border Efforts
Gordon Cowperthwaite received the International Federation of Accountants Sempier Award for lifelong contribution to the international accounting profession. Cowperthwaite served as senior partner of Peat Marwick Canada and participated actively in the formation of Peat Marwick International. He received the award, named in honor of IFACs first executive director, Robert Sempier, at the 1997 World Congress of Accountants in Paris.

Tar Heel State Makes Education Decision
North Carolina became the 39th state to pass the 150-semester hour requirement for future CPAs.

Picturing Pensions
The Department of Labors Pension and Welfare Benefits Administration (PWBA) issued Simplified Employee Pensions (SEPs): What Small Businesses Need to Know . The booklet explains how SEPs allow an employer to establish and make contributions to an individual retirement account. Included is a discussion on which employees must be included in a SEP, salary reduction SEPs and SEP investments. The booklet is on the PWBA World Wide Web site at http://www.dol.gov/dol/pwba/welcome.html . It also can be ordered by calling the PWBA publication hotline, toll-free, at 800-998-7542.

 

Se Habla Espaol?
Spanish-language skills may be the key to growing a business consulting practice: Hispanic-owned U.S. companies increased 76% between 1987 and 1992; U.S. companies overall grew only 26% during this period. Receipts for Hispanic businesses increased 134% during these five years; the rate for businesses in the United States overall was only 67%.

Did Chile Get It Right?
Much has been written about the controversial Chilean privatized social security system. The Employee Benefit Research Institute published an article, "Chilean Social Security Reform as a Prototype for Other Nations," discussing the systems advantages and disadvantages and possible application to other countries. To purchase a copy, call EBRI at 410-516-6946.

CPA, Lawyer, Joins FAF
Nicholas G. Moore, chairman and chief executive officer of Coopers & Lybrand (which may soon merge with Price Waterhouse), was elected a member of the board of trustees of the Financial Accounting Foundation, which oversees the Financial Accounting Standards Board and Governmental Accounting Standards Board. He replaces Lawrence Weinbach, who until recently was head of Arthur Andersen. Moore, a CPA with a law degree, is also chairman of Coopers & Lybrand International.

Good Government Facts
The Governmental Accounting Standards Board released its semiannual update to the Governmental Accounting Research System (GARS) in midyear. The boards new pension implementation guide, however, will be included in the January 1998 update. GARS is now available in a Windows version on CD-ROM or 3.5" diskettes. For more information and to order GARS, call the GASB at 203-847-0700, ext. 575.

PBGC Drops Top Problem List
Because it has newly strengthened enforcement tools, the Pension benefit Guarantee Corporation (PBGC) said it no longer needs to compile an annual list of the 50 companies with the most underfunded pension plans.




IASC on derivatives.


IASC to Consider U.S. Financial Instruments Standards

According to Sir Bryan Carsberg, secretary-general of the International Accounting Standards Committee, the IASC staff has proposed that its board adopt—on an interim basis—the Financial Accounting Standards Boards rules on financial instruments reporting, including the forthcoming FASB standard on derivatives disclosure. The IASC board was expected to decide on the staff proposal early this month.

By adopting the FASB standards, the IASC should be able to meet its goal of completing a core set of standards by April 1998. The IASC had reached an agreement with the International Organization of Securities Commissions (IOSCO) in April 1995 to complete core standards the IOSCO could endorse for cross-border offerings and listings.

To fulfill its own due process requirements, the IASC board must first issue an exposure draft proposing the adoption of the FASB standards. Carsberg said he was confident the IASC board would approve such a draft.

IASC Project Manager Paul Pacter told the Journal that, although the IASC has never adopted another countrys standards, he agreed with Carsberg it was likely the FASB standards would be adopted. "The only realistic way to fulfill our agreement with IOSCO is to adopt the U.S. financial instruments standards."


An interim solution

Carsberg emphasized that adopting the FASB standards would be only an interim step and the IASC would have to join with national standard setters, including the FASB, to develop a harmonized, comprehensive international standard on financial instruments.

Before disclosing the IASC board proposal, Carsberg had met with both FASB Chairman Edmund Jenkins and Securities and Exchange Commission Chief Accountant Michael H. Sutton to solicit their thoughts on the IASCs intentions. Jenkins called the proposal "a significant step toward the IASCs goal of developing a high-quality core set of international standards." The SEC has taken a more "wait-and-see" approach. Sutton told the Journal the SEC staff would continue to monitor the IASCs progress toward a core set of standards and provide input at the appropriate times.

More information on the financial instruments proposal, as well as the international accounting standards project, is available on the IASC Web site at http://www.iasc.org.uk.

CPE Direct:
Major Benefits for Journal Readers
Now theres another good reason for keeping up with the Journal. American Institute of CPAs members can earn up to 24 continuing education credits per year by reading selected Journal articles, completing four quarterly study guides and passing four quarterly examinations.
An annual subscription costs $159. For information or to order, call 800-862-4272 and select option #1.

IASC Issues Two New Exposure Drafts

The International Accounting Standards Committee is two steps—and two exposure drafts—closer to completing a core set of accounting standards that, if approved by the International Organization of Securities Commissions, could be used for cross-border offerings and listings. The two new EDs, E57, Interim Financial Reporting , and E58, Discontinuing Operations , are expected to be finalized by spring 1998, according to IASC Project Manager Paul Pacter.


What to include in your report

The interim reporting proposal would provide guidance for the business that prepares and reports financial information for a period ending on a date other than its yearend. The draft does not mandate which companies must publish interim reports, how frequently they are required or how soon they must appear after the end of an interim period. "The IASC decided such requirements are regulatory by nature and are best handled by national governments, securities regulators, stock exchanges and accounting bodies," said Pacter.

E57 proposes that, at a minimum, interim reports include four condensed financial statements—the balance sheet, income statement, cash flow statement and a statement showing changes in equity. The notes to the interim reports would explain the events and changes significant to understanding the changes in financial position and performance of the enterprise since the last annual reporting date. Virtually none of the notes to the annual financial statements would be repeated or updated.


Closing shop

The discontinuing operations ED proposes that certain information about a planned discontinuance—both approved and publicly announced by the board of directors—should be disclosed in the notes to the enterprises financial statements. The proposal focuses on how to present a discontinuing operation in the financial statements and what information should be disclosed.

"When a company sells off a major portion of its business, its cash flows will experience an abrupt change," said Pacter. Analysts consider a discontinued operations disclosure of income and expense, cash flows and assets and liabilities vitally important. "This proposal would clearly segregate for the analysts the ongoing from the terminating activities," said Pacter.

Comments for E58 are due by November 15. Copies of E57 and E58 can be obtained for $16 each by writing the IASC at 167 Fleet Street, London EC4A 2ES, United Kingdom, by phone at 44-171-353-0565 or by e-mail at iasc@iasc.org.uk .

Guidance on Assurance Services

The International Federation of Accountants released for exposure guidance on assuring the credibility of financial information. The exposure draft, Reporting on the Credibility of Information , was approved by the IFAC international auditing practices committee (IAPC). Comments are due by February 15, 1998.

"There is a worldwide demand for services that assure the credibility of information," said Robert Roussey, IAPC chairman. "This guidance would help establish accountants as the primary providers of these assurance services."

The ED examines the framework and general principles of assuring information and builds on existing audit guidance, including that on the audit function to enhance the credibility of financial statements. The framework provided in the ED identifies the elements of an engagement to report on the credibility of information. It is intended to include current practices and it examines how those practices can be expanded.

The ED also provides guidance on the objectives and principles governing the assurance services engagement. For example, the guidance asserts that accountants must follow the IFAC Code of Ethics for Professional Accountants . It also explains what process accountants should use for an assurance services engagement, from acceptance through quality control, planning and conduct, obtaining evidence and documentation.

The ED includes an appendix of example reports that comply with the framework and the general principles. Comments on the ED should be addressed to John Gruner, IFAC director general. Copies are available from the IFAC by phone at 212-302-5952 or on the Web at http://www.ifac.org .




When is a leap year not a leap year?   Smart stops on ...


The Other Year 2000 Problem

Every CPA should be aware by now of the possible problems as computer systems head to January 1, 2000 (commonly referred to as the Year 2000 issue). However, there is another adjustment that has to be made—one that was last addressed in 1600. An exception to the quadrennial leap year rule occurs in century years to adjust for small changes. Therefore, 1700, 1800 and 1900 were not leap years. However, century years divisible by 400, such as the Year 2000, are exceptions to the exception: These are leap years.

This calendar adjustment could affect any programs that calculate interest over the course of a year, for example. Accountants may want to make sure any calendar programs recognize February 29, 2000, as a valid date.




Hot jobs in accounting


Hot Jobs in Accounting

According to a survey of 1,400 chief financial officers, the demands for accounts receivable and cost accounting professionals is strong. Here's how accounting departments in different industries ranked the specialties with the strongest growth.

The specialty areas with the strongest growth overall.


Manufacturing


Finance, Insurance, and real estate


Retail


Professional services


Construction


Transportation


Wholesale


Business Services





AmEx wins


Florida First Amendment Case Settles Little

On the surface, its a simple court decision: The 11th Circuit Court of Appeals ruled that CPAs, even when working for an unlicensed entity, may advertise their designation. American Express and one of its CPA employees, Stephen M. Miller, had sued the Florida Board of Accountancy for the right of Amex CPAs to "hold out" as CPAs. "We can now advertise that we do employ CPAs," said Sarah McKenzie, Amex vice-president—government relations.

Amex appears to have received support from the American Institute of CPAs and the National Association of State Boards of Accountancy: Language added to the latest version of the Uniform Accountancy Act says, "CPAs may offer nonattest services through any type of entity they choose and there are no requirements in terms of a certain percentage of CPA ownership for these types of entities as long as they do not call themselves a CPA firm or use the term CPA in association with the entitys name."

AICPA General Counsel Richard Miller said the court decision "certainly appears to substantiate the action by the AICPA council at its last meeting regarding the direction regulation should take in the profession. To that extent, we have no problem with the ruling."


Not an end; only a beginning

However, despite the recent court decision, confusion and conflict remain. "I dont want to say NASBA supports Amexs position," NASBA President David Costello told the Journal . "We coauthored a position with the AICPA in the Final Report From the AICPA/NASBA Joint Committee on Regulation of the Profession that shows we have a similar stand, but it is not the Amex position. First and foremost, we support the right of the Florida board to enact and interpret the laws it has." Although Costello said he supported the right of CPAs to call themselves CPAs wherever they worked, he emphasized that they all needed to be under the authority of state boards. "I think Amex wants to say, NASBA supports us, but we dont. We support our state boards."


To compile or not to compile

In Florida, a non-CPA, or a CPA working at Amex but not holding out as a CPA, can issue a financial statement but cannot claim compliance with the AICPA statements on standards for accounting and review services (SSARS). But can a CPA now holding himself or herself out as a CPA, and working for Amex, do so and claim compliance with SSARS? The state board referred the Journal to John Rimes, an assistant attorney general in Florida. "That is a murky issue," he said. "Because the CPA doesnt work in a CPA firm while holding out as a CPA, he or she may not be able to be in compliance with SSARS. But as a CPA, he or she is required to. It could be a Catch 22 and no one really knows the answer right now." Meanwhile, Rimes said the state board was appealing Miller to the U.S. Supreme Court. If the Court refuses to hear the case, Miller will stand; if it does agree to hear the case, it will go a final, lengthy round. As for now, when Dave Fountain, spokesman for the Florida department of business and professional regulation, was asked if "confused" best described the situation, he said, "That would be accurate. It also would be an understatement."

At-Large Trustee Heads FAF

Manuel H. Johnson has been elected chairman of the board of trustees and president of the Financial Accounting Foundation, which oversees the Financial Accounting Standards Board and the Governmental Accounting Standards Board. A relative newcomer to the FAF, Johnson joined it in 1996 as one of the at-large, or public, members following negotiations on the boards composition between the FAF and the Securities and Exchange Commission. Johnsons immediate predecessor, J. Michael Cook, chairman and chief executive officer of Deloitte & Touche, remains on the board. "Cook will be a tough act to follow," said Johnson in a public statement, "He was an outstanding leader of the FAF." Cook also praised his successor: "Johnson is a great choice to lead the FAF."

Johnson, who has a PhD in economics, is cochairman of Johnson Smick International, a Washington, D.C., consulting firm that provides policy and economic analysis to U.S. and foreign financial institutions. He was assistant secretary of the treasury from 1982 to 1986 and vice-chairman of the Board of Governors of the Federal Reserve System from 1986 to 1990.


Standard setting—independent and fair

"Standard setting belongs in an independent private organization," Johnson told the Journal . "To that end, I see part of the FAFs role is making sure the process is perceived as fair." The problem—as exemplified by the furor over the proposed derivatives standard despite extensive exposure—may be one of public relations: "The FASB has been unfairly attacked. Its not as if the derivatives project was a big surprise to anyone; its been debated and discussed for a long time. We need to help financial statement preparers and users understand and support the process—a lot of them simply may not have been paying attention."

Another issue with its share of controversies is international accounting, which Johnson said would be a key concern for the FAF over the next few years. "The world is changing quickly—the standard-setting process is speeding up, and that makes some people uncomfortable." He said the FAF could help the FASB, SEC and other groups coordinate their efforts in addressing international GAAP.

Year 2000 Issue Information Online

The American Institute of CPAs Year 2000 task force has posted a document on AICPA Online addressing many of the problems connected with what is commonly known as the Year 2000 issue. The document explores questions in accounting and financial reporting, auditing and working with clients. It even includes a sample managements discussion and analysis section specifically referring to the Year 2000 issue. This information, which is similar to that found in an AICPA audit risk alert, will be continually updated and augmented.

At Journal press time, the document was expected to be available on November 1. Link directly from the AICPA home page, http://www.aicpa.org.




Sex and the consultant.


Sex and the Consultant

A survey, commissioned by a major accounting firm, of a variety of 600 woman executives on their thoughts on hiring different types of consultants showed that in this area, at least, the workplace is not yet sex neutral.


Women executives had preferences; they


However; woman executives don't necessarily play favorites:


Many women saw some advantages of hiring male consultants but had problems with men and women working together; they thought




Plain-paper hearing:


SSARS Hearing Yields No New Answers

There is still widespread disagreement about when financial statements have to be compiled and the so-called plain-paper issue, according to Wanda Lorenz, chairwoman of the American Institute of CPAs accounting and review services committee. ARSC held a two-day hearing on these issues in August. "However, despite the disagreement on how to solve the problem, for the first time I did see a general agreement that even though many may not like the proposed solutions, something needs fixing," she told the Journal . (For background information, see "Public Hearing on SSARS no. 1," JofA, July97.)

Although at Journal press time the committee had not yet met to formally address the results of the hearing, Lorenz discussed some of her impressions. "Even those who do not want to see a plain-paper standard are finding the current standards onerous. There were suggestions that standards should take into account the intent of the CPA and client." She cited "inadvertent compilations," in which a client wants the CPA only to post journal entries, for example. The software program used, however, automatically generates a statement. Although neither the client nor the CPA had intended to issue a formal statement, the CPAs actions call for at least a compilation. Lorenz said there were ways around generally accepted accounting principles, such as a tax basis statement. However, these solutions usually did not save any of the CPAs time and, thus, any of the clients money. Therefore, CPAs had to bill for services the client may not have wanted or needed.


Controllers Made Compensation Strides in 1996

Another key issue was GAAP departures. Lorenz said that with plain-paper statements, the CPA would not be taking responsibility for noting these departures. "Wed have to train the public to understand what plain-paper statements are and their differences from compilations." However, she said that might be a simpler proposition than the status quo of mandating compilations.


A work in progress

"I fail to see how we are serving the public interest when we force our clients to accept a service they dont want," she said. "Unfortunately, the hearing didnt supply a lot of really snappy ideas." She said that although there has been a lot of debate, no one has approached ARSC with a widely acceptable solution. The ARSC planned to review the meeting transcript and work with legal counsel on these difficult issues.




McCall wins


McCall Recognized for Outstanding Achievements

Sam M. McCall, the deputy auditor general of Florida, received the American Institute of CPAs 1997 Outstanding CPA in Government Award. The award, which recognizes CPAs who have made significant contributions to increase the efficiency and effectiveness of government organizations, was presented to McCall at the AICPA Governmental Accounting and Auditing Update Conference in Washington, D.C.

McCall has overseen much of Floridas financial management and administration, accounting and auditing for the past 11 years. He was a noted advocate for legislation—such as the Florida Government Performance and Results Act, the Florida Chief Internal Audit Act and the Florida Inspector General Act—that significantly improved state government operations.

He currently is assisting the state legislature with a bill for a state single audit act, which would ensure more accountability for state grants. He also has served as a technical adviser for the Governors Government Accountability for the People Commission and the Florida Commission on Education Reform and Accountability.

In 1996, McCall was reappointed by U.S. Comptroller General Charles A. Bowsher to the Government Auditing Standards Advisory Council, which recommends needed changes to government auditing standards. He is a member of the Governmental Accounting Standards Advisory Council, which advises the Governmental Accounting Standards Board on its agenda, and of the Institute of Internal Auditors International Internal Auditing Standards Board.

Besides the AICPA, McCall also belongs to the Florida Institute of CPAs, the Association of Governmental Accountants, the National Conference of State Legislatures and the National State Auditors Association.




clarifications and corrections


Following are clarifications and corrections for the article "Tax Software Buyers Guide" (JofA, Sept.97):

Go to the Article

  • In the review of Arthur Andersens A-Plus-Tax, we inadvertently failed to mention that the product is available in Windows 95/NT and DOS, not Windows 3.x.

  • In the review of Computer Language Researchs GoSystem for Windows, we reported the program misstated a foreign tax credit by a small margin. The companys technical support people said that when they ran the exercise, they came up with essentially the correct tax figure.

  • In the review of Lacerte software, we said the program allowed us to report rental income from a second home that had been rented for fewer than 14 days. Lacerte, while conceding that statement, maintained that the "error" would have been picked up had we run its built-in diagnostic program—a point we readily concede.

    Lacerte also disagreed with our criticism that the program allowed three exemptions for the taxpayer and the spouse. We acknowledge we entered contradictory information: We checked two boxes—one saying the husband and wife were filing a joint return and another that the husband was electing to take an exemption for his wife, who was filing a married-filing-separately return. Consequently, the program allowed two exemptions for the husband and one for the wife. While we concede our input error, we believe the software should never have allowed more than two exemptions—regardless of user input. Lacerte grants that, if its diagnostic tool had been run, it would not have picked up the input error; but the company explains that it considers the input error so rare as to "not warrant an automatic diagnostic report" in such a case.

  • In the review of MicroVisions Tax Relief, we failed to mention that, in addition to its Windows 3.1 version, a DOS package is available.

    Also, we cited the program for mishandling suspended passive losses from two passive activities, which were not allowed even though the disposition of a third passive activity generated sufficient passive income to absorb these losses. During our review, we called the companys technical support and explained the problem. We were told the program had a bug and, to correct the problem, we should enter the suspended passive losses as active losses on the K1. Subsequently, the company informed us the earlier correction itself was incorrect. After following new instructions, we found the program correctly handled the passive activity losses.

    And for clarification on our comments on how Tax Relief handles an excess IRA contribution, see the UltraTax section below.

  • In the review of Laser Systems TaxWorks, we cited the program for mishandling a health insurance expense. On further examination, we determined our criticism was not warranted. On another issue, in which we said the program erred in computing the depreciation adjustment for the taxpayers home office, Laser Systems claims the resulting alternative minimum tax was correctly figured; we have been unable to determine the cause of the problem and therefore acknowledge the software handles the tax correctly.

  • In the review of Creative Solutions UltraTax, we criticized the program for failing to automatically compute the excess individual retirement account contribution and the corresponding tax. While Creative Solutions agrees our statement is technically correct, it claims the criticism is misleading. When faced with an excess IRA contribution, the company explains, a taxpayer has the choice of paying the additional tax or withdrawing the excess IRA contribution and the corresponding deduction. The company maintains that forcing the taxpayer to make a "conscious decision" is a better approach. We agree that its a judgment call, and in light of the fact that at least one other tax program (Tax Relief) works that way, we defer to the issue and withdraw our criticism.

In addition, we inadvertently failed to indicate that, in addition to having a Windows 95/NT version, UltraTax also has a DOS version.




NPO accounting rule


Charities Tread Lightly With New Statement

A new, stricter Statement of Position, Accounting for Costs of Activities of Not-for-Profit Organizations and State and Local Governmental Entities That Include Fund Raising , is already arousing the ire of not-for-profit organizations. Although the SOP, issued by the American Institute of CPAs accounting standards executive committee, hasnt taken effect yet, some are offering gloomy predictions on what the statement will do to charities financial statements. (For details, see "AcSEC Becomes Strict on Fundraising" and "New Role for NPO CPAs," JofA, May97.)

"Implementing this SOP will be like walking through a minefield," said Robert H. Frank, CPA. Franks firm, Frank & Co., P.C., in McLean, Virginia, has a lot of NPO clients that he handles personally. He also sits on the board of directors of the D.C.-based National Federation of Nonprofits (NFN), an advocacy organization in postal, regulatory, legislative and accountability issues for its 400 members. The NFN wrote a protest letter to Securities and Exchange Commission Chairman Arthur Levitt, Jr., shortly after the statement was approved, complaining about a number of issues in the statement.

"Any affected organization will require a lot of CPA help to navigate the new standard," Frank continued. "NPOs will not need just a CPA—theyll need one very knowledgeable in cost allocations and NPO fundraising and multipurpose costs—a real specialist." He said that, personally, he should be thrilled with the new standard because "it will generate consulting work. But I think the new statement is inconsistent with recent accounting theory, and I dont agree with its thrust." He said under the old standard, SOP 87-2, Accounting for Joint Costs of Informational Materials and Activities of Not-for-Profit Organizations That Include a Fund-Raising Appeal , some NPOs did take liberties with its fairly loose provisions but the new standard was too restrictive.

However, shortly after the statement was approved for issuance, members of the AICPA NPO committee defended it. Kenneth Williams, the committees past chairman, said it made the rules less vague. "It provides specific guidelines but there is still some room for judgment." He noted that representatives from regulatory and watchdog groups lobbied for more rigid standards. And the current committee chairman, Gregory B. Capin, said the new statement was much clearer than SOP 87-2 in applying the criteria of purpose, audience and content.

At Journal press time, AcSEC had not formally responded to issues raised in the letter and was not expected to do so.

Software Revenue Recognition Updated

Software vendors are facing more stringent accounting with the issuance of a new statement of position that supersedes SOP 91-1, Software Revenue Recognition . "During the exposure period, we received comments that certain criteria of the proposed standard were a lot tougher than 91-1—some thought this was a good idea, and some thought it was too conservative," Richard Stuart, American Institute of CPAs accounting standards technical manager, told the Journal . The revenue recognition criteria in SOP 91-1 differed depending on whether remaining vendor obligations were significant or insignificant . "But these terms were not defined, so companies were left to decide for themselves what was significant," said Stuart.

The final statement is similar to the exposure draft, with some clarifications and relatively few significant changes. (See "Software Revenue Recognition—Revisited," JofA, Aug.96.) The transition is now prospective: The SOP is applicable for transactions entered into in fiscal years beginning after December 15, 1997. Without changing the conclusions, new language clarifies the provisions relating to software contracts with extended payment terms. The final SOP also discusses electronic delivery of software in more detail, specifying when the company can recognize revenue in those cases.

Remaining in the final statement is a paragraph calling for vendor-specific objective evidence for the allocation of revenue to the various elements of the arrangement based on vendor-specific objective evidence of the fair value of the elements. If that evidence does not exist, revenue should be deferred until the earlier of the following:

  • Sufficient vendor-specific objective evidence does exist.

  • All elements of the arrangement have been delivered.

The ED contained three exceptions to this rule. The final statement adds a fourth: services that do not involve significant production modification or customization. For example, if a company is providing training, it can recognize revenue as it provides this service instead of waiting until the service is completed.


Discounts: clarifications and judgment

The ED said companies should not allocate any discounts to upgrades and this remains. "There was some concern on how discounts should be allocated, however. We added language saying it should be proportionate, with the exception that no portion of a discount is allocated to upgrade rights," said Stuart. The final SOP also requires judgment based on the size of the discount. If, in connection with the licensing of one product, a vendor offers a small discount on additional licenses of the licensed product or other products that exist at the time of the arrangement, thats just a marketing issue outside the SOPs scope. But if the discount is more than insignificant, it creates a presumption that an additional element is being offered. The SOP does not list a specific number; its a matter of judgment.

To order the new statement of position, call the AICPA order department at 800-862-4272.




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