The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) each published an exposure draft (ED) containing joint proposals to improve and align the accounting for business combinations ( www.iasb.org/current/ed.asp ; www.fasb.org/draft ). The proposals retain the current requirement in both International Financial Reporting Standard 3 and FASB Statement no. 141 to account for all business combinations by means of a single method, in which one party always is identified as acquiring the other. Among the principal changes would be a requirement to measure the acquired business at fair value and recognize the goodwill attributable to any noncontrolling interests, not just to the acquirer.

The IASB and FASB also published EDs proposing that noncontrolling interests be classified as equity within the consolidated financial statements and that acquisitions of noncontrolling interests be accounted for as equity transactions ( www.fasb.org/draft/ed_business_combinations_replacement_of_fas141.pdf ; www.fasb.org/draft/ed_noncontrolling_interests.pdf ). Comments on all the EDs are due October 28.

The SEC released a staff report on off-balance-sheet arrangements, special purpose entities and transparency of filings by issuers reflected in a sample of filings by 200 public companies ( www.sec.gov/news/studies/soxoffbalancerpt.pdf ). In the report, which the Sarbanes-Oxley Act requires the SEC to deliver to the president and Congress, commission staff recommended among other things that FASB reconsider and refine its accounting guidance for defined-benefit pension and other post-retirement benefit plans and for leases. The report also discouraged companies’ use of transactions motivated primarily by accounting and reporting—rather than economic—considerations.

FASB issued Staff Position (FSP) no. 150-5, Issuer’s Accounting under FASB Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares That Are Redeemable ( www.fasb.org/fasb_staff_positions/fsp_fas150-5.pdf ). The guidance is effective for reporting periods beginning after June 30, 2005.

The Institute endorsed the SIMPLE Cafeteria Plan Act of 2005 (S. 723), a bill that would allow small businesses to provide nontaxable benefits, such as flexible spending accounts, to their employees ( http://thomas.loc.gov ) as large companies and government agencies now do. In addition, the proposed legislation would allow cafeteria plans, which permit employees to customize their benefits, to offer long-term-care insurance, and it would simplify and expand dependent care accounts. Introduced by Sen. Olympia J. Snowe (R-Maine), the bipartisan bill was co-sponsored by Sens. Jeff Bingaman (D-N.M.) and Christopher S. Bond (R-Mo.).

The Federal Accounting Standards Advisory Board (FASAB) published Statement of Federal Financial Accounting Standards (SFFAS) no. 29, Heritage Assets and Stewardship Land ( www.fasab.gov/pdffiles/sffas_29.pdf ). The standard reclassifies information on these assets and land as basic information, with the exception of condition information, which it classifies as required supplementary information. Most of the guidance is effective for reporting periods beginning after September 30, 2005, but certain disclosure requirements will be phased in over the next three years.

The Governmental Accounting Standards Board (GASB) issued Statement no. 47, Accounting for Termination Benefits ( www.gasb.org/st/summary/gstsm46.html ). It provides accounting and reporting guidance for state and local governments offering benefits such as early retirement incentives or severance to involuntarily terminated employees. In general the statement is effective for financial statements for periods beginning after June 15, 2005, but for termination benefits affecting defined-benefit postemployment benefits other than pensions, governments should implement Statement no. 47 simultaneously with Statement no. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions ( www.gasb.org/st/summary/gstsm45.html ). Both statements are available from GASB at http://store.yahoo.com/gasbpubs or by calling 800-748-0659.

The International Accounting Standards Board issued an amendment to the fair value option in International Accounting Standard (IAS) 39, Financial Instruments: Recognition and Measurement. In response to regulators’ concerns that the option provision in the 2003 revisions of IAS 39 might be misused, the IASB limited its application to financial instruments that meet certain conditions. The amendment takes effect January 1, 2006, with earlier application encouraged.

The IASB also amended International Financial Reporting Standard (IFRS) 1, First-time Adoption of International Financial Reporting Standards, and the Basis for Conclusions on IFRS 6, Exploration for and Evaluation of Mineral Resources. The amendments clarify the board’s intentions regarding an exemption for companies first adopting IFRSs before January 1, 2006. Information on both amendments is available at www.iasb.org/news .

The International Federation of Accountants (IFAC) released a revised Code of Ethics for Professional Accountants, which establishes a conceptual framework promoting the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior ( www.ifac.org/news ). It requires all accountants to identify threats to these principles and, where threats are identified, to apply safeguards to prevent the principles from being compromised. The revision is effective June 30, 2006, but may be implemented before then.

IFAC also issued an ED, Proposed Revised Section 290, Independence—Assurance Engagements ( www.ifac.org/eds ), proposing changes in the definition of the term network firm . The proposed revisions would classify one firm as a network firm of another if the two share a brand name or significant professional resources, revenues, profits, costs or expenses. Network firms are required to be independent of an audit client of a firm within the network. Comments are due September 30.

The International Auditing and Assurance Standards Board (IAASB) of IFAC released an international standard on review engagements (ISRE; www.ifac.org/guidance ) and two EDs of proposed international standards on auditing (ISA; www.ifac.org/eds ). ISRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, outlines the general principles of such a review, provides guidance on the inquiries, analytical and other review procedures the auditor performs and prescribes the review report’s content. The standard, which can be downloaded free at www.ifac.org/store , is effective for periods beginning on or after December 15, 2006, with earlier adoption permitted.

Comments on the two EDs—ISA 701, The Independent Auditor’s Report on Other Historical Financial Information, and ISA 800, The Independent Auditor’s Report on Summary Audited Financial Statements —are due October 31, 2005.

The Institute released AICPA Audit Committee Toolkit: Not-for-Profit Organizations and AICPA Audit Committee Toolkit: Government Organizations, which are comprehensive sets of best practices for, among other things, understanding internal controls, conducting meetings with company executives and making the audit committee charter a tool for managing committee responsibilities and documenting performance. These resources complement a similar one the Institute has developed for public companies. All the toolkits can be downloaded free at the AICPA Audit Committee Effectiveness Center ( www.aicpa.org/audcommctr ) and customized as needed; next month they also will be available in print at www.cpa2biz.com or by phone at 888-777-7077.

The Federal Financial Institutions Examinations Council (FFIEC) released the Bank Secrecy Act (BSA)/Anti-Money Laundering Examination Manual to ensure consistent application of the act to commercial banks, savings associations and credit unions ( www.fdic.gov/news ). In it the FFIEC prescribes uniform principles, standards and report forms for federal banking regulators. The manual, which does not set new standards, is a compilation of existing regulatory requirements, supervisory expectations and sound practices. For example, its guidelines will better enable examiners to evaluate banks’ compliance with federal requirements, regardless of organizational size or line of business. In collaboration with the Financial Crimes Enforcement Network, which administers the BSA, the banking regulators—the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., the National Credit Union Administration, the Office of the Comptroller of the Currency and the Office of Thrift Supervision—will begin employing the manual’s procedures in the third quarter of 2005.

President George W. Bush designated Cynthia A. Glassman as acting SEC chairman until the Senate confirms a successor to William H. Donaldson, who stepped down in June. The president has nominated Rep. Christopher Cox (R-Calif.) to replace Donaldson.

The Financial Accounting Foundation named Keith L. Johnson, CPA, chairman of the Governmental Accounting Standards Advisory Council for a two-year term. The council consults with GASB on technical issues, project priorities and other matters.

Michael G. Gaynor and Joseph D. McGrath began two-year terms as professional accounting fellows in the SEC’s Office of the Chief Accountant. Both were senior managers in public practice—Gaynor in KPMG’s New York office and McGrath in Ernst & Young’s Cleveland office. They will develop rule proposals under federal securities laws, communicate with professional accounting and auditing standard-setting bodies and consult with SEC-registered companies on accounting and reporting matters.