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ACCOUNTING
The AICPA released three technical practice aids (TPAs), two of which—in relation to Statement of Position (SOP) 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer— specify how to account for pools of loans that are accounted for as a single asset. The other TPA explains why GAAP does not permit preparing parent-company financial statements in lieu of consolidated financial statements ( www.aicpa.org/members/ ).

The Institute submitted comments on IRS technical advice memo (TAM) 200603027, which holds that a taxpayer’s LIFO election must be extended to all items within a dollar-value LIFO pool under the inventory price index computation (IPIC) pooling method. In its letter the AICPA said the TAM’s conclusion is inconsistent with a plain reading of IRC section 472 regulations and violates basic policy ramifications of the LIFO IPIC method rules ( http://tax.aicpa.org/Resources/Tax+Accounting ).

The AICPA Center for Public Company Audit Firms (CPCAF) issued a report on the Public Company Accounting Oversight Board’s findings from its inspections of eight PCAOB-registered firms that audit more than 100 public companies ( www.aicpa.org/cpcaf/download/PCAOB_inspection_deficiency_analysis_january2006.pdf ). An earlier analysis focused on PCAOB deficiency reports for firms with 100 or fewer SEC-registered audit clients ( www.aicpa.org/cpcaf/download/PCAOB_inspection_deficiencies.pdf ). The CPCAF addressed only the deficiencies reported in the public portions of the PCAOB inspection reports and did not include cited criticisms of a firm’s quality control system. Large firms’ most common deficiencies related to confirmation procedures, estimates, substantive/analytical procedures, documentation, risk assessment vs. tests, GAAP applicability, materiality, third-party service organizations, sample sizes and arrangements or side agreements. For smaller firms, the most common deficiencies involved revenue, expenses, accounts receivable, inventory, allowances for loan losses, accrued expenses, business combinations or acquisitions, going concern issues, investments and equity transactions.

As part of a broader initiative to improve financial reporting for insurance accounting, FASB issued an invitation to comment on whether bifurcating insurance and reinsurance contracts into insurance and financing components would improve the transparency of financial reporting for insurance accounting ( www.fasb.org/draft/ ). Current standards give insurers and reinsurers limited guidance on accounting for insurance contracts, which often have both insurance and financing components that are combined and accounted for as insurance contracts. The board therefore is asking buyers and sellers of insurance contracts, users of their financial statements and, in particular, noninsurance-company policyholders, including small and private companies, whether and how insurance and reinsurance contracts should be bifurcated into insurance and deposit components. Comments are due August 24, 2006.

The Federal Accounting Standards Advisory Board issued a concepts statement exposure draft titled Definition and Recognition of Elements of Accrual-Basis Financial Statements ( www.fasab.gov/pdffiles/ ). It seeks respondents’ views on proposed definitions of certain elements— assets, liabilities, net position, revenue and expense —in such financial statements and on the essential characteristics of assets and liabilities and how they influence the definitions of revenue and expense. FASAB also asks for feedback on the government’s ability to amend laws, recognition criteria and uncertainty about existence and measurement. Comments are due August 5, 2006.

The U.S. Office of Management and Budget (OMB) issued the Circular A-133 2006 Compliance Supplement ( www.whitehouse.gov/OMB/circulars/a133_compliance/06/06toc.html ), which identifies important federal requirements to be considered as part of an audit in accordance with the Single Audit Act and OMB Circular A-133, Audits of States, Local Government, and Not-for-Profit Organizations. The annually updated supplement contains information to help auditors understand federal program objectives, procedures and compliance requirements, as well as audit objectives and suggested audit procedures for determining compliance with these requirements. The 2006 supplement is effective for audits of fiscal years beginning after June 30, 2005, and supersedes the supplement issued in March 2004 and updated in May 2005. To order a print copy (stock number 041-001-00629-0) from the Government Printing Office, call 202-512-1800. The 2006 AICPA audit and accounting guide, Government Auditing Standards and Circular A-133 Audits (# 012746JA), contains information on implementing the circular’s provisions and is available at www.cpa2biz.com .

The International Accounting Standards Board published an ED of proposed amendments to International Accounting Standard (IAS) 23, Borrowing Costs ( www.iasb.org ). The proposal requires entities to capitalize borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of its cost, rather than immediately recognizing borrowing costs as an expense. This change would align IAS 23 with the provisions of the Financial Accounting Standards Board’s Statement no. 34, Capitalization of Interest Cost ( www.fasb.org/st/summary/stsum34.shtml ) and thus improve comparability between U.S. GAAP and international standards. Comments are due September 29, 2006.

The International Federation of Accountants’ Professional Accountants in Business Committee released Business Planning Guide: Practical Application for SMEs, an information paper that shows managers in small and midsize entities—and the accounting firms that serve them—how to manage risk and develop business plans to help measure performance and obtain external funding. The paper is available free of charge at www.ifac.org/store .

The Pension Benefit Guaranty Corporation published a final rule requiring sponsors of insured defined benefit pension plans to submit their premium filings electronically. As of July 1, sponsors of plans with 500 or more participants must do so for plan years beginning on or after January 1, 2006; for all other plan sponsors, the requirement applies to plan years beginning on or after January 1, 2007. For more information and to set up an electronic payment account, go to www.pbgc.gov/practitioners and click on the “Online Premium Filing” link.

Strategic planning and developing a marketing plan are critical topics to be covered in live, online forums the AICPA’s Private Company Practice Section (PCPS) is offering free to its members. The series, which began in June, includes events in August and September, with others to follow, and features presentations by prominent consultants. A schedule and information on section membership are available at the PCPS Firm Practice Center ( www.aicpa.org/pcps ).

Strategic planning and developing a marketing plan are critical topics to be covered in live, online forums the AICPA’s Private Company Practice Section (PCPS) is offering free to its members. The series, which began in June, includes events in August and September, with others to follow, and features presentations by prominent consultants. A schedule and information on section membership are available at the PCPS Firm Practice Center ( www.aicpa.org/pcps ).

The Financial Accounting Foundation, which funds and oversees the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB), appointed Thomas J. Linsmeier, CPA, to FASB for a five-year term that began July 1. A nationally respected accounting educator and researcher, he is chairman of the department of accounting and information systems in the Eli Broad College of Business at Michigan State University. He succeeded Katherine Schipper.