Federal bank regulators made an interim decision that FASB Statement no. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, will not affect banking organizations’ regulatory capital. Pending further action by the Federal Reserve Board, FDIC, Office of the Comptroller of the Currency and Office of Thrift Supervision, bank holding companies and savings associations should exclude from regulatory capital any amounts recorded in accumulated other comprehensive income (AOCI) resulting from the application of Statement no. 158.

The standard requires organizations that sponsor defined benefit postretirement plans to recognize the overfunded or underfunded status of each such plan as an asset or liability on their balance sheet with corresponding adjustments in AOCI. For additional guidance, visit www.federalreserve.gov/boarddocs/reportforms/supplemental/SI_FRY9_200612.pdf .

The SEC adopted an amendment to its executive and director compensation disclosure rules to more closely conform the reporting of stock and option awards to FASB Statement no. 123(R), Share-Based Payment. The changes apply to rules the commission adopted in July 2006 to enhance executive compensation disclosure requirements for proxy statements, registration statements and annual reports filed by public companies.

The commission’s amendment will align the reporting of equity awards in the Summary Compensation Table and the Director Compensation Table to the amounts that are disclosed in the financial statements under Statement no. 123(R), which requires recognition of the costs of equity awards over the period in which an employee is required to provide services in exchange for the award. The change is intended to give investors a better idea of the compensation earned by an executive or director during a particular reporting period.

The amendment, in the form of interim final rules, was published in the Federal Register on Dec. 29, 2006. The changes apply to proxy, information and registration statements filed on or after Dec. 15, 2006, that are required to include Item 402 disclosure for fiscal years ending on or after Dec. 15, 2006, and for forms 10-K and 10-KSB for fiscal years ending on or after Dec. 15, 2006. The amendment is available at www.sec.gov/rules/final/2006/33-8765.pdf .

FASB issued for public comment proposed Statement 133 Implementation Issue No. H17, Foreign Currency Hedges: Hedging Functional-Currency-Equivalent Proceeds to Be Received From a Forecasted Foreign-Currency-Denominated Debt Issuance.

The statement clarifies that the variability in functional-currency-equivalent proceeds expected to be received from the forecasted issuance of debt, denominated in a currency other than the reporting entity’s functional currency, cannot be designated as the hedged transaction in a cash flow hedge of foreign currency risk because it does not affect reported earnings, as required by paragraph 29(c) of FASB Statement no. 133, Accounting for Derivative Instruments and Hedging Activities. The guidance, if adopted, would apply for each reporting entity on the first day of its first fiscal quarter beginning after the board’s cleared guidance is posted on the FASB Web site. The guidance is available at www.fasb.org/derivatives/12-28-06.pdf .

An AICPA task force and staff produced a working draft of a document designed to guide practitioners in accounting for equity-related financial instruments including convertible debt, convertible preferred shares and warrants.

The document is designed to help preparers and auditors of financial statements determine whether those financial instruments should be classified as stockholders’ equity or as assets or liabilities, among other issues. A working draft of the document is available at www.aicpa.org/Professional+Resources/ .

The AICPA staff also issued technical practice aids answering frequently asked questions on the following topics relating to investment companies:

Recognition of premium/discount on short positions in fixed-income securities.

Presentation of reverse repurchase agreements.

Accounting treatment of offering costs incurred by investment partnerships.

Meaning of “continually offer interests.”

The AICPA staff also issued these TPAs:

Income Tax Accounting for Contributions to Certain Nonprofit Scholarship Funding Organizations, which specifies that a contribution to a scholarship fund eligible for a state corporate income tax credit should be reported on income statements as a contribution, not an income tax expense.

Accounting for Certain Liquidated Damages, which states that liquidated damages, or contractual payments for late or incomplete delivery of certain fixed assets, typically would be recorded as a reduction of payments the buyer has made to the vendor.

Parent-Only Financial Statements and Relationship to GAAP notes a presumption under Accounting Research Bulletin 51 in favor of consolidated financial statements of entities with majority-owned subsidiaries.

These and other recently issued TPAs are available at www.aicpa.org/Professional+Resources/ .

 
GASB issued an exposure draft of a proposed guidance statement titled Accounting and Financial Reporting for Intangible Assets to answer questions about whether and when certain intangibles should be considered capital assets in financial reports. Intangibles frequently encountered by governments include easements, water and timber rights, patents, trademarks and computer software, GASB noted.

Specifically, the proposed statement would require that certain intangible assets be classified as capital assets and addresses issues of identifying, recognizing and amortizing them. Provisions of the proposed guidance generally would be applied retroactively and be reflected in financial statements for periods beginning after June 15, 2009. Comments on the draft, which is available at www.gasb.org/exp/ed_intangible_assets.pdf , are requested by March 23.

 
The International Ethics Standards Board for Accountants (IESBA), an independent standard-setting body of the International Federation of Accountants (IFAC), issued an ED that contains substantive revisions to the independence standards of the IFAC Code of Ethics for Professional Accountants.

The changes:

Expand the applicability of partner rotation requirements with respect to listed entities and remove the provision that allows flexibility for small firms to apply alternative safeguards.

Strengthen requirements related to provision of non-assurance services, including setting out additional guidance on the provision of tax services to audit clients.

Extend the more restrictive listed entity independence requirements to the audits of a wider range of entities of significant public interest.

The AICPA Professional Ethics Executive Committee will be evaluating the proposal and providing comment. Comments are due by April 30. The ED is available at www.ifac.org/EDs .

In a move intended to enhance the participation of investors and other users of financial information in the standard-setting process, FASB established the Investors Technical Advisory Committee (ITAC).

The committee comprises 12 members from the investment community with strong technical accounting and financial reporting knowledge. The panel will help FASB identify urgent accounting and financial reporting issues, propose new items for the board’s agenda and provide perspectives on the standard-setting process.

FASB plans to meet with ITAC in public sessions at least twice each year. Meetings with FASB staff are expected to occur quarterly.

A complete list of ITAC members is available at www.fasb.org/news/nr010207.shtml .

The SEC proposed rules designed to provide additional protection to investors in certain pooled investment vehicles including hedge funds. One new rule, under the Investment Advisers Act of 1940 (15 U.S.C. 80b), would clarify the SEC’s ability to bring enforcement actions against investment advisers who defraud investors in a pooled investment vehicle. The SEC said the clarification was needed in light of a recent District of Columbia Court of Appeals decision ( Goldstein v. SEC , 451 F.3d 873), which overturned the 2004 “Hedge Fund Rule” on SEC registration requirements for funds.

Two more new rules would revise requirements under the Securities Act of 1933 (15 U.S.C. 77) for determining an individual’s eligibility to invest in pooled vehicles. The definition of accredited investor, as the term is applied by some privately offered investment pools, may not provide sufficient protection to investors, the SEC said. The proposed rules are available at www.sec.gov/rules/proposed.shtml , which also has a link for submitting comments by March 9.

 
The Treasury Department needs to improve its enforcement of laws to detect and deter criminal financial activities, the GAO said in a report to Congress. Thirty-six years after passage of the Bank Secrecy Act (BSA), Treasury’s Financial Crimes Enforcement Network (FinCEN) and the IRS still face challenges in fulfilling the law’s mandates, the GAO said. The IRS has not identified and examined all nonbank financial institutions (NBFIs) such as check-cashing and money-transmitting businesses, as required under BSA, the GAO said. And FinCEN was unable to complete a planned data system despite spending $14 million on the project—$6 million over its original budget, the GAO said. FinCEN also lacked a comprehensive plan for taking over BSA data management from the IRS, according to the report.

FinCEN regulations defining NBFIs are confusing, making it harder for the IRS to identify them, the GAO said. But the IRS has not developed a statistically valid, risk-based method of selecting NBFIs for examination from among those it has identified, the GAO said. The report recommends the agencies develop a strategy to clarify rules, strengthen data management and better coordinate their activities.

The BSA, also known as the Currency and Foreign Transactions Reporting Act, was enacted to prevent banks and other financial service providers from being unwitting intermediaries in the concealment, transfer or deposit of money deriving from criminal activity.

FinCEN and the SEC announced an agreement for the routine exchange of examination and enforcement information aimed at identifying, deterring and interdicting terrorist financing and money laundering. The agreement is intended to improve monitoring of SEC-regulated firms’ compliance with the BSA and identify institutions with BSA violations or deficiencies.

The pact calls for the SEC to provide FinCEN quarterly with detailed information about anti-money-laundering examination and enforcement activities. The commission and FinCEN will meet regularly to continue efforts to improve anti-money-laundering and anti-terrorist-financing compliance.

FinCEN and federal banking agencies revised the format for the Suspicious Activity Report by Depository Institutions (SAR-DI) to support a new joint filing initiative, which will reduce the number of duplicate SARs filed for a single suspicious transaction. Filers may begin using the new format June 30, 2007; they will be required to file in the new format by Dec. 31, 2007.

Financial institutions can review and download the PC fill-in version from FinCEN’s Web site at www.fincen.gov under “What’s New.”

 
Many more corporations now must file their tax returns electronically, and the AICPA offers an online informational aid to help CPAs meet their corporate clients’ e-filing requirements. Corporations with total assets of $10 million or more that file at least 250 returns annually, such as W-2s or other employment tax forms, are required to e-file their forms 1120 or 1120S for tax years ending on or after Dec. 31, 2006. In the previous filing season, the threshold was $50 million. The AICPA guide, in Microsoft PowerPoint format, is available at http://tax.aicpa.org/Resources/Corporations+and+Shareholders/ . The IRS also offers corporate e-filing information and resources at www.irs.gov/businesses/corporations/article/0,,id=146959,00.html .

 
The Big Four firms announced 2006 results ranging from 9.6% to 11.5% growth worldwide. Combined, Big Four revenues totaled $77.3 billion.

Twenty-two midsize firms joined a new alliance called Baker Tilly USA (a new branch of network Baker Tilly International) in an effort to compete with larger firms for U.S. audit business.

Meanwhile, China announced plans to develop its own international accounting firms. The policy statement by the Chinese Institute of Certified Public Accountants (CICPA), which was first reported by the Financial Times in October, says that in the next five to 10 years China should develop 10 accountancy firms capable of operating internationally. The firms would audit foreign operations of Chinese companies that are currently being audited by Big Four firms.