The SEC proposed new rules that would require securities issuers to provide an XBRL version of their financial statements. Under the proposal, all U.S. public companies and foreign private issuers listed with the SEC would be required to provide financial information using XBRL within three years. The SEC staff recommended the following implementation schedule beginning with fiscal periods ending on or after Dec. 15, 2008 (contingent upon the rules being adopted by this fall):
Year 1. The proposed rules would apply only to domestic and foreign large accelerated filers that use U.S. GAAP and have a worldwide public float above $5 billion (approximately the 500 largest companies).
Year 2. All other large accelerated filers, domestic and foreign, using U.S. GAAP would be subject to interactive data reporting.
Year 3. All remaining filers using U.S. GAAP and all foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB would be subject to the same requirements.
Companies filing in U.S. GAAP under the proposed rules will use data tags issued April 28, 2008, by XBRL US Inc. The SEC said it expects its EDGAR system to begin accepting test filings using a Feb. 11, 2008, version of these tags in late May, with the final April 28 version of the tags becoming available in June. Until the EDGAR system is fully functional, companies will be able to use an interim system to provide XBRL submissions to the SEC using the April 28 version of the tags.
Comments on the SEC’s proposed rules are due 60 days after publication in the Federal Register . For more information, visit www.sec.gov/spotlight/xbrl.shtml or http://xbrl.us.
FASB issued Statement no. 162, The Hierarchy of Generally Accepted Accounting Principles. The standard is intended to improve financial reporting by identifying a consistent framework for selecting accounting principles to be used in preparing financial statements that conform to U.S. GAAP for nongovernmental entities.
Before the standard was issued, the GAAP hierarchy was defined in Statement on Auditing Standards (SAS) no. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. In 2003, the SEC recommended that FASB redefine the GAAP hierarchy. FASB began work to move the GAAP hierarchy into the accounting literature. Statement no. 162 establishes that the GAAP hierarchy should be directed to entities, because it is the entity, not its auditor, that is responsible for selecting accounting principles for financial statements.
Statement no. 162 is effective 60 days after the SEC’s approval of the PCAOB auditing amendments to AU Section 41, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The GAAP hierarchy will remain in SAS no. 69 for state and local governmental entities and federal governmental entities.
Statement no. 162 is available at www.fasb.org.
Proposed changes to the Uniform CPA Examination include, for the first time, incorporating International Financial Reporting Standards IFRS), according to an exposure draft published by the AICPA Board of Examiners. The ED proposes that the IFRS conceptual framework be tested and that additional testing of international standards occur if IFRS becomes generally accepted in the United States. Comments will be considered by the Board of Examiners as the proposed content and skill specifications are finalized. The new specifications will be scheduled for implementation after they have been approved and will be available to students, educators and other interested parties well before the effective date. Comments are due by July 31. The ED and comment form are available at www.cpa-exam.org/cpa/exposure_draft.html.
FASB issued FASB Staff Position FAS 142-3, Determination of the Useful Life of Intangible Assets. The FSP’s goal is to provide guidance on the determination of the useful life of intangible assets in accordance with FASB Statement no. 142, Goodwill and Other Intangible Assets.
In particular, the goal is to improve the consistency between the useful life of a recognized intangible asset under Statement no. 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement no. 141(R), Business Combinations , and other applicable accounting literature.
The FSP is effective for financial statements issued for fiscal years beginning after Dec. 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset should be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements should be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date.
The FSP is available at www.fasb.org/pdf/fsp_fas142-3.pdf.
SEC Chairman Christopher Cox called for new regulation of investment banks in a recent speech at a security traders’ conference in Washington. “The notion embedded in the Gramm-Leach-Bliley Act that investment banks should be able to operate outside of a statutory consolidated supervision regime is no longer tenable in the wake of Bear Stearns,” Cox said. He also commented that “the SEC has focused on the need to change the standards for measuring the adequacy of liquidity in light of the ‘run on the bank’ that Bear [Stearns] experienced.” For a complete copy of Cox’s remarks, visit www.sec.gov/news/speech/2008/spch050708cc.htm.
Reports of suspected money laundering in the residential real estate industry rose sharply between 2002 and 2005 then flattened in 2006 as overall market activity slowed, according to the Financial Crimes Enforcement Network. The report, Suspected Money Laundering in the Residential Real Estate Industry, describes the types of transactions and associated illicit activities that individuals or groups may use to launder money via residential property transactions.
The analysis found that more than 75% of reported suspects had no relationship with the residential real estate industry, and reported collusion with real estate or construction professionals was rare. In some cases, money was laundered through residential real estate to support tax evasion, fraud and identity theft. The schemes often included the use of straw buyers to obtain dozens of mortgages, which were then used to launder illicit funds as loan payments were made.
FinCEN said a major difficulty in identifying mortgage loan fraud connected with money laundering is that the launderer projects an “image of normalcy” by making regular and timely payments to integrate the illicit funds. On the other hand, an attempted fraud-for-profit scheme could result in a loss to the financial institution and is more likely to prompt the filing of a suspicious activity report (SAR).
The analysis is available at www.fincen.gov/MLR_Real_Estate_Industry_SAR_web.pdf.
The FDIC reported a 370% increase in the Deposit Insurance Fund’s contingent liability for anticipated failures in the first quarter of 2008. The banking regulator is also increasing the frequency of special examinations in response to what it calls “changing economic conditions.”
The first quarter Letter to Stakeholders said the amount set aside in the DIF’s Provisions for Insurance Losses increased from $124 million to $583 million at quarter’s end. Assets in liquidation for institutions in receivership increased 148% since the end of the first quarter of 2007 from $331 million to $821 million.
The agency said it is continuing to expand its staff of field examiners to accommodate a greater workload. The FDIC is pursuing targeted reviews of selected issues between regularly scheduled examinations and other activities in cooperation with other federal banking agencies.
The FDIC’s Letter to Stakeholders is available at www.fdic.gov.
The AICPA’s Peer Review Board issued new standards for performing and reporting on peer reviews to promote quality in CPA firms’ accounting and auditing practices. The standards, effective for peer reviews beginning on or after Jan. 1, 2009, are intended to produce simpler, more readable reports that will provide greater transparency to state boards of accountancy, federal agencies such as the Government Accountability Office, and the private sector.
“We have rewritten the standards to be more principles-based,” said Susan Coffey, AICPA senior vice president–member quality and state regulation. “It results in less of a checklist-based process that is intended to be more robust. It focuses the report on the most important issues.”
Letters of comment have been eliminated as well as the old three-tier system of “unmodified,” “modified” and “adverse” grades given to firms by reviewers. The new standards require a simple “pass,” “pass with deficiencies,” or “fail” grade.
The revised standards are available on the AICPA Peer Review Program and CPCAF Peer Review Program Web sites at www.aicpa.org/members/div/practmon/index.htm and www.aicpa.org/centerprp/index.htm, respectively.