FASB issued Accounting Standards Update (ASU) 2009-06 to provide additional implementation guidance on accounting for uncertainty in income taxes and to eliminate the disclosures required by FASB Accounting Standards Codification (ASC) Paragraphs 740-10-50-15(a) through (b) for nonpublic entities, including pass-through and not-for-profit entities.

The new guidance involves requirements under what was previously known as FASB Interpretation no. 48 (FIN 48), which was first effective for fiscal years beginning after Dec. 15, 2006.

Following recommendations by the Private Company Financial Reporting Committee (PCFRC) and others, FASB deferred FIN 48’s effective date for nonpublic entities until annual financial statements for periods beginning after Dec. 15, 2008—effectively beginning in 2009. The PCFRC was formed by the AICPA and FASB to increase private company constituent input in the standard-setting process.

The PCFRC also recommended that FASB exempt private companies from FIN 48. After interviewing stakeholders, FASB declined to exempt private companies and not-for-profit entities from FIN 48 in its entirety. However FASB decided to modify the disclosure requirements for nonpublic entities and provide further guidance for pass-through and not-for-profit entities.

ASU 2009-06 modifies ASC Topic 740 (previously FIN 48) to provide the needed guidance and eliminate certain disclosures for nonpublic entities relating to unrecognized tax benefits. The document is available at tinyurl.com/mgn38j.

The ASU is a new type of FASB release. Effective July 1, 2009, all changes to the codification are communicated through ASUs. ASUs will also be issued for amendments to the SEC content in the codification as well as for editorial changes.

The PCAOB published staff questions and answers about references to authoritative accounting guidance in PCAOB standards.

The series of Q&As serves as a reminder that auditors should look to the FASB Accounting Standards Codification and SEC rules for authoritative U.S. GAAP guidance for SEC registrants, even though PCAOB standards may contain descriptions of and references to U.S. GAAP, according to a statement by the PCAOB. The Q&A series also provides guidance on the auditor’s responsibilities regarding the codification, including situations where the auditor believes an item in the financial statements should be accounted for differently under the codification than under pre-Codification U.S. GAAP, as well as considerations auditors should give to U.S. GAAP references in the standards of the PCAOB when auditing the financial statements of a foreign private issuer prepared in conformity with IFRS, as issued by the International Accounting Standards Board.

The statements contained in the Q&A are not rules of the board, however. They are available at tinyurl.com/msk6d2.

Insured institutions earned $424 million in net operating income in the latest quarter even after a special assessment of $5.5 billion to bolster the DIF, but one-time losses and other items totaling $4.1 billion pulled the industry results into negative territory. Loan-loss provisions were $66.9 billion, an increase of $16.5 billion (32.8%) over the second quarter of 2008. Noninterest expenses were $1.7 billion (1.7%) higher, primarily due to increased FDIC deposit insurance premiums. An increase in noninterest income (up $6.5 billion or 10.6%) helped stem industry losses.

Both the quarterly net charge-off rate and the percentage of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) reached the highest levels registered in the 26 years that insured institutions have reported these data. Insured institutions charged off a record $48.9 billion in uncollectible loans during the quarter, up from $26.4 billion a year earlier, and noncurrent loans and leases increased by $40.4 billion during the second quarter. At the end of June, noncurrent loans and leases totaled $332 billion, or 4.35% of the industry’s total loans and leases.

The number of insured institutions on the “Problem List” (institutions at risk of failing) increased to 416 from 305 at the end of the first quarter. Total assets of “problem” institutions increased from $220.0 billion to $299.8 billion, the highest level since Dec. 31, 1993. This is the largest number of institutions on the list since June 30, 1994, when 434 institutions earned the dubious distinction.

The DIF reserve balance was $42.4 billion at the end of the quarter. After subtracting $32 billion set aside for contingent loss reserves, the DIF balance was $10.4 billion compared with $45.2 billion a year earlier. The reserve ratio stood at 0.22%. FDIC Chairman Sheila Bair noted that the DIF held $22 billion in cash and U.S. Treasury securities at the end of the quarter and has the ability to borrow $500 billion from the Treasury. “A decline in the fund balance does not diminish our ability to protect insured depositors,” she said.

More details about bank earnings and the DIF are available in the Quarterly Banking Profile and the Chief Financial Officer’s (CFO) Report to the Board at www.fdic.gov.

  In the second quarter, the nation’s thrift industry posted its first overall profit since the third quarter of 2007, according to the Office of Thrift Supervision. While the industry nudged slightly into positive territory with $4 million in earnings in the second quarter, troubled assets as a percentage of all industry assets continued to rise, reflecting the nation’s weak job market; the number of problem thrifts continued to rise as well.

Loan-loss provisions of $4.7 billion, though lower than recent quarters, were still the sixth highest on record. Special assessments by the FDIC to bolster the DIF dragged down earnings a further $325 million.

Capital remained solid, with 96.2% of all thrifts, holding 95.9% of industry assets, exceeding “well-capitalized” regulatory standards. Profitability, as measured by return on average assets, was zero percent in the second quarter, an improvement from −0.53% in the previous quarter and −1.43% in the second quarter a year ago. But the number of problem thrifts—those with composite examination ratings of 4 or 5 (with 1 being the best rating on a scale of 1 to 5)—was 40, up from 31 in the previous quarter.

More details, as well as charts and selected indicators, are available at www.ots.treas.gov.

  The federal banking and thrift regulatory agencies issued proposed regulatory capital rule related to FASB’s adoption of Statement no. 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140, and Statement no. 167, Amendments to FASB Interpretation No. 46(R). Beginning in 2010, these accounting standards will change substantively how banking organizations account for many items, including securitized assets, that are currently excluded from these organizations’ balance sheets.

The Federal Reserve, the FDIC, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision issued the joint proposal to better align regulatory capital requirements with the actual risks of certain exposures. Banking organizations affected by the new accounting standards generally will be subject to higher minimum regulatory capital requirements. The proposed regulation, Risk-Based Capital Guidelines; Capital Adequacy Guidelines; Capital Maintenance: Regulatory Capital; Impact of Modifications to Generally Accepted Accounting Principles; Consolidation of Asset-Backed Commercial Paper Programs; and Other Related Issues, was published in the Federal Register on Sept. 15.

The proposal is available at tinyurl.com/n9np83. The comment period ended Oct. 15.

The Pension Benefit Guaranty Corp. (PBGC) released the Pension Insurance Data Book 2008. The report said the number of PBGC-insured single-employer plans was 27,900 at the beginning of 2008, down from a high of 112,200 in 1985. The PBGC insured another 1,500 multiemployer plans. The plans covered 43.9 million participants.

The report said the combined deficit for single-employer and multiple-employer plans was $11 billion at the end of fiscal year 2008, but Acting Director Vince Snowbarger reported to Congress in May that as of March 31, 2009 (halfway through the federal fiscal year), the deficit had mushroomed to $33.5 billion—the largest since the agency was created in 1974.

Additionally, 4,851 plans were hard-frozen. When a plan is hard-frozen, employees will receive the benefits they have earned, but no new benefits will be earned after the date the plan was frozen. Under this scenario, an employee who has spent 20 years at a company and intends to stay for another five years until retirement will not receive additional pension benefits for future work. New employees are not allowed to participate in the pension plan.

The Data Book is available at pbgc.gov/docs/2008databook.pdf. Single copies may be obtained by writing to PBGC Data Book, Room 12108, 1200 K Street NW, Washington, DC 20005-4026. Requests also may be submitted by fax to 202-326-4344 or e-mail to publications@pbgc.gov.

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) published a document to help boards of directors strengthen their oversight of enterprise risks.

The four-page paper, Effective Enterprise Risk Oversight: The Role of the Board of Directors, calls attention to COSO’s Enterprise Risk Management—Integrated Framework (2004) and its definition of ERM.

In emphasizing the critical role boards of directors play in overseeing ERM, it points to the following areas discussed in COSO’s 2004 ERM framework that contribute to board risk oversight:

• Understand the entity’s risk philosophy and concur with the entity’s risk appetite.
• Know the extent to which management has established effective enterprise risk management of the organization.
• Review the entity’s portfolio of risk and consider it against the entity’s risk appetite.
• Be apprised of the most significant risks and whether management is responding appropriately.

The paper can be downloaded at coso.org.

FASB’s proposal is based on input received from users of financial statements. Users requested more information about fair value measurements that use significant unobservable inputs (Level 3 inputs) because of their greater degree of uncertainty and subjectivity. For Level 3 inputs, the board proposed disclosures about any significant effects on fair value measurements if the reporting entity uses reasonably possible alternative inputs.

FASB said the proposal also addresses requests from users for segregating information for different classes of assets and liabilities that are determined based on their nature and risk characteristics and their placement in the fair value hierarchy (Level 1, 2 or 3). The board said users need more robust disclosures about valuation techniques and inputs for both Level 2 and Level 3 measurements because many consider these measurements to be less reliable than Level 1 measurements. 

The ED is available at tinyurl.com/lfhnvg. The comment period ended Oct. 12.

FASB also issued the following three ASC amendments:

• Accounting Standards Update no. 2009-05, Fair Value Measurements and Disclosures (Topic 820)—Measuring Liabilities at Fair Value, which clarifies which techniques must be used in valuing liabilities in certain circumstances. The amendments also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. Also, the amendments clarify that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements.
• Accounting Standards Update no. 2009-03, SEC Update—Amendments to Various Topics Containing SEC Staff Accounting Bulletins, contains technical corrections to various Topics containing SEC Staff Accounting Bulletins to update cross-references to Codification text.
• Accounting Standards Update no. 2009-04, Accounting for Redeemable Equity Instruments: Amendment to Section 480-10-S99, is an update to Section 480-10-S99, Distinguishing Liabilities from Equity, per EITF Topic D-98, Classification and Measurement of Redeemable Securities.

All Accounting Standards Updates are available at tinyurl.com/mjb3aq.

The Accounting and Auditing Policy Committee (AAPC), a permanent committee of the Federal Accounting Standards Advisory Board (FASAB), released two exposure drafts of new Federal Financial Accounting Technical Releases, Implementation Guidance on Asbestos Cleanup Costs Associated with Facilities and Installed Equipment and Implementation Guidance on Cleanup Costs Associated with Equipment.

The first proposed TR, Implementation Guidance on Asbestos Cleanup Costs Associated with Facilities and Installed Equipment, provides additional clarification of SFFAS 6, Accounting for Property, Plant, and Equipment, and Technical Bulletin 2006-1, Recognition and Measurement of Asbestos-Related Cleanup Costs, and a framework for identifying assets containing asbestos, assessing the asset to collect information and/or develop key assumptions in applying acceptable methodologies to estimate asbestos cleanup costs for federal facilities and installed equipment.

The proposed TR, Implementation Guidance on Cleanup Costs Associated with Equipment, addresses cleanup costs associated with equipment as it applies to SFFAS 1, Accounting for Selected Assets and Liabilities, SFFAS 5, Accounting for Liabilities, SFFAS 6 and TR 2, Determining Probable and Reasonably Estimable for Environmental Liabilities in the Federal Government. The guidance focuses on cleanup of hazardous waste associated with equipment and when the cleanup should be recognized as an environmental liability and when it should be expensed as a routine operation. The guidance includes two examples—one example is associated with equipment cleanup when a liability should be recognized, and one is associated with equipment cleanup when the costs should be expensed as routine operations.

This proposed TR provides steps federal entities can follow to ensure consistent, accurate and meaningful application of the standards. The proposed guidance will also help federal entities provide reasonable estimates of cleanup costs associated with the disposal of equipment assets.

Specific questions for respondents are included in the EDs. Comments for each ED are due Dec. 4. The EDs are available at fasab.gov/exposure.html.

The AICPA asked the Federal Trade Commission (FTC) to exempt CPAs from certain provisions of its Red Flags Rule to prevent identity theft that was scheduled to go into effect Nov. 1, 2009.

The Red Flags Rule, which was released Nov. 9, 2007, under the Fair and Accurate Credit Transactions Act of 2003, requires businesses and organizations within its scope to implement a written identity theft prevention program to detect warning signs of identity theft in their day-to-day operations. Enforcement of the rule has been postponed three times since the original Nov. 1, 2008, effective date. 

The rule applies to what it calls “financial institutions” and “creditors.” However, according to the FTC Web site, the definition of “creditor” in the rule is broad, and includes businesses or organizations that regularly provide goods or services first and allow customers to pay later. As examples, the FTC says utilities, health care providers, lawyers, accountants, and other professionals, and telecommunications companies may fall within the definition.

“We are concerned with the potentially broad application of the Red Flags Rule to the accounting profession, and do not believe that there is any reasonably foreseeable risk of identity theft when CPA clients are billed for services rendered,” wrote AICPA President and CEO Barry Melancon in an Aug. 4 letter to the FTC.

Melancon pointed out that CPAs are personally acquainted with their clients and adhere to strict privacy requirements related to identifying information. “We suggest that the likelihood of misrepresentation or theft of one’s identity is so low that the burdens associated with the rules’ requirements outweigh the benefits,” he wrote.

The proposed amendments range from clarification of the measurement of noncontrolling interests in IFRS 3, Business Combinations (as revised in 2008), to changes of wording to clarify the meaning of IFRSs and remove unintended inconsistencies.

Unless otherwise specified, the proposed effective date for the amendments is for annual periods beginning on or after Jan. 1, 2011. Entities would be permitted to adopt them earlier. The proposed effective date for the amendments arising from IFRS 3 and the consequential amendments to the transition requirements of IAS 27, Consolidated and Separate Financial Statements (as amended in 2008), is July 1, 2010.

The ED, Improvements to IFRSs, is available at tinyurl.com/mg5vyx. Comments are due Nov. 24.

Printed copies of Improvements to IFRSs (ISBN 978-1-907026-33-1) are available for approximately $16 (plus shipping), from the IASC Foundation Publications Department at tinyurl.com/lkujmb.

  Representing the AICPA and the National Association of State Boards of Accountancy (NASBA), the International Qualifications Appraisal Board (IQAB) signed a mutual recognition agreement (MRA) with the Institute of Chartered Accountants in New Zealand (NZICA) that is intended to help facilitate the process for U.S. CPAs to be recognized as chartered accountants in New Zealand and vice versa.

The IQAB reviews accounting qualifications of foreign countries, negotiates reciprocity agreements with professional accounting organizations and makes reciprocity recommendations to state boards of accountancy based upon mutual recognition agreements adopted by the IQAB with foreign institutes. Agreements recommended by the IQAB are subject to approval by the boards of the AICPA and NASBA. Both boards have approved the MRA with New Zealand.

In addition to the new agreement with New Zealand, the AICPA and NASBA have mutual recognition agreements with institutes from Canada, Mexico, Ireland and Australia. Applicants from these countries are eligible to take the four-hour International Qualifications Examination (IQEX) as determined by those state boards that recognize the various mutual recognition agreements. In states that choose to recognize the MRA with New Zealand, applicants who receive a passing score on the IQEX exam will be eligible for licensure without sitting for the Uniform CPA Examination.

  The European Commission (EC) published the results of a survey on control structures in audit firms and their consequences on the audit market. The survey found that:

• Ninety percent of respondents believe that the EC should strive to reduce all potential barriers to the entry, growth and survival of audit firms in the international audit market. However, most of the respondents consider that lack of access to external financial capital is not the most important barrier preventing emergence of new players. It would not, therefore, be sufficient simply to change the current rules on the control of audit firms; a comprehensive analysis on a greater number of priorities would be needed. Nevertheless, some respondents do believe that allowing external investment in audit firms can help. For others, however, the risks linked to the external investor model exceed any potential benefits.
• Stakeholders do not consider the current rules essential to retain human capital. However, they are important to protect independence of auditors. If these rules were changed, additional safeguards on independence of auditors would be needed.
• Stakeholders are unhappy about the lack of harmonization of regulatory requirements, in particular on independence rules for auditors and professional qualifications requirements. Multiple registration requirements to provide cross-border services as well as lack of harmonization of liability limitations for auditors were also seen as important barriers.
• Some respondents would favor new governance rules for audit firms, as well as measures to address the lack of recognition of the actual audit capabilities of firms other than the four largest networks. More frequent and transparent tender procedures, and the involvement of companies’ audit committees and of shareholders in the tendering process, would be helpful in this respect.
• Respondents emphasized the need for action at the EU level while also acknowledging that any action should take into account the global dimension of the issues.

Additional information is available at tinyurl.com/mzn3af.

The SBA’s Microloan program provides microlenders with up to $3.5 million in low-cost loans to finance lending to small businesses. The SBA’s interest rate to microlenders is based on the five-year Treasury rate, with adjustments tied to a microlender’s average loan size. Microlenders use the SBA funding to provide loans of up to $35,000 to entrepreneurs, which can be used for working capital and acquisition of materials, supplies, furniture, fixtures and equipment.

Information for lenders interested in participating in the Microloan program is available at tinyurl.com/n2sses. Information for entrepreneurs is available at tinyurl.com/2x4m24.

  The SBA launched an online training course it says will help strengthen access to contracting opportunities for small businesses, including those owned by women, minorities, disadvantaged individuals and veterans. The free training course, “Recovery Act Opportunities: How to Win Federal Contracts,” is part of a federal governmentwide initiative being led by the SBA and the Department of Commerce.

The course provides information about the federal marketplace, contract rules and how to sell to the government and where to find contract and Recovery Act opportunities. It also provides an overview of the federal procurement process.

The course is available at sba.gov/fedcontractingtraining. It is one of more than 24 online tutorials offered by the SBA. To access all courses, go to sba.gov and click on “Free Online Training” in the left rail.

Kroeker had been acting chief accountant since January 2009 and guided the day-to-day operations of the SEC’s Office of the Chief Accountant. He was staff director of the SEC’s congressionally mandated study of fair value accounting standards.

He joined the SEC as deputy chief accountant in February 2007 from Deloitte and Touche LLP, where he had been a partner in the firm’s National Office Accounting Services Group. At Deloitte, he was responsible for providing consultation and support regarding the implementation, application, communication and development of accounting standards, including disclosure and reporting matters.

  Deborah Matz became the eighth chairman of the National Credit Union Administration (NCUA) on Aug. 24. Her six-year term on the three-member board runs until April 10, 2015.

The NCUA is the independent federal agency that regulates the charters of and supervises federal credit unions. The NCUA also manages the National Credit Union Share Insurance Fund, which insures the deposits of nearly 90 million account holders in all federal credit unions and the majority of state-chartered credit unions.