Derivatives standard




Squaring Off on Derivatives

T he derivatives issue is turning Financial Accounting Standards Board Chairman Edmund Jenkins into a regular Norwalk-to-Washington commuter. On October 1, he testified before the House Subcommittee on Capital Markets, Securities and Government-Sponsored Enterprises. And on October 9 he went before the Senate Securities Subcommittee. Each time he defended both the proposed derivatives statement and the due process the FASB uses to reach its conclusions.

At the House hearings, Arthur Levitt, chairman of the Securities and Exchange Commission, joined Jenkins in defending the board. The FASBs revised proposal, developed under the commissions oversight and with the publics active participation, solidifies the accounting for derivatives, he testified.

However, most of the testimony at both hearings was critical of the proposal. For example, the Senate subcommittee heard from William Roberts, CPA, who spoke on behalf of the American Bankers Association. He said the ABA had been extremely uncomfortable joining others in requesting a hearing and noted that the ABA had rarely, if ever, requested congressional hearings on an accounting rule. However, he described the proposal as a very ugly duckling. He continued, My industrys success in achieving a standard that is workable is the same as my Chicago Bears success—0 and 6.

Congressman Richard J. Baker (R-La.), chairman of the House subcommittee, emphasized that the House hearings were not about congressional prescriptions in accounting standards. However, he did not rule out any option, saying the group will see what further actions, if any, may be warranted. Senator Phil Gramm (R-Texas), chairman of the Senate subcommittee, said the last thing he wanted was congressional involvement in the business of setting accounting standards. However, he said, I am concerned about whats happening at the FASB.


Eyeball to eyeball
Meanwhile, the FASB is proceeding with its planned process for the standard. The proposals final comment period ended on October 14. Jenkins said the FASB staff would analyze the comment letters and board members would read all of them. Public meetings of the board would follow. Its still our plan to have a standard out by the end of the year, Jenkins told the Journal. Of course I am concerned that Congress has become involved in this matter, which, I think, is better kept in the private sector.

For up-to-the-minute details, a good source is the FASBs Web site, http://www.fasb.org . Jenkins Senate testimony can be downloaded. CNN ( http://www.cnn.com ) has been covering the issue and posting articles on the Web.


Insurance SOP Approved With Later Date

T he American Institute of CPAs accounting standards executive committee issued a new Statement of Position, Accounting by Insurance and Other Enterprises for Insurance-Related Assessments. This SOP, which applies to all entities subject to guaranty-fund and other insurance-related assessments, provides guidance on determining when an entity should recognize a liability for guaranty-fund and other assessments. (See AcSEC ED Covers Insurance and Other Enterprises , JofA, Feb.97 for more details.)

During the exposure period AcSEC received 24 letters; these commented most significantly on reporting assets and policy surcharges, estimation of the assessment liability, accounting for prospective-premium-based assessments and scope. AcSEC subsequently made two important changes, said AICPA Technical Manager Elaine Lehnert. It added an appendix with three examples illustrating the computation of assessment liabilities. It also moved the effective date ahead a year to make it effective for fiscal years beginning after December 15, 1998. In addition, AcSEC changed the title from the original Accounting by Insurance and Other Enterprises for Guaranty Fund and Certain Other Insurance-Related Assessments. We wanted to make it clear the SOP covers virtually all insurance-related assessments by all entities, said Lehnert.

To order the SOP, call the AICPA order department at 800-862-4272.

Worried About Money



SPONSORED REPORT

How to make the most of a negotiation

Negotiators are made, not born. In this sponsored report, we cover strategies and tactics to help you head into 2017 ready to take on business deals, salary discussions and more.

VIDEO

Will the Affordable Care Act be repealed?

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.

QUIZ

News quiz: Scam email plagues tax professionals—again

Even as the IRS reported on success in reducing tax return identity theft in the 2016 season, the Service also warned tax professionals about yet another email phishing scam. See how much you know about recent news with this short quiz.