Highlights


  

 

FASB tentatively approved a one-year delay in the effective date for FIN 48, Accounting for Uncertainty in Income Taxes, for private enterprises, including not-for-profit organizations.

Acting on a request from the Private Company Financial Reporting Committee for a deferral, the FASB board is seeking public comment on a plan to delay the effective date for all nonpublic entities to fiscal years beginning after Dec. 15, 2007. FASB board members agreed to take comments for 30 days on the deferral. A proposed FASB staff position had not yet been released by late November.

FIN 48 took effect for fiscal years beginning after Dec. 15, 2006. Because many private companies are not required to file interim financial statements, private companies generally had until the end of the first year of adoption to comply, unless they had an earlier contractual reporting requirement, such as debt covenant calculations.

The deferral would allow private companies that start their fiscal year after Dec. 15, 2007, (typically Jan. 1, 2008) to adopt FIN 48 in 2008 when they prepare that year’s financials. Without the postponement, private companies would have had to comply during 2007.

FASB reaffirmed its opposition to a blanket deferral of Statement no. 157, Fair Value Measurements, while agreeing to provide a one-year deferral for nonfinancial assets and liabilities that are not carried at fair value on a recurring basis.

For fiscal years beginning after Nov. 15, 2007, companies will be required to implement the standard for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis in financial statements. An exposure draft will be issued for comment on the partial deferral.

The SEC approved rule amendments that will allow financial statements from foreign issuers listed on U.S. markets to be accepted without reconciliation to U.S. GAAP if they are prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The rule amendments will take effect 60 days after publication in the Federal Register and apply to financial statements covering years ended after Nov. 15, 2007.

Financial Accounting Foundation Chairman Robert Denham and FASB Chairman Robert Herz, in a comment letter to the SEC, voiced opposition to allowing U.S. companies an extended period of choice between U.S. GAAP and International Financial Reporting Standards (IFRS). Such choice would result in a “two-GAAP system that creates unnecessary complexity for investors and other users of financial information,” Denham and Herz wrote. “Permitting choice would add to the overall complexity of our reporting system.”

The chairmen suggested moving U.S. public companies to an improved version of IFRS. The letter was a response to an SEC concept release that proposes allowing U.S. issuers to use IFRS as an alternative to GAAP. The letter is available at http://fasb.org/FASB_FAF_Response_SEC_Releases_msw.pdf.

The AICPA and the U.S. Small Business Administration signed a strategic alliance on Nov. 1 that will provide CPAs with greater access to SBA programs and its nationwide network. The purpose of the SBA is to aid, counsel and protect small business interests as well as the public interest, a mission that SBA Administrator Steven Preston said dovetails with the role of CPAs.

“The small business community in this country is not only essential, it is the primary driving force in our economy,” Preston said in a news release. “To have a national partnership with a group like the AICPA is incredibly important because when a small business owner is looking for answers, when they are looking for someone to trust, they are really in your hands as CPAs.”

As AICPA members serve their clients, they will be able to draw more easily upon SBA resources to help clients finance startups, expansions and recovery from natural disasters. The alliance will enable firms to work more closely with SBA resource centers and offices for the benefit of their small business clients. About two-thirds of the AICPA’s 44,000 member firms are sole proprietors.

More information is available at www.sba.gov.

SEC Chairman Christopher Cox focused on timetables for implementation of interactive data initiatives during a week of discussions with securities regulators from Japan, China, Korea, Canada and Australia. Cox did not comment publicly on when the SEC might mandate XBRL filings. Other countries provided status reports including:

Japan. All public companies will be required to report their full financial statements in XBRL beginning with quarterly reporting in the second quarter of 2008.

China. The first country to mandate XBRL reporting, China is currently requiring interactive data filing for the full financial statements of all listed companies in quarterly, half-year and annual reports under rules of both the CSRC and the Shanghai Stock Exchange.

Korea. Beginning in October 2007, all publicly held companies are required to file financial statements using XBRL on the electronic filing system of the Korean Financial Supervisory Commission. The system allows interested non-Korean-speaking investors to view and analyze a company’s financial statements in English.

Canada. The Canadian Securities Administrators began a voluntary XBRL filing program in 2007, under which issuers can voluntarily file financial statements in XBRL format.

Australia. Australia’s implementation of interactive data for financial reporting is scheduled for mid-2010, with pilots and proof-of-concepts beginning in 2008.

The AICPA endorsed legislation that would create a uniform national standard for state withholding of nonresident income tax, which would be especially helpful to small businesses, as well as larger ones. The AICPA statement outlining difficulties businesses face was submitted to the House Judiciary Subcommittee on Commercial and Administrative Law for its Nov. 1 hearing on the Mobile Workforce State Income Tax Fairness and Simplification Act of 2007.

Businesses and accounting firms do a great deal of business across state lines and many businesses and CPAs are negatively affected by nonresident income tax withholding laws, said James Metzler, AICPA vice president–Small Firm Interests. “We need a simple and uniform system governing how states apply taxes to nonresidents doing business in their states. Recordkeeping can be voluminous under the current regulatory scheme,” he said.

AICPA members have an important role to play in the official measurement of the American economy by responding to the 2007 Economic Census, according to Thomas Mesenbourg Jr., associate director for economic programs of the U.S. Census Bureau. More than 4 million U.S. businesses were to have received census forms in December. In a letter to AICPA President and CEO Barry Melancon, Mesenbourg emphasized the importance of timely and accurate data to effective public policy and, ultimately, to the AICPA and its members and encouraged AICPA members to return their forms by the legal deadline of Feb. 12. To learn more about the Economic Census, visit http://business.census.gov. The site contains information and tips on how to use Census data to assess and grow business operations and has links to sample forms.

The major federal banking regulators released a report to Congress detailing progress those agencies have made in eliminating outdated, unnecessary and overly burdensome regulations.

The report, issued by member agencies of the Federal Financial Institutions Examination Council, examines the easing of requirements for regulated institutions to file reports on currency transactions and suspicious activities under the Bank Secrecy Act and streamlining customer identification requirements under the USA Patriot Act.

The agencies address numerous issues, including regulations on the accounting treatment of fees for international loans and the application of various provisions of the Sarbanes-Oxley Act to different types of financial institutions. The report, issued jointly by the Federal Reserve, the FDIC, National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision, is available at www.ots.treas.gov/
docs/4/481016.pdf
.

The SEC, with three other regulatory organizations, proposed changes to strengthen the institutional framework of the International Accounting Standards Committee (IASC) Foundation, the parent organization of the International Accounting Standards Board (IASB). The European Commission, Financial Services Agency of Japan, International Organization of Securities Commissions and the (U.S.) SEC proposed to use the IASC’s 2008 constitution review to put forward changes to strengthen the foundation’s governance framework, while emphasizing the continued importance of an independent standard-setting process.

Central to this effort is the establishment of a new monitoring body within the governance structure of the IASC Foundation to reinforce the existing public interest oversight function of the IASC Foundation trustees. One key objective is to have the monitoring body meet regularly with IASC Foundation trustees to discuss, review and comment on the IASB’s work program.

The monitoring body would, together with the IASC Foundation trustees and in consultation with the trustee appointments advisory group, participate in the selection of trustees. The monitoring body would also be responsible for the final approval of trustee nominees and would have the opportunity to review the trustees’ procedures for overseeing the standard-setting process and ensuring the IASB’s proper funding. To see the complete statement, visit www.sec.gov/news/press/2007/2007-226.htm.

The U.S. Chamber of Commerce released an online survey of 177 members showing that, despite recent reforms, Sarbanes-Oxley (SOX) section 404 disproportionately burdens small businesses. The study found that more than 83% of respondents have already engaged auditors with respect to SOX 404(a) and more than 58% have done so with respect to SOX 404(b).

The study also found that more than half of the companies responding with less than $75 million in market value will spend more than 3% of net income on SOX 404(a). Sixty-three percent anticipated a cost increase in the next year due to compliance with 404(a) and 404(b). Finally, more than 58% of the respondents believed that SOX 404 will not help detect and prevent fraud. To download a copy of the study, visit www.uschamber.com/publications/reports/0711soxsurvey.htm.

In response to the survey, the Center for Audit Quality issued a statement noting that the experience of the past several years suggests that SOX 404 has provided significant benefits to investors, companies and the capital markets. The CAQ’s view is that any adjustments in section 404 implementation to reduce costs can and should be accomplished without exposing investors to new risks and must strike the right balance between that and making the audit more effective and more efficient.

IFAC celebrated its 30th anniversary during World Accountancy Week, Dec. 2–8. On Dec. 4, a forum in New York City organized around the theme “Government, the Accountancy Profession and the Public Trust: Current Initiatives and Future Challenges” helped raise awareness of the valuable role that professional accountants play in contributing to economic growth and development worldwide. As part of this forum, former AICPA Chairman and IFAC Deputy President Robert Bunting moderated a discussion on governance, oversight and business growth. Other prominent speakers included representatives of government, standard-setting bodies, regulators, accounting firms and public policy organizations. AICPA President and CEO Barry Melancon attended the event representing the Institute, which is a member body of IFAC.

For more information, go to www.ifac.or .

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