The SEC released a long-awaited road map for the transition by U.S. public companies to the use of IFRS. The proposal puts forth milestones that, if met, could lead to the required use of IFRS by U.S. issuers beginning in 2014. The Commission is also seeking comment on two alternative proposals under which U.S. issuers that elect to use IFRS would disclose U.S. GAAP information.

The 165-page document echoes the outlines of the plan unveiled Aug. 27, when the Commission voted unanimously to seek comments on the road map. Under the proposal, the SEC would decide in 2011 whether to proceed with rulemaking to require that U.S. issuers use IFRS beginning in 2014. Limited early use of IFRS, beginning with filings for fiscal years ending on or after Dec. 15, 2009, would be allowed where this would enhance comparability for U.S. investors. Eligibility would be based on both the prevalence of the use of IFRS and the significance of the issuer in a given industry. The SEC estimates that a minimum of 110 companies could be eligible.

Under a staged transition, IFRS filings would begin for large accelerated filers for fiscal years ending on or after Dec. 15, 2014. Remaining accelerated filers would begin IFRS filings for years ending on or after Dec. 15, 2015. Non-accelerated filers, including smaller reporting companies, would begin IFRS filings for years ending on or after Dec. 15, 2016.

The road map spells out two alternative proposals under which U.S. issuers that elect to use IFRS would disclose U.S. GAAP information. Under the first alternative, Proposal A, a U.S. issuer that elects to file IFRS financial statements would provide the reconciling information from U.S. GAAP to IFRS called for under IFRS 1, First-time Adoption of International Financial Reporting Standards, in a footnote to its audited financial statements.

Under the second alternative, Proposal B, U.S. issuers that elect to file IFRS financial statements would provide the reconciling information from U.S. GAAP to IFRS required under IFRS 1 and would also disclose on an annual basis certain unaudited supplemental U.S. GAAP financial information covering a three-year period.

The Commission stressed the importance of uniformly applying IFRS. “Any decision we may take to expand the use of IFRS to U.S. issuers would necessitate our evaluation of whether global developments support the assertion of IFRS as the single set of high-quality globally accepted accounting standards that is applied consistently across companies, industries and countries,” the proposal states.

Comments should be received on or before Feb. 19. The plan’s 90-day comment period likely shifts the potential adoption of the road map to an SEC led by President-elect Barack Obama’s pick to succeed Chairman Christopher Cox, who has said he intends to resign at the end of President Bush’s term.

The road map proposal is available at http://www.sec.gov/rules/proposed/2008/33-8982.pdf.

 The AICPA submitted a comment letter to the SEC about the Commission’s study on mark-tomarket accounting for financial institutions. The AICPA emphasized the importance of transparency in accounting standards and in having FASB be the body to consider the study’s recommendations. “We believe that the FASB, with appropriate oversight by the SEC given its investor protection mandate, is best able to decide what is the most appropriate financial reporting for the capital markets,” the letter reads. The AICPA also encouraged the SEC and FASB to continue their efforts with the International Accounting Standards Board and international regulators to promote converged accounting standards related to fair value for public companies.

The letter touches on the role of private companies. “Once the SEC’s study of fair value is complete, the AICPA encourages the FASB to consider how the results of this study should apply to privately held entities, given that those entities do not have investors that buy and sell securities on a regular basis. Differences in fair value accounting for private entities would be warranted only after deliberate consideration of user needs and the related costs and benefits to key constituents of that financial reporting,” the letter states.

The AICPA suggested in the comment letter that the SEC seek the views of “U.S. depository institution regulators on the topic of fair value to determine if the SEC’s investor protection mandate needs reconciling to the depository institution regulators’ mandate to protect the safety and soundness of the U.S. financial system and the deposit insurance fund.”

The mark-to-market study, mandated by Congress under the Emergency Economic Stabilization Act of 2008, is scheduled to be completed by Jan. 2. The AICPA comment letter is available at http://tinyurl.com/5raqye.

 FASB board members approved FASB Staff Position (FSP) no. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active . The FSP, available at www.fasb.org/pdf/fsp_fas157-3.pdf, amplifies guidance issued jointly by FASB and the SEC on Sept. 30 regarding Statement no. 157 application issues. It provides an example to help illustrate key considerations for determining the fair value of a financial asset.

In early October, the AICPA’s Accounting Standards Executive Committee submitted comments to FASB expressing support for the FSP, stating that there is significant confusion among preparers, auditors and users about how to apply FASB Statement no. 157, Fair Value Measurements, to illiquid securities. The comment letter is available at http://tinyurl.com/6j48zs.

 The major federal banking and thrift regulators extended to certain indirect investments the applicability of their interagency statement, issued Oct. 24, on direct investments in Fannie Mae and Freddie Mac preferred stock.

The change, a response to the Oct. 29 issuance of IRS Revenue Procedure 2008- 64, allows banks, bank holding companies and thrifts to adjust their Sept. 30, 2008, regulatory capital calculations for the tax effects from losses on direct and indirect investments in Fannie Mae and Freddie Mac preferred stock. Essentially, the banking organizations may proceed as if section 301 of the Emergency Economic Stabilization Act of 2008 and Revenue Procedure 2008-64 had been issued in the quarter ending Sept. 30, 2008.

Revenue Procedure 2008-64 allows banking organizations, for tax purposes, to treat gains and losses on certain indirect investments in Fannie Mae and Freddie Mac preferred stock as ordinary rather than capital. Institutions that have already filed reports for the quarter ending Sept. 30, 2008, may file amended reports.

The change was issued jointly by the Federal Reserve (www.federalreserve.gov), the FDIC (www.fdic.gov), the Office of the Comptroller of the Currency (www.occ.treas.gov) and the Office of Thrift Supervision (www.ots.treas.gov).

 The SEC’s Office of the Chief Accountant (OCA) provided guidance on valuing perpetual preferred securities (PPS) under the other-than-temporary impairment model in FASB Statement no. 115, Accounting for Certain Investments in Debt and Equity Securities. In an Oct. 14 letter to FASB Chairman Robert H. Herz, the OCA said that it would not object to an issuer, for impairment tests in filings subsequent to the date of the letter, applying an impairment model (including an anticipated recovery period) similar to a debt security. The letter added that the OCA would not object to this treatment provided there has been no evidence of deterioration in credit of the issuer. Further, the OCA would expect an issuer to provide adequate disclosure about its PPS holdings in situations where the cost exceeds the current fair value as required by FASB Staff Position nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.

The letter also noted that it represents “an intermediate step” and that the OCA has asked FASB to “expeditiously address issues that have arisen in the application of the OTTI model in Statement 115.” The complete letter is available at www.sec.gov/info/accountants/staffletters/fasb101408.pdf.

 The maximum insurance benefit for participants in underfunded pension plans terminating in 2009 is $54,000 per year for those who retire at age 65, up from $51,750 for 2008, the Pension Benefit Guaranty Corporation (PBGC) announced. The amount is higher for those who retire later and lower for those who retire earlier or elect survivor benefits (see chart at http://tinyurl.com/5r5vvx). If a pension plan terminates in 2009 but a participant does not begin collecting benefits until a future year, the 2009 maximum insurance limits still apply. The Pension Protection Act of 2006 sets the maximum benefit payable at the legal limits in force on the date of the plan sponsor’s bankruptcy and not on the date of plan termination.

More information is available at www.pbgc.gov.

 The Financial Crimes Enforcement Network (FinCEN) said Magnetic Media filers must have transitioned to BSA Electronic Filing (E-Filing) by Dec. 31.

The Web-based BSA E-Filing system is user-ID and password-protected and does not require storage media such as tapes and disks to submit Bank Secrecy Act (BSA) reports. The system supports the filing of both single and multiple BSA reports and uses the same file format as the Magnetic Media Program. Reporting institutions also will be able to file a wide range of BSA forms faster and obtain a quicker receipt of acknowledgements.

FinCEN is working with the IRS to ensure a smooth transition. Financial institutions may register for BSA E-Filing at any time. Details on registration and an overview of the system are available at http://bsaefiling.fincen.treas.gov. Filers may also contact the BSA E-Filing Help Desk at 1-888-827-2778 (option 6) from 8 a.m. to 6 p.m. ET, Monday through Friday.

 The International Federation of Accountants’ Professional Accountants in Business Committee conducted a survey about the development of financial and nonfinancial performance measurement and reporting structures in various publicsector (government) entities around the world. The results, contained in the information paper Developments in Performance Measurement Structures in Public Sector Entities, will help professional accountants in business, and others who work in the public sector, in evaluating and further improving their own financial and nonfinancial performance measurement structures. The full report can be downloaded free from the IFAC online bookstore at www.ifac.org/store.


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