The March 19, 2009, discussion paper, Leases: Preliminary Views, was issued jointly with the International Accounting Standards Board and responds to concerns raised by investors and other financial statement users about the treatment of lease contracts under IFRS and U.S. GAAP.
Many lease contracts don’t appear on a balance sheet because IFRS and GAAP split leases into two categories—finance leases (capital leases under U.S. GAAP) and operating leases—and only assets and liabilities arising from finance leases are recognized on the balance sheet. For an operating lease, the lessee simply recognizes lease payments as an expense over the lease term. The different accounting treatment of finance and operating leases has resulted in various issues, such as similar transactions being accounted for differently and therefore reducing comparability, the standard setters say.
The Accounting Standards Executive Committee of the AICPA (AcSEC) submitted the comment letter to FASB on July 31, expressing support for improving and converging standards for lease accounting but cautioning against setting a self-imposed deadline of mid-2011 at the risk of “issuing a standard that is incomplete and perhaps not a significant improvement to current practice.”
The comment letter can be found at tinyurl.com/mrkc7b. The discussion paper is available at fasb.org/draft/DP_Leases.pdf. The Institute’s FAQs address what the AICPA is doing in relation to this project, the overall model and key provisions outlined in the discussion paper and how they compare to current U.S. GAAP, and the advantages and disadvantages of the proposed model and how it affects lessees, among other things. It is available under the “In the Spotlight” section on the Accounting Standards page of the Institute’s Web site, at tinyurl.com/lntzkk.
The SEC approved PCAOB rules requiring registered public accounting firms to report certain events. The rules take effect Oct. 12. They implement a provision of the Sarbanes-Oxley Act of 2002 and are the first reporting obligations imposed on registered firms by the board.
Under the rules, certain events that occur on or after Oct. 12, 2009, must be reported on PCAOB Form 3 within 30 days after they occur. If certain events occurred between the time of a firm’s registration application and Oct. 12, the firm must report those events in a special report on Form 3 by Nov. 11. Qualifying events range from administrative matters such as changes in a firm’s contact information to more substantive matters, such as the institution of certain types of legal proceedings against a firm or its personnel.
Firms also must file annual reports on Form 2, with the first annual reports due June 30, 2010. Going forward, all firms that are registered with the board as of March 31 of a particular year must file an annual report covering the 12-month period ending March 31 by June 30 of that year. Annual reports should include information about audit reports issued, disciplinary histories of new personnel and certain information about fees billed to issuer audit clients for various categories of services, among other things.
All firms registered as of March 31 of a given year also must pay an annual fee by July 31 of that year. The amount of the fee had not been determined as of this writing.
The rules also govern the filing of Form 4, an optional form that allows a firm to succeed to the registration status of a predecessor firm without a break in that registration status and without the need to file a new registration application on Form 1, in certain circumstances.
Forms 1, 2, 3 and 4 all must be filed electronically through the board’s Web-based system.
More information and links to detailed rules can be found on the board’s Web site at pcaob.org.