Financial reporting

  The AICPA’s Financial Reporting Executive Committee (FinREC) issued a working draft of the AICPA Accounting and Valuation Guide Testing Goodwill for Impairment. The guide provides nonauthoritative guidance and illustrations for valuation specialists, preparers of financial statements, and independent auditors regarding goodwill impairment testing. While the guide includes some guidance from FASB Accounting Standards Update (ASU) no. 2011-08, Testing Goodwill for Impairment (issued in September), it does not provide significant task force commentary or task force-prepared example scenarios of the qualitative assessment framework provided therein.


Interested parties are encouraged to review the working draft and submit their informal feedback on the guide as well as share their thoughts regarding the need for additional implementation guidance on ASU no. 2011-08. Comments are due March 15.


The working draft of the guide and questions regarding the need for additional guidance on ASU no. 2011-08 are available at FinREC expects to issue this month a working draft of the revised AICPA Guide Assets Acquired in a Business Combination to Be Used in Research and Development Activities.



  FASB issued two Proposed Accounting Standards Updates (ASUs), one that the board said would improve and converge financial reporting by setting forth consistent criteria for determining whether an entity is an investment company and a second that would require an entity that meets certain criteria to measure its investment properties at fair value.


FASB recommends that stakeholders review the exposure drafts concurrently. Comments on both proposals are due Jan. 5.


The board said the first proposed ASU, Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, is a result of joint efforts with the International Accounting Standards Board (IASB) to develop consistent criteria for determining whether an entity is an investment company. FASB said that, under long-standing U.S. GAAP, investment companies carry all of their investments at fair value, even if they hold a controlling interest in another company. The proposal would amend the guidance in Topic 946 for determining whether an entity is an investment company. The ED is available at


The proposal clarifies that an entity that invests in real estate properties and meets the criteria to be an investment property entity under the simultaneously released Proposed ASU, Real Estate—Investment Property Entities (Topic 973), would not be an investment company.


The primary changes in the Investment Companies ED relate to which entities would be considered investment companies as well as certain disclosure and presentation requirements. The ED says the proposed amendments would improve the comparability between entities that meet the criteria to be investment companies under U.S. GAAP and those that meet the criteria to be investment entities under the IASB’s proposed amendments to IFRS. The IASB issued its proposal, Investment Entities, on Aug. 25. The IASB’s ED is available at Comments are also due Jan. 5.


In addition to the changes to the criteria for determining whether an entity is an investment company, FASB also proposed that an investment company consolidate another investment company if it holds a controlling financial interest in the entity.


The second Proposed ASU, Real Estate—Investment Property Entities (Topic 973), would require an entity that meets certain criteria to measure its investment properties at fair value, rather than to apply lease accounting to each individual lease. The proposed amendments also would introduce additional presentation and disclosure requirements for an investment property entity.


FASB said this ED, which is available at, is a result of its efforts to align the scope of entities that would apply the proposed lessor accounting model under U.S. GAAP and IFRS and to address the diversity in practice about the accounting by real estate entities.


FASB said that, as part of the FASB and IASB joint project on accounting for leases, the IASB decided that a lessor of an investment property would not be required to apply the proposed lessor accounting requirements in the IASB’s August 2010 ED, Leases, if the lessor measures its investment properties at fair value by electing the fair value model under IAS (International Accounting Standard) 40, Investment Property. Unlike IFRS, FASB said U.S. GAAP does not contain specific accounting requirements for investment properties. As a result, an entity that invests in real estate properties but is not an investment company is required to measure its real estate properties at cost under Topic 360, Property, Plant, and Equipment, and account for the leases separately. In response to consistent investor input, FASB said it decided to prescribe the circumstances when fair value would be required, rather than introduce an optional accounting practice into U.S. GAAP.


FASB said the effective date for each proposal will be determined after the board considers feedback. The proposed amendments would be effective for interim and annual reporting periods in fiscal years that begin on or after the effective date. Early adoption would be prohibited.



  FASB issued a Proposed Accounting Standards Update (ASU) that would make certain technical corrections to the FASB Accounting Standards Codification (ASC). The comment period closed Dec. 13.


FASB said it periodically updates the ASC to make technical corrections. The board said the amendments included in the Proposed ASU, Technical Corrections, cover a wide range of ASC topics and are generally nonsubstantive in nature. Many of the proposed amendments update terminology to conform with Topic 820, Fair Value Measurement. The board said in a press release that it does not anticipate that the amendments in the ED would result in pervasive changes to current practice.


The board said the effective date of the amendments will be determined after it considers the feedback on this Proposed ASU.


The ED is available at


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