Highlights

The Treasury Department and the IRS proposed amendments to Circular 230, which governs tax professionals practicing before the IRS ( www.irs.gov/newsroom/article/0,,id=154248,00.html). The revisions would modify the definition of practice, eligibility for enrollment as an agent, unenrolled practice and the rules concerning contingent fees, conflicts of interest, standards with respect to tax returns and documents, affidavits and other papers, sanctions, discovery, publicity and appeals. Comments are due April 7, 2006.

An AICPA special task force of CPAs from firms and industry and regulators released recommendations to enhance the transparency of the Institute’s peer review programs ( www.aicpa.org/transparency). Chief among them were proposals to provide state boards of accountancy with adverse or second consecutive modified reports on firms receiving them, to require that peer review reports be written in “plain English,” to publicly report on the peer review programs’ oversight process, to make peer review a condition of licensure in all states, to recruit high-quality peer reviewers and to permit all AICPA member firms to post their review results in the Institute’s public file.

FASB issued Statement of Financial Accounting Standards no. 155, Accounting for Certain Hybrid Financial Instruments, which amends FASB Statement nos. 133, Accounting for Derivative Instruments and Hedging Activities, and 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

The new guidance permits remeasurement at fair value of any hybrid financial instrument containing a derivative that otherwise would have to be accounted for separately ( www.fasb.org/pdf/fas155.pdf). The statement (see Official Releases, page 96) is effective for all financial instruments acquired or issued during an entity’s first fiscal year beginning after September 15, 2006.

The Governmental Accounting Standards Board published proposed guidance on how an employer or defined benefit other postemployment benefit (OPEB) plan should report payments it receives under Medicare’s Part D prescription drug coverage ( www.gasb.org). Comments are due April 17, 2006.

The AICPA Professional Ethics Executive Committee adopted a Conceptual Framework for AICPA Independence Standards and a related revision to Interpretation 101-1 under Rule 101, Independence, of the Code of Professional Conduct. The committee also adopted revisions to Ethics Interpretation 501-1, “Response to Requests by Clients and Former Clients for Records under Rule 501, Acts Discreditable,” that provides guidance on the ethical responsibilities of members regarding requests for client records or other documents that are in their custody or control ( www.aicpa.org/members/div/ethics; see also Official Releases, page 96).

The AICPA Employee Benefit Plan Audit Quality Center issued Obtaining Quality Employee Benefit Plan Audit Services: The Request for Proposal and Auditor Evaluation Process, a tool to help plan sponsors and other stakeholders hire qualified auditors ( www.aicpa.org/EBPAQC). The document explains how to prepare a request for proposal and evaluate responses to it.

Leaders of accounting organizations from around the world, including AICPA President and CEO Barry C. Melancon, gathered recently in London at the International Federation of Accountants’ (IFAC) invitation to discuss improving the quality of governments’ financial reporting and financial management ( www.ifac.org). The participants agreed to encourage governments to adopt IFAC’s International Public Sector Accounting Standards. “We are pleased that the world accountancy body is approaching this issue in a manner consistent with GAO Comptroller General David Walker’s focus in the United States,” Melancon said.

The AICPA expressed concern to the California State Board of Accountancy that its new practice privilege requirements for out-of-state CPAs are burdensome ( www.aicpa.org/download/news/2006/AICPA_Practice). The Institute is working with the California Society of CPAs and the state board to resolve related issues. Information on this and other state licensing requirements is available at www.aicpa.org/statelicensing.

The SEC and the Public Company Accounting Oversight Board (PCAOB) are sponsoring a roundtable on May 10, 2006, for issuers, auditors, investors and others to discuss their second-year experiences with the reporting and auditing requirements of Sarbanes-Oxley Act provisions on internal control over financial reporting. The SEC and PCAOB also are requesting written feedback by May 1, 2006, on lessons learned in implementing those requirements ( www.sec.gov/news/press/2006-22.htm).

The Institute submitted comments to Congress questioning a certain provision in the Tax Relief Act of 2005 (HR 4297; http://tax.aicpa.org). The Institute opposed the bill’s “more likely than not” standard for return positions and its codification of the “economic substance” doctrine.

The IRS made it simpler for businesses to request an extension of their tax return filing deadline ( www.irs.gov/newsroom/article/0,,id=154554,00.html). Taxpayers who previously filed extension forms 8800, 8736, 7004 and 2758 now will have to file only revised form 7004.