New Deloitte Audit Committee Brief on FEI 'Top Challenges'
In our News Story of 29 Dec 2007, we posted the list of the Top Challenges for Financial Executives for 2008, prepared by the CEO of Financial Executives International. Number two on the list was convergence of US GAAP and International Financial Reporting Standards: "Are the US markets ready for principles-based standards?" Deloitte has prepared the 2008 Special Edition of the Audit Committee Brief (PDF 120k, April 2008) to summarise each of the 11 FEI challenges and provide resources relevant to each topic.
A Roadmap to the Accounting and Regulatory Aspects of Postretirement Benefits
Deloitte & Touche LLP (United States) has published A Roadmap to the Accounting and Regulatory Aspects of Postretirement Benefits (PDF 1,521k, 188 pages). This publication summarises the common types of postretirement benefits, their funding requirements, and associated statutory and accounting guidance in the United States. An appendix contains a comparison of the accounting for postretirement benefits under US GAAP and IFRSs. The book is divided as follows:
Benefits and Plans. This section notes that postretirement benefits can be classified in various ways, including (1) defined benefit versus defined contribution and (2) pension benefits versus other postretirement benefits. This section discusses the various plans, distinguishing between them for tax, regulatory, and accounting purposes.
Funding/Management of Plan Assets. The funding of postretirement benefits continues to garner media attention because of concerns over the Pension Benefit Guaranty Corporation's deficit and the ability of employers to make good on their pension and other postretirement obligations. This section discusses the funding and management of defined contribution plans and defined benefit plans, including Internal Revenue Service and Employee Retirement Income Security Act considerations.
Statutory Considerations. A substantial body of regulation governs the funding and management of postretirement plans. Consideration should be given to these regulations in plan design as well as in any subsequent plan amendments or changes. These regulatory requirements also should be considered in determining the appropriate accounting for the benefit obligations. This section summarises the key reference points for the regulatory requirements, including the Pension Protection Act of 2006, and the regulatory processes that underlie the US system of benefit regulation.
Accounting. This section outlines the existing accounting model, including recently issued standards and implementation guidance. Also highlighted are the SEC staff's views on certain aspects of postretirement benefit accounting.
Accounting for Business Combinations, Goodwill, and Other Intangible Assets
Deloitte & Touche LLP (United States) has published Accounting for Business Combinations, Goodwill, and Other Intangible Assets: A Roadmap to Applying Statements 141 and 142 (PDF 884k, May 2007, 236 pages). This publication is a single source for both the requirements of FASB Statement No. 141 Business Combinations and No. 142 Goodwill and Other Intangible Assets, and available interpretive guidance. Where appropriate, Deloitte & Touche LLP interpretive views are included. In addition, it compares Statement 141 to IFRS 3 Business Combinations, and to an Exposure Draft of a proposed FASB Statement issued in June 2005 that is intended to replace Statement 141 (the IASB issued a nearly identical exposure draft at the same time).
2007 Summary of International Public Sector Accounting Standards
Deloitte's 2007 IPSAS Summary Booklet (PDF 472k, 1 November 2007, 36 pages). Summaries of IPSASs 1 to 24 plus two exposure drafts outstanding at the time of publication.
Uncertainty in Income Taxes: A Roadmap to Applying Interpretation 48
Deloitte & Touche LLP (United States) has published Uncertainty in Income Taxes: A Roadmap to Applying Interpretation 48 (PDF 416k, 75 pages, March 2007). FIN 48, which is effective for fiscal years beginning after 15 December 2006, introduces a new approach that significantly changes how entities recognise and measure tax benefits associated with tax positions and disclose related uncertainties in their financial statements.
Principles in FASB Interpretation 48
A tax position is a filing position that an entity has taken or expects to take on its tax return. Examples include a decision not to file a tax return, an allocation of income between jurisdictions, and a decision to exclude income from a tax return.
An entity cannot recognise a tax benefit in its financial statements unless it concludes that it is 'more likely than not' that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. In that evaluation, the entity must assume that the position:
(1) will be examined by a taxing authority that has full knowledge of all relevant information, and
(2) will be resolved in the court of last resort.
This publication provides guidance on applying FIN 48. While convergence of US GAAP and International Financial Reporting Standards (IFRSs) is a high priority of both FASB and the IASB, the requirements of FIN 48 differ in several respects from those of IFRSs, including differences in when a tax liability is recognised and how it is measured. Deloitte's FIN 48 book includes a comparison of the requirements of FIN 48 and IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
Innovation in Emerging Markets: Strategies for Achieving Commercial Success
In recent years, global manufacturers have been enticed by the enormous business potential presented by emerging markets. But what is required to succeed in these markets whose cultures, customer requirements, labour practices, and regulatory regimes are very different than those in developed markets? How are companies adjusting their product offerings, human resource strategies, and supply chains? A new publication from Deloitte Innovation in Emerging Markets: Strategies for Achieving Commercial Success identifies five challenges that companies must innovatively tackle to achieve success in emerging markets:
Build new value propositions to deliver different product offerings that meet the unique needs of emerging market customers. In many cases, this will be at dramatically lower price points than in developed markets.
Globalise research and development by locating R&D facilities in emerging markets to acquire deeper customer knowledge, and to build, market and distribute tailored products.
Tailor talent management strategies to the unique needs of employees in emerging markets, rethinking how to effectively recruit, develop, deploy, and connect people.
Master the complexity of global value chains to provide autonomy at the local level, while leveraging the strengths of headquarters, including governance and management know-how.
Build risk management capabilities to effectively detect, correct and manage the unique profile of risks presented by emerging markets, such as the protection of intellectual property.
The research report is based on a global survey of more than 400 executives, as well as in-depth interviews with senior executives at several global manufacturers. Learn more by downloading Innovation in Emerging Markets (PDF 647k, 32 pages, July 2006).
2006 Global Venture Capital Survey
Deloitte's 2006 Global Venture Capital Survey (PDF 1,389k, 36 pages, July 2006) was conducted in association with Venture Capital Associations in the Americas, Asia Pacific and Europe, Middle East and Africa.
Over half of all the respondents come from outside the United States, which gives some indication of the growing profile of global VC communities.
Over half of all respondents – 53% of those in the United States and 58% non-US – are set on global expansion in the coming year.
VCs are increasingly viewing strategic alliances and international interdependence as a key method of globalisation. 75% of non-US and 71% of US respondents viewed these as key to success.
The report is based on 505 responses from general partners of venture capital companies with assets under management ranging from less than US$100 million to greater than $1 billion. Of the 505 total respondents, 279 were based in the Americas, 140 in Europe, Middle East and Africa and 86 in Asia Pacific.
Managing in the Face of Exchange-Rate Uncertainty
Deloitte Research has published Managing in the Face of Exchange-Rate Uncertainty: A Case for Operational Hedging (PDF 167k, June 2006, 8 pages). This report examines the risk exposures of large and long-term shifts in currency values to future business cash flow, especially changes to the US dollar vs Asian currencies. The report identifies operational hedging as a means for companies to create flexibility in their operating models. In contrast to financial hedging, operational hedging provides companies a broader range of options to manage long-term exchange rate risks and sustain future cash flows.
Operational hedging is a strategy designed to manage risks through operational means. It provides companies with flexibility in their supply chains, financial positions, distribution patterns and market-facing activities by allowing dynamic adjustments in the locations used to manufacture, source, and sell. When deployed carefully, such flexibility can help to reduce the impact of large and long-term shifts in currency
values on costs and revenues.
A Roadmap to Fair Value Measurements under FAS 123 Share-Based Payment - Second Edition
Deloitte & Touche (USA) has updated its book of guidance on FASB Statement No. 123(R) Share-Based Payment: A Roadmap to Applying the Fair Value Guidance to Share-Based Payment Awards (PDF 2335k). This second edition reflects all authoritative guidance on FAS 123(R) issued as of 28 April 2006. It includes over 60 new questions and answers, particularly in the areas of earnings per share, income tax accounting, and liability classification. Our interpretations incorporate the views in SEC Staff Accounting Bulletin Topic 14 "Share-Based Payment" (SAB 107), as well as subsequent clarifications of EITF Topic No. D-98 "Classification and Measurement of Redeemable Securities" (dealing with mezzanine equity treatment). The publication contains other resource materials, including a GAAP accounting and disclosure checklist. Note that while FAS 123 is similar to IFRS 2 Share-based Payment, there are some measurement differences that are Described Here.
2005 Survey of Year-end Pension and Postretirement Benefit Plan Assumptions
Deloitte Consulting LLP's Human Capital practice has published its survey of year-end pension and postretirement benefit plan assumptions. The survey provides insights to publicly traded corporations and their chief financial officers about the economic assumptions used in preparing the 2004 year-end pension (Statement of Financial Accounting Standards No. 87) and other postretirement employee benefit plan (SFAS No.106) accruals and disclosures of 291 Fortune 500 companies. The survey shows how those companies selected financial assumptions and can be used as a benchmark for similarly situated companies. Click to Download the Study (PDF 618k, October 2005, 13 pages).
Sarbanes-Oxley Section 404: Compliance Challenges for Foreign Private Issuers
In the United States, public companies large and small have laboured over the requirements of section 404 of the Sarbanes-Oxley Act. Accelerated filers with international operations are now finalising their assessment of internal control over financial reporting. Foreign Private Issuers (FPIs), beginning with year-ends on or after 15 July 2005, are required to include an internal control report from management in their annual report. Although the SEC has delayed the effective date of section 404 several times, Deloitte highly recommends that FPIs do not change the timing or scope of their section 404 work. Deloitte's publication, Sarbanes-Oxley Section 404: Compliance Challenges for Foreign Private Issuers (PDF 287k, 10 pages, February 2005), summarises the experiences of FPIs and highlights key challenges that your company may face as part of your section 404 readiness activities.
Under Control: Sustaining Compliance with Sarbanes-Oxley in Year Two and Beyond
In response to a compelling need to bring more order, predictability, and value to section 404 compliance, Deloitte & Touche LLP (United States) has released a new publication, Under Control: Sustaining Compliance with Sarbanes-Oxley in Year Two and Beyond. Under Control provides a straightforward discussion of the essential characteristics of sustainability, as well as plain-English guidance for deriving long-term value from internal control programs. The document clearly and simply explains key concepts, provides practical advice, and analyses critical shortcomings that many companies experienced in their first-year efforts. Click to Download Under Control (PDF 409k, February 2005, 20 pages).
Taking Control: A Guide to Compliance with Section 404 of the Sarbanes-Oxley Act of 2002
Taking Control is a comprehensive guide to compliance with Section 404 of the Sarbanes Oxley Act. That section requires a registered company's management to assess and report on the effectiveness of the company's internal control over financial reporting, and requires auditors to attest to and report on management's assessment. Section 404 applies to "accelerated filers" effective for financial years ending on or after 15 November 2004. The date is deferred until years ending on or after 15 July 2005 for foreign (non-US) registrants and non-accelerated filers. Taking Control targets non-accelerated filers and foreign private issuers that may be just getting their work under way, as well as companies currently involved in their section 404 projects. Click to download Taking Control (PDF 397k, 43 pages, August 2004).
Sarbanes-Oxley: A Bridge to Excellence
Dealing with the mandates of the Sarbanes-Oxley Act has proved something of a scramble for public companies. And not just US companies, because the 1,400 foreign registrants in the US have to comply, and so do the thousands of foreign subs of US registrants. In the course of assisting with hundreds of section 404 readiness and other Sarbanes-Oxley-related projects, we have learned numerous lessons and gained valuable insights. The Deloitte (USA) publication Sarbanes-Oxley: A Bridge to Excellence (PDF 517k, February 2004) reveals Deloitte's point of view on Sarbanes-Oxley compliance. Compliance is just one step on the bridge to excellence. Corporate leaders who embrace the "spirit of the law" – strong ethics, good governance, reliable reporting – can get a re-energized company and reassured investors.
Conditions For Use of Non-GAAP Financial Measures
A 12-page Brochure that summarises and clarifies the significant provisions in new rules adopted by the SEC in January 2003 dealing with public companies' disclosure of financial information calculated and presented on the basis of methodologies other than GAAP (PDF 132k, July 2003).
Empowering the CFO Tomorrow's chief financial officer must play a leading role in restoring business integrity, serving both as a company's fiduciary steward and a key corporate strategist. But in the wake of the passage of new federal corporate-disclosure regulations, there is uncertainty on who is leading the response to new governance requirements among top senior executives and board members. Those are among the findings of a joint survey of 500 senior executives conducted by Deloitte Consulting and BusinessWeek. Click for a Summary of the Survey Results (PDF 426k, March 2003).
Audit Committee Resource Guide
The Sarbanes-Oxley Act, related SEC rule-making, and the proposed modifications of the NYSE, NASDAQ, and AMEX listing standards expand, codify, and formalise the composition, duties, and responsibilities of the audit committees of public companies. Audit committee members are in the process of implementing the new requirements to fulfill investor expectations and protect shareholder interests. They are also seeking resources and tools to assist in executing their new responsibilities effectively and efficiently. Deloitte & Touche is committed to helping audit committee members and management remain apprised of emerging requirements and trends. With that objective, we have published The Audit Committee Resource Guide. It presents a history and overview of the new requirements and, more importantly, emerging best practices and specific steps for consideration. The Audit Committee Resource Guide also includes a compilation of resources and tools developed by Deloitte & Touche and other professional service organisations and trade groups that we believe will be useful in helping audit committees comply with the new requirements. Please Click to Download (PDF 1,669k, February 2003).
Strategy Matrix for Global Transfer Pricing
Deloitte's Strategy Matrix for Global Transfer Pricing (7th edition) is a compilation of essential information regarding the transfer pricing regimes in 39 jurisdictions around the world and the OECD. The 2004 edition includes a new country: Norway. The information regarding the 38 countries included in last year's edition has been thoroughly reviewed and updated to reflect any changes implemented since that edition. The book represents the collective knowledge of the members of Deloitte's Global Transfer Pricing Service Line. Given the complexity of transfer pricing issues, this book should be the starting point rather than the finish line for all your transfer pricing inquiries. If you seek assistance, the book identifies transfer pricing specialist contact people in Deloitte member firms in each of the 39 jurisdictions. Click to download Deloitte's 2004 Strategy Matrix for Global Transfer Pricing (PDF 1,421k, 66 pages, June 2004).
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