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December

Ann Spruill appointed to the FAF Board of Trustees

Dec 31, 2013

The Financial Accounting Foundation (FAF) has announced the appointment of Ann M. Spruill to the FAF Board of Trustees. Ms. Spruill will begin her term on January 1, 2014, when she will replace retiring Trustee Dennis M. Kass.

Ms. Spruill retired in 2008 from a career in investment and asset management, when she was a partner at a private, institutional asset management firm in Boston. Currently, Ms. Spruill serves as a Trustee of Harbor Funds in Chicago and a Trustee of the University of Rhode Island. She also is a member of the investment committee of Boston's Museum of Fine Arts.

Ms. Spruill's five-year term will end on December 31, 2018.

For more information, see the press release on the FAF’s Web site.

SEC removes NRSRO ratings from certain rules and forms

Dec 27, 2013

The SEC has issued two final rules that remove references to credit ratings by nationally recognized statistical rating organizations (NRSRO) in certain rules and forms. The amendments were required as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

As a result of the amendments, the following rules and forms have been affected:

  • Rule 5b-3 of the Investment Company Act
  • Forms N-1A, N-2, and N-3
  • Rule 15c3-1 (including certain appendices), Rule 15c-3, and Rule 10b-10 of the Securities Exchange Act of 1934

More information is available on the SEC’s Web site:

FASB issues standard to determine which entities are within the scope of the new PCC Decision-Making Framework

Dec 24, 2013

Yesterday, the FASB and the Private Company Council (PCC) issued the "Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies." The FASB also issued FASB Accounting Standards Update (ASU) No. 2013-12, "Definition of a Public Business Entity: An Addition to the Master Glossary."

 

Private Company Decision-Making Framework

The Private Company Decision-Making Framework ("the Guide") was developed to assist the FASB and the PCC in determining whether — and in what circumstances — to provide alternative recognition, measurement, disclosure, display, effective date, or transition guidance for private companies reporting under U.S. GAAP.

"Th[e] Guide provides considerations for the PCC and the Board in making user-relevance and cost-benefit evaluations for private companies under the existing conceptual framework. The Guide is intended to be a tool to help the Board and the PCC identify differential information needs of users of public company financial statements and users of private company financial statements and to identify opportunities to reduce the complexity and costs of preparing financial statements in accordance with U.S. GAAP."

 

Definition of a Public Business Entity

The FASB issued ASU 2013-12, Definition of a Public Business Entity: An Addition to the Master Glossary, in conjunction with the Guide. The ASU allows the FASB, PCC, and EITF to determine (1) what companies will be included in the scope of the Guide, and (2) the scope of new financial accounting and reporting guidance.

The ASU does not contain an effective date; however, an entity would apply the definition of a public business entity in connection with its adoption of the first ASU that uses the term.

According to the final ASU:

A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity.

a. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing).

b. It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC.

c. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer.

d. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market.

e. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including footnotes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion.

An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity’s filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC.

 

For more information on the Guide and the ASU, see Deloitte's Accounting Journal Entry and the FASB's Web site for its:

SEC report on disclosure requirements for public companies

Dec 20, 2013

The SEC has issued a staff report reviewing the disclosure requirements of Regulation S-K. The staff report will provide the framework for the SEC when it determines how to streamline the requirements and reduce the associated costs.

The report reviewed disclosure requirements relating to:

  • Registrant’s business and operations.
  • Registrant’s financial condition.
  • Management, securityholders and corporate governance.
  • Registrant’s securities.
  • Risk and risk management.
  • Specialized disclosure requirements.
  • Securities offerings.
  • Other comments.

On the basis of its review, the SEC staff noted that additional research should be conducted in order to formulate specific recommendations concerning specific disclosure requirements. Further, the staff reported that economic analysis must be considered when possible amendments to disclosure requirements are proposed. The staff concluded that a comprehensive approach should be used to achieve the goals of streamlining the requirements in Regulation S-K.

For more information, see the press release and staff report on the SEC’s Web site.

FASB discusses four topics at its December 18 meeting

Dec 19, 2013

At its meeting yesterday, the FASB discussed the following four topics: (1) not-for-profit financial reporting, (2) repurchase agreements, (3) classification and measurement, and (4) impairment.

   

Not-for-profit financial reporting — Financial statements

The Board tentatively decided to improve the reporting of expenses for all not-for-profit entities (NFPs) by:

    1. Requiring NFPs to report expenses by nature. The FASB elected to retain the requirement for NFPs to also report expenses by function.
    2. Continuing to allow NFPs to present expenses on the face of an activity statement by either function or nature with the alternative in notes or by both classifications.
    3. Requiring NFPs to provide an analysis of all expenses by function and by nature in one location, in the statement of activities, a separate statement of expenses (currently called a statement of functional expenses), or a schedule in the notes.

For more information, see the meeting minutes on the FASB's Web site.

 

Repurchase agreements and similar transactions

This was the FASB's final discussion on the project; a final ASU is expected in the first half of 2014. In this session, the Board discussed the feedback received in limited outreach meetings held with users, preparers, auditors, and regulators. Key issues discussed during this session include:

IssueDecision
Accounting for repurchase-to-maturity transactions The Board affirmed its initial decision that a repurchase-to-maturity transaction on a held-to-maturity security would not taint an entity’s held-to-maturity portfolio.
Substantially-the-same criterion for effective control The Board decided to not move forward with implementation guidance on the basis of the presence of trade stipulations. In addition, the Board decided to make no changes to the guidance on the substantially-the-same criterion as part of this project. The Board decided that it would consider whether to pursue any amendments to the substantially-the-same criterion separately from this project.
Disclosures — transfers of financial assets accounted for as a sale (Set 1)
  • The Board affirmed its earlier decision to require certain disclosures.
  • The Board decided to require disclosure of the amount of proceeds received by a transferor in the transaction.
  • The Board agreed to clarify that the disclosures would not be required for dollar-roll transactions that do not meet the substantially-the-same characteristics.
Disclosures — asset quality disclosures (Set 2) The Board decided to require the disclosure of asset quality information as discussed at a previous meeting, limiting the scope of the disclosure to repurchase agreements and securities lending transactions that are accounted for as secured borrowings only. The Board also tentatively decided to require disclosure of the tenor (maturity profile) of the agreement.
Transition method, effective date, and early adoption The Board decided to require a cumulative-effect approach for all changes in accounting.
  • Public entities — The changes would be effective for annual periods (and interim periods within those annual periods) beginning after December 15, 2014. Early adoption would not be permitted.
  • All other entities — The changes would be effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. Early adoption for interim periods beginning after December 15, 2014, would be permitted.

For more information, see Deloitte's Accounting Journal Entry and the meeting minutes on the FASB's Web site.

 

Classification and measurement of financial instruments

See our previous story on the FASB's decision to diverge joint FASB/IASB classification and measurement guidance.

 

Impairment

The Board discussed the next steps on the credit impairment project. Board members explored four alternatives and decided to continue to refine the current expected credit loss (CECL) model.

For more information, see Deloitte's Accounting Journal Entry and the meeting minutes on the FASB's Web site.

FASB decision diverges classification and measurement guidance

Dec 19, 2013

At its meeting yesterday, the FASB decided to abandon the “SPPI test” that would have been required as part of the proposed contractual cash flow assessment for determining the classification and measurement of financial assets.

In joint deliberations at an earlier meeting, the FASB and IASB had proposed classifying and measuring financial assets on the basis of their contractual cash flow characteristics and the business model in which those assets are managed. Under the proposals issued by both boards, a financial asset would meet the requirements of the contractual cash flow characteristics assessment if the contractual terms of the instrument “give rise on specified dates to cash flows that are solely payments of principal and interest [SPPI] on the principal amount outstanding.“

At yesterday’s meeting, however, the FASB discussed the complexity associated with the proposed contractual cash flow test and decided to reject the SPPI assessment. According to Board members, requiring an SPPI test would be swapping known complexity (i.e., the bifurcation guidance in ASC 815-15) for unknown complexity (SPPI). Instead, in a 5 to 2 decision, the FASB voted to retain the requirement to bifurcate financial assets under the “clearly and closely related” guidance in ASC 815-15 on assessing whether an embedded derivative feature should be bifurcated from a hybrid financial asset. The FASB directed the staff to analyze whether the contractual cash flow characteristics test should be based solely on the “clearly and closely related” criterion in ASC 815-15 or whether to use that criterion to further develop the test. The FASB will consider the results of the staff’s analysis at a future meeting.

For more information on the classification and measurement discussion, see Deloitte's Accounting Journal Entry or the meeting minutes on the FASB's Web site. For details on the other topics discussed at the December 18 FASB meeting, see our previous story.

FASB releases Financial Reporting Taxonomy 2014

Dec 18, 2013

The FASB has released the 2014 U.S. GAAP Financial Reporting Taxonomy, pending final acceptance by the SEC. The taxomony contains accounting standards updates and other improvements to the official taxonomy, which is used by public issuers registered with the SEC.

The FASB issued proposed improvements to the taxonomy in August 2013, allowing users of the taxonomy to provide feedback on the updates and to provide SEC filers, service providers, software vendors, and other interested parties the opportunity to become familiar with and incorporate new element names for their filings.

For more information, see the press release (with a link to the taxonomy) on the FASB's Web site.

SEC proposes Regulation A+ exemption for smaller companies

Dec 18, 2013

At today's open meeting, SEC Chair Mary Jo White announced that the SEC has issued a proposed rule intended to increase access to capital for smaller companies. The proposal creates a new exemption from registration under the Securities Act for offerings of up to $50 million in a 12-month period.

Known as Regulation A+, the proposed rule amendments would update and expand the Regulation A exemption by creating two tiers of Regulation A offerings:

  • Tier 1 would consist of those offerings already covered by Regulation A: securities offerings of up to $5 million in a 12-month period, including up to $1.5 million for the account of selling securityholders.
  • Tier 2 would consist of securities offerings of up to $50 million in a 12-month period, including up to $15 million for the account of selling securityholders.
  • For offerings up to $5 million, the company could elect whether to proceed under Tier 1 or Tier 2.

Comments on the proposal are requested by March 24, 2014.

For more information, see Deloitte's Accounting Journal Entry, the proposed rule, and press release on the SEC's Web site. Speeches from today's open meeting on Regulation A+ are also available on the SEC's Web site:

FASB provides update for nonpublic entities

Dec 17, 2013

Yesterday, the FASB held a webcast that provided an update on its standard-setting activities related to private and not-for-profit (NFP) entities.

The webcast focused on the following topics:

The webcast was hosted by FASB members Daryl Buck and Hal Schroeder, as well as PCC member Jeffrey Mechanick and other FASB staff members.

For additional information, please see Deloitte’s Accounting Journal Entry.

FASB ratifies EITF consensuses and tentative conclusions

Dec 13, 2013

At its meeting on December 11, 2013, the FASB approved several EITF consensuses reached at the November 14, 2013, EITF meeting. The EITF Issues will be released as updates to the FASB Accounting Standards Codification.

The EITF Issues ratified that will be issued as Accounting Standards Updates (ASUs) include:

  • Issue 12-G, “Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.”
  • Issue 12-H, “Accounting for Service Concession Arrangements.”
  • Issue 13-B, “Accounting for Investments in Qualified Affordable Housing Projects.”
  • Issue 13-E, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.”

In addition, the Board approved the issuance of a proposed ASU for EITF Issue 13-F, “Classification of Certain Government Insured Residential Mortgage Loans upon Foreclosure,” and directed the staff to gather information to be presented at a later meeting on the applicability of EITF Issue 13-B to other types of tax credit investments.

For more information, see Deloitte’s EITF Snapshot and the meeting minutes on the FASB's Web site.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.