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GASB issues implementation guide for pension standard

Jan 31, 2014

The GASB has issued an implementation guide to assist state and local government financial statement preparers and auditors in the implementation and application of GASB Statement No. 68, “Accounting and Financial Reporting for Pensions.”

The guide is classified as category (d) within the GAAP hierarchy (as defined in GASB 55). It provides authoritative guidance that has been prepared by GASB’s staff and cleared for issuance by the GASB board.

The guide is in a question and answer format and discusses the following:

  • The scope and applicability of GASB 68.
  • Considerations regarding the identification of special funding situations.
  • Measurement of defined benefit pension liabilities of employers and nonemployer contributing entities.
  • Pension expense and deferred inflows and outflows of resources related to pensions.
  • Note disclosures and required supplementary information.
  • Unique issues related to cost-sharing employers and certain nonemployer contributing entities.
  • Transition to the new standards.

GASB 68 is effective for periods beginning after June 15, 2014.

For more information, see the press release and the implementation guide on the GASB’s Web site.

PCAOB extends comment period for reproposed transparency amendments

Jan 31, 2014

The PCAOB has extended the comment period for its reproposed amendments that aim to improve the transparency of public company audits. The new comment deadline is now March 17, 2014 (previously February 3, 2014).

The proposed amendments would require “(1) disclosure in the auditor’s report of the name of the engagement partner and (2) disclosure in the auditor’s report of the names, locations, and extent of participation of other independent public accounting firms that took part in the audit and the locations and extent of participation of other persons not employed by the auditor that took part in the audit.”

For more information, see the press release on the PCAOB's Web site.

FASB discusses three topics at its January 29 meeting

Jan 30, 2014

At its meeting yesterday, the FASB discussed the following three topics: (1) principal-versus-agent analysis, (2) classification and measurement, and (3) FASB agenda prioritization.


Consolidation: Principal versus agent analysis

The FASB continued its deliberations on the principal-versus-agent analysis related to the consolidation of variable interest entities (VIEs) and non-VIEs. The Board discussed how rights held by other parties should affect whether (1) an entity is a VIE and (2) an entity should consolidate a VIE. The Board decided that ASC 810-10-15-14(b)(1) should be amended to incorporate concepts included in Subtopic ASC 810-20, Consolidation—Control of Partnerships and Similar Entities, specifically for limited partnerships and similar legal entities. The Board also decided that in the primary-beneficiary evaluation for a VIE, rights held by other parties would only be considered when they are unilaterally exercisable.

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

The FASB tentatively decided not to pursue the converged approach jointly developed by the FASB and IASB for assessing the business model in which a financial asset is managed. The Board discussed alternatives to the business model portion of the overall classification and measurement model and asked the staff to further analyze and bring to a future meeting the following alternatives for deliberations:

  • Retaining existing guidance in U.S. GAAP on classifying and measuring investments in debt securities and loans. 
  • Developing a single classification and measurement model for both loans (including trade receivables) and investments in debt securities.

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


FASB agenda prioritization

The FASB voted to reorganize its agenda to focus more closely on the issues most important to FASB stakeholders. The Board added eight research projects to its agenda and voted to remove six projects from the FASB agenda:

Research projects added Projects removed
  • Accounting issues in employee benefit plan financial statements
  • Conceptual Framework
  • Financial instruments — Hedging
  • Financial instruments — Liquidity and interest rate disclosures
  • Financial statement presentation
  • Liabilities and equity — Short-term improvements
  • Pensions — Cash balance plans
  • Simplifications initiative
  • Emissions trading
  • Earnings per share
  • Income taxes (short-term convergence project)
  • Not-for-profit financial reporting — Other financial communications
  • Investment property entities
  • Investment companies — Real estate property investments

The Board also voted to remove five projects from the Emerging Issues Task Force (EITF) agenda and decided that the Private Company Council (PCC) should consider doing pre-agenda work on phase two of the “Definition of a Nonpublic Entity” project.

For more information, see the press release on the FASB's Web site.

IASB issues interim standard on rate regulation

Jan 30, 2014

The IASB has published IFRS 14 "Regulatory Deferral Accounts." This Standard is intended to allow entities that are first-time adopters of IFRSs, and that currently recognize regulatory deferral accounts in accordance with their previous GAAP, to continue to do so upon transition to IFRSs. The Standard is intended to be a short-term, interim solution while the longer-term rate-regulated activities project is undertaken by the IASB. The IASB has stated that by publishing this Standard, they are not anticipating the outcome of the comprehensive rate-regulated activities project, which is in its early stages.



In September 2012, the IASB began a comprehensive rate-regulated activities project, starting with a research phase to develop a discussion paper. In December 2012, the IASB decided to add an additional phase to the rate-regulated activities project to develop this limited-scope standard.

In April 2013, the IASB published exposure draft ED/2013/5, Regulatory Deferral Accounts (the "ED"), with comments due by September 4, 2013. 

The IASB received comments on the ED, which lead to some clarifications and edits, including additional disclosure requirements; however, the main proposals in the ED were not changed substantially in the final Standard.



Initial application of IFRS 14 must coincide with the application of IFRS 1, First-time Adoption of International Financial Reporting Standards. This means that IFRS 14 cannot be applied by entities that have previously adopted IFRSs. Entities applying this interim standard must also meet specified eligibility criteria. Specifically, the entity has to conduct "rate-regulated activities" (as defined by IFRS 14), and it must have recognized amounts that qualify as regulatory deferral account balances in its financial statements in accordance with its previous GAAP.


Overview of the key requirements

  • IFRS 14 requires the balances reflecting the effects of rate regulation to be described as “regulatory deferral account debit balances” and “regulatory deferral account credit balances” (collectively they are referred to as “regulatory deferral account balances”) and these balances cannot be referred to as, or presented with, assets and/or liabilities because  the determination of whether these balances meet the definition of assets or liabilities in the Conceptual Framework must be addressed as part of the IASB's comprehensive conceptual framework project.
  • The effects of rate regulation must be separately presented in the statement of financial position and statement(s) of profit or loss and other comprehensive income, and the Standard provides illustrative examples of these presentation requirements.
  • All assets and liabilities, balances, and transactions must comply with all other IFRS standards so the regulatory deferral account balances represent the effects of rate regulation only after the requirements of other IFRS standards have been met.
  • IFRS 14 includes some specific guidance on how other standards such as IAS 10, Events After the Reporting Period; IAS 12, Income Taxes; IAS 33, Earnings Per Share; IAS 36, Impairment of Assets; IFRS 3, Business Combinations; and IFRS 5, Non-current Assets Held for Sale and Discontinued Operations should be applied to regulatory deferral balances and/or movements in such balances.
  • There are specific disclosure requirements to (1) enable users to evaluate the nature of, and the risks associated with, the specific rate regulation regime and (2) enable users to understand how the regulatory deferral account balances are recognized and measured both initially and subsequently.


Effective date and transition

The Standard can be applied in an entity's first annual IFRS financial statements for periods beginning on or after January 1, 2016. Earlier application is permitted. Application of the standard is voluntary. However, an entity that elects to apply the standard in its first IFRS financial statements continues to apply it in all its subsequent financial statements.


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SEC issues risk alert on advisers' selection of alternative investments

Jan 29, 2014

The SEC staff issued a Risk Alert yesterday on investment advisers' due diligence processes for selecting alternative investments. The alert is a summary of observations made by staff in the Office of Compliance Inspections and Examinations (the "staff"); it describes current industry trends and notes compliance deficiencies.

Alternative investments — private funds such as hedge funds, private equity funds, venture capital, real estate, and funds of private funds — are a rapidly growing asset class. The due diligence process for these types of investments can be more challenging because of the characteristics of private offerings and the complexity of alternative investment strategies.

The Risk Alert compared current observations with those of prior periods and found that advisers are:

  • Seeking more and broader information and data directly from managers of alternative investments.
  • Utilizing third parties to supplement analyses and validate information regarding alternative investments.
  • Performing additional quantitative analyses and risk measures on the alternative investments and their managers.
  • Enhancing and expanding their due diligence processes and focus areas.

The staff also noted the following deficiencies in several of the advisory firms it examined:

  • Omitting alternative investment due diligence policies and procedures from their annual reviews.
  • Providing potentially misleading information in marketing materials about the scope and depth of the due diligence conducted.
  • Having due diligence practices that differed from those described in the advisers' disclosures to clients.

More information is available in the press release and Risk Alert on the SEC's Web site.

Summary of the January 2014 PCC meeting

Jan 29, 2014

Yesterday, the Private Company Council (PCC) met to discuss three projects on its technical agenda and made the following decisions in regard to each:


ProjectNext step
Issue No. 13-01A, Accounting for Identifiable Intangible Assets in a Business Combination The PCC requested that the FASB staff continue to conduct additional research on how to define the scope of this alternative, such as an entity recognizing only intangibles that are capable of being sold or licensed independently from other assets of the business.
Issue No. 13-02, Applying Variable Interest Entity Guidance to Common Control Leasing Arrangements The PCC finalized this accounting alternative, after refining its scope criteria, and agreed to send it to the FASB for endorsement.
Issue No. 13-03B, Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps — Combined Instruments Approach The PCC removed this project from its agenda in light of Dodd-Frank rulemaking and the recent issuance of ASU 2014-03.

In addition, the PCC and FASB discussed components of the FASB’s project on financial instruments.

The next PCC meeting is planned for Tuesday, April 29, 2014.

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

SEC postpones release of EDGAR filer manuals

Jan 29, 2014

Yesterday, the SEC announced that the implementation date for Electronic Data Gathering, Analysis, and Retrieval (EDGAR) System Release 14.0 — which was originally scheduled for February 3, 2014 — has been changed to February 18, 2014.

The new release will introduce several changes, as described in our previous story. This draft has not been approved by the Commission and is subject to change. The final version of the EDGAR Filer Manual will be posted on the SEC’s Web site once it has been approved.

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

FAF offers to contribute to IFRS Foundation funding

Jan 29, 2014

The Financial Accounting Foundation (FAF), which is responsible for the oversight, administration, and finances of the FASB, has announced that it will contribute up to $3 million to the IFRS Foundation “to support the completion of international convergence projects.” The FAF stressed that the contribution, to be made in up to three payments of $1 million during 2014, is nonrecurring.

The IASB and FASB have four major convergence projects to complete: revenue recognition, leasing, financial instruments (both classification and measurement and impairment), and insurance. Revenue recognition is nearing completion (finalized pronouncements by IASB and FASB are currently expected in the first quarter of 2014), the financial instruments topics could be completed in the second half of 2014, while insurance and leases have not yet been given an expected publication date.

While the aim of the contribution is to complete the convergence projects, collaboration will continue even after the finalized pronouncements have been published. The FASB and IASB announced that they would form a joint transition resource group for revenue recognition in July 2013. The FASB is also a member of the IASB's Accounting Standards Advisory Forum (ASAF).

The FAF trustees made one previous contribution of $500,000 to the IFRS Foundation in 2011. In addition, FASB has dedicated technical staff to the convergence projects.

More information is available in the announcement on the FAF's Web site.

SEC chair discusses opportunities for 2014

Jan 28, 2014

SEC Chair Mary Jo White gave a speech yesterday at the Securities Regulation Institute in Coronado, California. She discussed how the SEC continues to adapt to emerging technologies, ever-evolving markets, and other transformative industry changes. She also discussed some of the Commission's priorities for the coming year.

Ms. White acknowledged that the continuous advances in technology have hand a tremendous impact on the securities markets and spoke about some of the transformative changes the SEC has made to keep up, while continuing to carry out the agency's mission to protect investors and ensure markets are operating fairly:

  • NEAT — The SEC uses its "National Exam Analytics Tool" to access and systematically analyze vast amounts of trading data. It can identify signs of possible insider trading, front-running, window dressing, improper allocations of investment opportunities, and other kinds of misconduct.
  • MIDAS — The "Market Information Data Analytics System" collects one billion records of trading data daily. The SEC posts the aggregated data and analyses on the market structure section of its Web site.
  • Operational integrity — The SEC is also interested in making sure that exchanges and other market participants strive towards zero errors and no interruptions in the markets. Ms. White expects that the SEC's 2014 agenda will include consideration of the adoption of Regulation SCI, which would provide new, stricter requirements for the use of technology.

Ms. White also discussed how the SEC is evolving with new financial products, like the emerging over-the-counter derivatives market. She explained how the SEC is creating a new "regulatory regime" for this market in an effort to make it more transparent. She also talked about money market reform and the need to address heightened redemption risk since the financial crisis. Two proposals were issued in June 2013, and issuing a final rule is a "critical priority" for the Commission.

Ms. White touched on changes in how capital is raised; she talked about general solicitation rules, crowdfunding, and Regulation A. She also elaborated on her previous remarks on disclosure reform, stating: "I believe we should rethink not only the type of information we ask companies to disclose, but also how that information is presented, where and how that information is disclosed, and how we can take advantage of technology to facilitate investors’ access to information and make it more meaningful to them."

Looking forward into 2014, Ms. White noted that she expects the SEC will focus on market integrity, enforcement, compelling more admissions of wrongdoing, and uncovering more instances of financial fraud. These agenda items are in addition to the mandates by the Dodd-Frank and JOBS Acts, which include examining equity market structure, duties of brokers-dealers and investment advisers, the management and responsibilities of clearing agencies and credit rating agencies, Dodd-Frank executive compensation, target date funds, systemic risk issues, and broker-dealer financial responsibility, among others.

The full text of Ms. White's speech is available on the SEC's Web site.

Boards discuss insurance contracts

Jan 27, 2014

Last week, the FASB and IASB met to discuss their joint insurance contracts project. The boards' staffs summarized the feedback received on their respective insurance proposals. FASB and IASB members jointly discussed the results of the comment letter analysis and the outcome of the fieldwork that was performed during the comment period.

No decisions were made by the FASB or IASB during this session. The FASB will continue its discussions on its insurance contracts project in February, and the IASB will continue its discussions in March.

For more information, see IAS Plus for preliminary and unofficial notes taken by Deloitte observers, and the meeting minutes on the FASB's Web site.

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