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September 2006 edition of EITF Roundup

21 Sep 2006

We have posted the (PDF 178k), which provides an overview of the issues discussed, consensuses reached, and administrative matters discussed at the 7 September 2006 meeting of FASB's Emerging Issues Task Force.

You will find past issues Here. Issues covered in the September 2006 edition include:
  • Issue No. 06-1, Accounting for Consideration Given by a Service Provider to Manufacturers or Resellers of Equipment Necessary for an End-Customer to Receive Service From the Service Provider
  • Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split- Dollar Life Insurance Arrangements
  • Issue No. 06-5, Accounting for Purchases of Life Insurance – Determining the Amount That Could Be Realized in Accordance With FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance
  • Issue No. 06-6, Debtor's Accounting for a Modification (or Exchange) of Convertible Debt Instruments
  • Issue No. 06-7, Issuer's Accounting for a Previously Bifurcated Conversion Option in a Convertible Debt Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities
  • Issue No. 06-8, Application of the Assessment of a Buyer's Continuing Investment Under FASB Statement No. 66, Sales of Real Estate, for Sales of Condominiums
  • Issue No. 06-9, Reporting a Change in (or Elimination of) a Previously Existing Difference Between the Fiscal Year- End of a Parent and a Consolidated Subsidiary or Equity Method Investee
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Notes from the third day of the IASB meeting

21 Sep 2006

The International Accounting Standards Board held its September 2006 Board meeting at its offices, 30 Cannon Street, London, on Monday through Friday 18-22 September 2006. Click here for the preliminary and unofficial Notes taken by Deloitte Observers at the Meeting. .

The International Accounting Standards Board held its September 2006 Board meeting at its offices, 30 Cannon Street, London, on Monday through Friday 18-22 September 2006. Click here for the preliminary and unofficial Notes taken by Deloitte Observers at the Meeting.

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Notes from the second day of the IASB meeting

20 Sep 2006

The International Accounting Standards Board held its September 2006 Board meeting at its offices, 30 Cannon Street, London, on Monday through Friday 18-22 September 2006. Click here for the preliminary and unofficial Notes taken by Deloitte Observers at the Meeting. .

The International Accounting Standards Board held its September 2006 Board meeting at its offices, 30 Cannon Street, London, on Monday through Friday 18-22 September 2006. Click here for the preliminary and unofficial Notes taken by Deloitte Observers at the Meeting.

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SEC views on accounting for stock options

20 Sep 2006

The Office of the Chief Accountant (OCA) of the US SEC has stated its views on the appropriate application of the stock option accounting literature in the historical financial statements of public companies in the following circumstances: dating an option award to predate the actual award date, option grants with administrative delays, uncertainty as to the validity of prior grants, and other related circumstances. The OCA's views are set out in a letter to the Committee on Corporate Reporting of Financial Executives International and the Center for Public Company Audit Firms of the American Institute of Certified Public Accountants.

Prior to the adoption of the Financial Accounting Standards Board's Statement No. 123 (revised 2004) Share-Based Payment, many US public companies accounted for stock options under Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees. The OCA's letter discusses the accounting consequences under Opinion 25 of the circumstances cited above. One of the key conclusions in the letter is as follows:

In many cases, when options were awarded before (or in the absence of) completion of required granting actions, the terms cannot be considered to have been determined with finality until (and unless) such actions were completed. Indeed, as evidenced by some of the option granting practices and patterns of conduct that the staff has become aware of, awarding options in a manner that did not comply with the required granting actions does suggest that the terms and recipients of the options may have been subject to change. For example, in the event that the company's stock price declined prior to finalizing the required granting actions, the company may have retracted awards (e.g., failed to follow through with the initially determined awards) or lowered the exercise price of options. This type of practice indicates that, for all awards (including those awards for which the terms were not changed), the terms and recipients were not determined with finality (and therefore were not "known") prior to the completion of all required granting actions. Similarly, any evidence indicating that the preparation of documentation was done in a manner calculated to disguise the true nature of the option granting actions would preclude a company from concluding that a measurement date occurred prior to the completion of all required granting actions. If a company operated as if the terms of its awards were not final prior to the completion of all required granting actions (such as by retracting awards or changing their terms), the staff believes the company should conclude that the measurement date for all of its awards (including those awards that were not changed) would be delayed until the completion of all required granting actions.

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FASB issues fair value measurement standard

19 Sep 2006

The US Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 157 'Fair Value Measurements'.

FAS 157 provides enhanced guidance for using fair value to measure assets and liabilities. It applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. FAS 157 does not expand the use of fair value in any new circumstances.

Some points about FAS 157:

  • Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.
  • Fair value should be based on the assumptions market participants would use when pricing the asset or liability.
  • FAS 157 establishes a fair value hierarchy that prioritises the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, for example, the reporting entity's own data.
  • Fair value measurements would be separately disclosed by level within the fair value hierarchy.
  • FAS 157 is effective for financial statements issued for fiscal years beginning after 15 November 2007, and interim periods within those fiscal years. Early adoption is permitted.
  • FAS 157 may be downloaded from FASB's Website without charge.

The IASB has on its agenda a project on fair value measurement. It is one of the convergence projects with the FASB. This means that the IASB and the FASB plan to have similar, if not identical, definitions and guidance relating to fair value measurements. The IASB plans to issue a discussion paper in the fourth quarter of 2006 that will:

  • indicate the IASB's preliminary views on the provisions of FAS 157;
  • identify differences between FAS 157 and fair value measurement guidance in existing IFRSs; and
  • invite comments on the provisions of FAS 157 and on the IASB's preliminary views about those provisions.
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SEC bulletin on materiality of misstatements

19 Sep 2006

Three departments within the US Securities and Exchange Commission have jointly published Staff Accounting Bulletin (SAB) 108 explaining how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement.

SAB 108 states that registrants should use both a balance sheet approach and an income statement approach when quantifying and evaluating the materiality of a misstatement.

"Exclusive reliance on an income statement approach can result in a registrant accumulating errors on the balance sheet that may not have been material to any individual income statement, but which nonetheless, may misstate one or more balance sheet accounts. Similarly, exclusive reliance on a balance sheet approach can result in a registrant disregarding the effects of errors in the current year income statement that result from the correction of an error existing in previously issued financial statements."

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Notes from the first day of the IASB meeting

19 Sep 2006

The International Accounting Standards Board held its September 2006 Board meeting at its offices, 30 Cannon Street, London, on Monday through Friday 18-22 September 2006. Click here for the preliminary and unofficial Notes taken by Deloitte Observers at the Meeting. .

The International Accounting Standards Board held its September 2006 Board meeting at its offices, 30 Cannon Street, London, on Monday through Friday 18-22 September 2006. Click here for the preliminary and unofficial Notes taken by Deloitte Observers at the Meeting.

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New Global Offerings Services newsletter

19 Sep 2006

We have posted the (PDF 143k).

Global Offerings Services is a global team of Deloitte practitioners assisting non-US companies and non-US practice office engagement teams in applying US and International accounting standards (that is, US GAAP and IFRSs) and in complying with the SEC's financial reporting rules. The GOs Newsletter is an update on relevant GAAP, regulatory, and other matters, webcasts, and publications. Past GOs Newsletters are Here.
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International Forum of Independent Audit Regulators

18 Sep 2006

Eighteen independent audit regulatory organisations from around the world have decided to establish the International Forum of Independent Audit Regulators (IFIAR).

The goals of the Forum are:

  • To share knowledge of the audit market environment and practical experience of independent audit regulatory activity;
  • To promote collaboration in regulatory activity; and
  • To provide a focus for contacts with other international organisations that have an interest in audit quality.
The 18 countries are Australia, Austria, Brazil, Canada, Denmark, France, Germany, Ireland, Italy, Japan, Mexico, the Netherlands, Norway, Singapore, South Africa, Spain, Sweden, and the United Kingdom.
The US Public Company Accounting Oversight Board participated as an observer. Other international organisations participating at the meeting at which the Forum was established were the Financial Stability Forum, the World Bank, the International Organisation of Securities Commissions, the Basel Committee, the International Association of Insurance Supervisors, the Public Interest Oversight Board, and the European Commission.
Jeffrey Lucy, Chairman of the Australian Securities and Investments Commission (ASIC), will be the initial Chairman of the Forum, and Paul Boyle, Chief Executive Officer of the UK Financial Reporting Council, will serve as Vice Chairman. The first meeting of the IFIAR will take place in March 2007 in Tokyo.
Click for Press Release (PDF 65k).

 

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EC regulation adopting IFRIC 8 and 9

18 Sep 2006

We have posted the European Commission's (PDF 52k) of 8 September 2006, as published in the Official Journal of the European Union, adopting the following two Interpretations for use in Europe: IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of Embedded Derivatives .

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