Current reporting issue

SEC provides assistance to filers affected by Hurricane Sandy

The Securities and Exchange Commission announced that it is preparing relief measures that include extending filing deadlines for individuals and entities with filing obligations that have been affected by Hurricane Sandy and its aftermath. It is anticipated that filing deadlines for any filing due from October 29 to November 20, 2012 will be extended to November 21, 2012. The Divisions of Corporation Finance and Investment Management will also consider requests for additional relief on a case-by-case basis.

FASB

All decisions reached at Board meetings are tentative and may be changed at future meetings. Decisions are included in an Exposure Draft only after a formal written ballot. Decisions reflected in Exposure Drafts are often changed in redeliberations by the Board based on information received in comment letters, at public roundtable discussions, and from other sources. Board decisions become final after a formal written ballot to issue a final Accounting Standards Update.

Meeting held October 31

At its October 31 meeting, the FASB discussed its financial instruments project and began discussions on a new project focusing on balance sheet offsetting. Highlights of those discussions are summarized below.

Balance sheet offsetting

The FASB announced the addition of a project to the Board's agenda to address implementation issues related to the scope of FASB Accounting Standards Update (ASU) 2011-11, Disclosures about Offsetting Assets and Liabilities. After its initial discussion, the Board tentatively decided that the scope of the disclosure requirements in ASU 2011-11 would be limited to derivatives, repurchase agreements and reverse repurchase agreements, and securities lending and securities borrowing arrangements.

Currently, the disclosure requirements in ASU 2011-11 apply to all recognized financial instruments and derivatives that are either

  • Offset in accordance with FASB Accounting Standards Codification® (ASC) 210-20-45, Balance Sheet: Offsetting, or ASC 815-10-45, Derivatives and Hedging.
  • Subject to an enforceable master netting arrangement or similar agreement.

Constituents had expressed concerns over the significant cost and limited benefit to providing these disclosures for short-term trade receivables and trade payables.

Under the proposed changes, the disclosure requirements would continue to be effective for annual reporting periods beginning on or after January 1, 2013 and for interim periods within those annual periods. The proposed scope clarification will be exposed for a 25-day comment period.

Financial instruments

Impairment

The Board completed its deliberations on the credit impairment portion of the financial instruments project and plans to issue a proposed ASU, with a comment period ending on the later of either 120 days after issuance or April 30, 2013.

Classification and measurement

The Board continued redeliberations on the classification and measurement portion of the financial instruments project, and tentatively decided that entities would transition to the proposed guidance by recording a cumulative effect adjustment to beginning retained earnings as of the beginning of the first reporting period in which the guidance is effective.

Board members also agreed that early adoption of the guidance would not be permitted, except for the requirement to present separately in other comprehensive income the changes in fair value that result from changes in an entity's own credit risk for certain financial liabilities measured at fair value through net income, which could be early adopted under certain circumstances.

The Board confirmed that it will re-expose the proposed classification and measurement model.

Comment periods extended

In response to disruptions caused by Hurricane Sandy, the FASB announced the following comment period extensions:

  • The deadline for comments on the FASB staff paper, Private Company Decision-Making Framework: A Framework for Evaluating Financial Accounting and Reporting Guidance for Private Companies, has been extended to November 9.
  • The deadline for comments on the FASB Invitation to Comment, Disclosure Framework, has been extended to November 30.

Webcast on accounting for credit losses announced

The FASB will hold a webcast, IN FOCUS: Accounting for Credit Losses on Financial Instruments, on November 9 from 1:00 to 2:15 p.m. EST to discuss the proposed credit impairment model, including common questions on the proposed model and the Board's next steps.

EITF meeting cancelled

Due to travel disruptions caused by Hurricane Sandy, the EITF cancelled its November 1 meeting. The EITF announced that the Task Force will instead utilize its alternate January 17, 2013 meeting date.

AICPA proposes accounting framework for SMEs

Decisions reflected in AICPA draft documents may be changed in redeliberations based on information received in comment letters and from other sources. Decisions become final only upon issuance of a final document and are nonauthoritative.

For private entities not required to report under U.S. GAAP, the AICPA has released its Proposed Financial Reporting Framework for Small- and Medium-Sized Entities (SMEs), which details an other comprehensive basis of accounting (OCBOA) that SMEs could elect to use in preparing their financial statements. The proposed framework is self-contained, relies on historical cost as its primary measurement basis, and encompasses less complicated, relevant financial reporting principles that were developed based on the needs of SME financial statement users and on cost-benefit considerations.

Comments on the proposed framework are due by January 30, 2013.

PCAOB updates FAQs on broker-dealer support fee

The PCOAB recently published an updated frequently asked questions (FAQs) document explaining the staff's views on issues related to implementing the Board's funding rules for brokers and dealers, including the accounting support fee and the funding process.

COSO releases paper on risk management

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) recently released a thought paper, Risk Assessment in Practice, as part of a series of papers designed to help entities develop a robust enterprise risk management (ERM) program. The latest paper discusses risk assessment approaches and techniques that the authors have determined to be the most useful and sustainable for decision making.

Comment letters issued

On October 31, Grant Thornton LLP issued a comment letter to the SEC in response to the SEC staff paper, Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers: Final Staff Report.

On November 1, Grant Thornton LLP issued a comment letter to the Accounting Standards Board of the AICPA in response to the proposed Statement on Auditing Standards, Omnibus Statement on Auditing Standards – 2012.

The comment letters are available at grantthornton.com.

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