January 13, 2012

We are pleased to send you ParenteBeard's weekly audit and accounting e-alert. It is our intention to deliver you the most up-to-date, relevant and technical accounting and audit-related information to assist you in your business and personal needs. We hope you find this e-alert informative.

FASB Discusses Going Concern Issues

At its January 11, 2012, meeting the FASB discussed, among other issues, disclosures about risks and uncertainties and the liquidation basis of accounting. The FASB decided not to require that management of an entity assess whether there is substantial doubt about the entity’s ability to continue as a going concern. A majority of FASB members observed that such a requirement would be difficult to apply and that users of financial statements would benefit to a greater extent from ongoing disclosures about risks and uncertainties than they would from disclosures that would be made only after management concludes that there is substantial doubt about an entity’s ability to continue as a going concern. As a next step in this project, the FASB directed its staff to develop a principle for an entity to assess the adequacy of its disclosures about risks and uncertainties and to evaluate how the content of such disclosures could be improved.

FASB Update Published

The FASB has published the FASB Update “Financial Statement User Edition.” The publication is an update of accounting standard-setting activities that may be of interest to entities. The publication includes: (a) a general standards setting update; (b) recently issued or effective standards; (c) standards soon to be effective; and (d) an update on international convergence activities.

The FASB Update “Financial Statement User Edition” is available here.

Financial Accounting Foundation Comment Period Ending

On October 4, 2011, the Board of Trustees of the Financial Accounting Foundation (FAF) issued a Request for Comment on its “Plan to Establish the Private Company Standards Improvement Council.” The FAF is the independent, private-sector organization responsible for the oversight and administration of the FASB and the GASB.

Under the FAF plan, the new Private Company Standards Improvement Council (PCSIC) would identify, propose, deliberate, and formally vote on specific exceptions or modifications to U.S. GAAP for private companies. Changes approved by a two-thirds majority would be forwarded to the FASB for ratification. The changes would become final following public comment, further deliberation by the PCSIC, and final ratification by the FASB. The PCSIC would replace the Private Company Financial Reporting Committee, the current FASB advisory-only body established in 2006.

The new private company council would comprise between 11 and 15 members, appointed by the FAF Trustees, representing investors, lenders, auditors, accountants and others with broad experience in using and preparing private company financial statements. The chairman of the group would be a member of the FASB and would be appointed by the FAF Trustees. Once its members were appointed, the PCSIC, jointly with the FASB, would develop a set of specific criteria to determine whether and when exceptions or modifications to U.S. GAAP are warranted for private companies.

The FAF Board of Trustees is seeking public comment on the plan through Saturday, January 14, 2012. The Trustees also plan to conduct roundtables across the country in early 2012. The Trustees will make a final decision on the plan after reviewing and considering public input.

An overview of the plan, links to related documents, and a list of currently scheduled roundtables are available on the FAF website here.

The Request for Comment, “Plan to Establish the Private Company Standards Improvement Council,” is available here.

SEC Staff Issues Guidance on European Sovereign Debt Exposures

The SEC Division of Corporation Finance (Corp Fin) has issued CF Disclosure Guidance: Topic No. 4, “European Sovereign Debt Exposures.” This guidance provides the views of the Corp Fin staff regarding disclosure of registrants’ exposures to risks related to holdings of the sovereign debt of certain European countries.

As a result of the recent uncertainties with regard to European sovereign debt holdings, the Corp Fin staff has expressed concerns about the risks to financial institutions that are SEC registrants from direct and indirect exposures to these holdings and indicated inconsistent disclosures in registrant filings regarding the nature and extent of the exposures. The Corp Fin staff is issuing this guidance to provide additional information to assist registrants in their assessment of what information about exposures to sovereign debt risk of European countries they should consider disclosing and how they should disclose this information with the goal of greater clarity and comparability.

A copy of this guidance is available here.

Our strategic partnership with CCH, a Wolters Kluwer business, has enabled us to craft our Audit & Accounting eAlert. The articles have been selected from CCH’s Accounting Research Manager Daily and/or Weekly Summary and we hope you find them valuable and relevant. Please feel free to contact ParenteBeard LLC at info@ParenteBeard.com if you have any questions related to these stories or ParenteBeard's services.

©2012 CCH. All Rights Reserved.