October 19, 2012
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Foreign Currency - FASB Issues Proposed ASU
The FASB has issued for public comment a proposed Accounting Standards Update (ASU), Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. This is the second proposed ASU resulting from EITF Issue No. 11-A, "Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." This proposed ASU is intended to resolve the diversity in practice about whether Subtopic 810-10, Consolidation-Overall, or Subtopic 830-30, Foreign Currency Matters-Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a consolidated foreign entity. In addition, the amendments would resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity.
The amendments in this proposed ASU would be applied prospectively to derecognition events occurring after the effective date. Prior periods would not be adjusted. Early adoption would be permitted. If an entity elects to early adopt the amendments in this ASU, it would apply them as of the beginning of the entity’s fiscal year of adoption. The effective date will be determined after the EITF considers stakeholder feedback on the proposed ASU.
Comments on this proposal are due December 10, 2012.
A copy of the Proposed ASU – Foreign Currency Matters is available here.
Consolidation - FASB Issues Proposed ASU
The FASB has issued for public comment a proposed ASU, Consolidation (Topic 810): Accounting for the Difference between the Fair Value of the Assets and the Fair Value of the Liabilities of a Consolidated Collateralized Financing Entity. This is a consensus of the EITF and is intended to resolve the diversity in practice in the accounting by a reporting entity for the difference between the fair value of the financial assets and the fair value of the financial liabilities of a consolidated collateralized financing entity and to arrive at the amount a reporting entity would ultimately expect to realize.
The amendments in this proposed ASU would be applied using a modified retrospective approach to only those consolidated collateralized financing entities that exist as of the date of adoption. Adjustments to the financial assets and financial liabilities of those consolidated collateralized financing entities would be made to all relevant prior periods presented upon the date of adoption, beginning from the fiscal year in which FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R) (codified by ASU No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities), was initially adopted. Reporting entities would also be permitted to apply the proposed amendments retrospectively to all consolidated collateralized financing entities by adjusting the financial assets and financial liabilities of all relevant prior periods presented upon the date of adoption, beginning from the fiscal year in which FASB 167 was initially adopted. Early adoption would be permitted. The effective date will be determined after the EITF considers stakeholder feedback on the proposed ASU.
Comments on this proposal are due December 10, 2012.
A copy of the proposed ASU - Consolidation is available here.
Governance Leaders Release Tool for Audit Committees
A number of organizations have joined forces to launch a new tool, Audit Committee Annual Evaluation of the External Auditor, to assist audit committees in performing an annual evaluation of the external auditor in order to make an informed recommendation to the Board whether to retain the auditor. The groups behind the effort are: the Association of Audit Committee Members, Inc.; Center for Audit Quality (CAQ); Corporate Board Member; an NYSE Euronext Company; Independent Directors Council; Mutual Fund Directors Forum; National Association of Corporate Directors; and Tapestry Networks.
The new annual evaluation tool provides a brief, scalable approach that allows audit committees to take advantage of formal and informal opportunities to objectively evaluate the auditor’s performance. The tool contains sample questions to gauge the quality of: services and sufficiency of resources provided by the auditor; communication and interaction with the auditor; and the auditor’s independence, objectivity and professional skepticism. It also provides a sample form for obtaining input from company personnel. Audit committees also are encouraged to find ways to communicate to shareholders that they perform an annual evaluation of the auditor and explain their process and scope of the assessment.
A press release is available from the CAQ here.
The tool is available from the CAQ here.
SEC Staff Publishes Illustrative Letter
The staff in the SEC’s Division of Corporation Finance has published an illustrative letter, “Sample Letter Explaining Transition to EDGAR Submission and Filing of Draft Registration Statements.” This letter was sent to certain companies whose draft registration statements were under staff review to explain how they can transition to electronic filing via the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR). Specifically, this letter provides guidance on how to start using the EDGAR system to submit draft registration statements pursuant to the “Jumpstart Our Business Startups Act” (JOBS Act).
The JOBS Act was signed into law on April 5, 2012, and is intended to increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies. Among other things, the JOBS Act amends the Securities Act of 1933 (Securities Act) to include a new Section 6(e) that provides for the confidential submission of registration statements for review. Under Section 6(e), an emerging growth company (as defined) may confidentially submit to the SEC a draft registration statement for confidential, non-public review prior to public filing, provided that the initial confidential submission and all amendments thereto are publicly filed not later than 21 days before the date on which the issuer conducts a road show, as defined by the Securities Act.
A copy of the illustrative letter is available here.
SEC Staff Issues Guidance on Shareholder Proposals
The staff in the SEC’s Division of Corporation Finance issued, Staff Legal Bulletin No. 14G, Shareholder Proposals. This staff legal bulletin provides information for companies and shareholders regarding Rule 14a-8 under the Securities Exchange Act of 1934. Specifically, this bulletin contains information regarding the:
- Parties that can provide proof of ownership under Rule 14a-8(b)(2)(i) for purposes of verifying whether a beneficial owner is eligible to submit a proposal under Rule 14a-8;
- Manner in which companies should notify proponents of a failure to provide proof of ownership for the one-year period required under Rule 14a-8(b)(1); and
- Use of website references in proposals and supporting statements.
A copy of the legal bulletin is available here.
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