March 1, 2022

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FASB Issues Proposal on Presentation of an Unrecognized Tax Benefit

The FASB has issued for public comment a proposed Accounting Standards Update (ASU), EITF 13C-Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward or Tax Credit Carryforward Exists. This proposed ASU is a consensus of the FASB Emerging Issues Task Force (EITF). The objective of the amendments in this proposed ASU is to eliminate the diversity in practice in the presentation  of unrecognized tax benefits in the statement of financial position  in instances in which a net operating loss carryforward or a tax credit carryforward exists because the guidance in Topic 740, Income Taxes, is not explicit.

Under the proposed ASU, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, would be presented in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, except as follows. To the extent that a net operating loss carryforward or tax credit carryforward at the reporting date is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, the unrecognized tax benefit would be presented in the statement of financial position as a liability. No new recurring disclosures would be required.

Comments on this proposed ASU are due April 22, 2013.

The Proposed ASU is available here,

FASB Issues Proposal on Derivatives and Hedging

The FASB has issued for public comment a proposed ASU, EITF 13A-Derivatives and Hedging (Topic 815):Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes. This proposed ASU is a consensus of the FASB EITF. The proposed amendments would affect all entities, both public and nonpublic, that elect to apply hedge accounting of the benchmark interest rate under Topic 815, Derivatives and Hedging. The amendments in this proposed ASU would permit the Fed Funds Effective Swap Rate to be included as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to UST and LIBOR. No additional disclosures would be required.

Comments on this proposed ASU are due April 22, 2013.

The Proposed ASU is available here.

FASB Discusses Liquidation Basis of Accounting and Other Matters

As reported in its "Summary of Board Decisions" publication, the FASB met on February 13, 2013, and discussed the following issues:

  • Insurance contracts;
  • Liquidation basis of accounting; and
  • Disclosure framework.

Regarding its project on insurance contracts, the FASB continued its discussions of the proposed insurance contracts standard. Specifically, the FASB discussed: (a) reconsideration of the measurement of investment components and the aggregate insurance contracts revenue; (b) transition; (c) effective date and comparative financial statements; (d) early adoption; and (e) comment period. The FASB reached a number of decisions during this meeting on these topics, including the following:

  • The amount of consideration allocated to investment components and excluded from the premium presented in the statement of comprehensive income should be equal to the cash flows the insurer estimates it will be obligated to pay to policyholders or their beneficiaries regardless of whether an insured event occurs.
  • At each reporting date these cash flows should be re-estimated based on current assumptions utilized in the measurement of the insurance contract liability, with any effect on insurance contract revenue allocated prospectively to periods in proportion to the value of coverage (and any other services) that the insurer estimates will be provided in those periods.
  • When determining the margin at contract inception, insurers can measure the insurance contract liability and the margin using the insurers’ determination of the portfolio immediately prior to transition.
  • Contracts written or substantially modified subsequent to the transition date should be grouped into portfolios in accordance with the proposed guidance.
  • Insurers would not be allowed to early adopt the proposed guidance.

Regarding its project on the liquidation basis of accounting, the FASB reached a number of decisions, including the following:

  • The standard will apply to all entities except investment companies regulated under the SEC’s Investment Company Act of 1940.
  • There is no need for differential requirements for nonpublic companies.
  • The standard will provide specific recognition and measurement guidance only for an entity’s assets and the accruals of expected future income and expenses. An entity should recognize and measure its liabilities under the requirements of otherwise applicable U.S. GAAP. In applying those requirements, the entity might adjust the balance of a liability to reflect changes in the entity’s assumptions about the timing and amount of repayments of the liability; however, the entity should not anticipate legal release.

The Summary of Board Decisions is available here.

FASB Discusses Insurance Contracts

As reported in its "Summary of Board Decisions" publication, the FASB met on February 20, 2013, and continued its discussions of the proposed insurance contracts standard. The FASB discussed: (a) segregated assets related to direct performance linked insurance contracts; and (b) accretion of interest on the margin. The FASB reached a number of decisions on these topics, including the following:

  • The liability for “direct performance linked insurance contracts” and the assets directly linked to those liabilities should be reported in the insurer’s financial statements;
  • The guidance in Subtopic 944-80, Financial Services-Insurance-Separate Accounts, regarding an insurer’s consideration of qualifying segregated fund arrangements when performing analyses for consolidation under Subtopic 810-10, Consolidation-Overall, should be retained;
  • An insurer should accrete interest on the margin to reflect the time value of money; and
  • The interest accretion rates should be based on the same yield curves used for purposes of discounting the cash flows determined at inception of the portfolio of insurance contracts and not subsequently adjusted.

The Summary of Board Decisions is available here.

SEC Announces 2013 Examination Priorities

The SEC published its examination priorities for 2013, which cover a wide range of issues at financial institutions, including broker-dealers, clearing agencies, exchanges and self-regulatory organizations, investment companies, hedge funds and private equity funds, and transfer agents.

According to Carlo V. di Florio, Director of the SEC’s Office of Compliance Inspections and Examinations, which is responsible for the national examination program, they are publishing the priorities to promote compliance and communicate with investors and registrants about areas that the SEC perceive to have heightened risk.

The examination priorities address issues that span the entire market as well as issues that relate specifically to particular business models and organizations. The market-wide priorities include fraud detection and prevention, corporate governance and enterprise risk management, conflicts of interest, and technology controls. Priorities in each program area include:

  • For investment advisers and investment companies - presence exams for newly registered private fund advisers, and payments by advisers and funds to entities that distribute mutual funds;
  • For broker-dealers - sales practices and fraud, and compliance with the new market access rule;
  • For market oversight - risk-based examinations of securities exchanges and FINRA, and order-type assessment; and
  • For clearing and settlement - for transfer agent exams, timely turnaround of items and transfers, accurate recordkeeping, and safeguarding of assets. For clearing agencies designated as systemically important, conduct annual examinations as required by the Dodd-Frank Act.

The press release on this matter 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.

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