May 3, 2022

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.


IIA Issues Updated Toolkit

The Institute of Internal Auditors (IIA) has updated the Building Awareness Toolkit. According to the IIA, this toolkit now includes a section of advocacy at the chapter level, which provides tips on forming a chapter advocacy committee and meeting with local elected officials.

This toolkit also includes creative ideas, sample programs, videos, tips, tools, and templates to help individuals, audit teams, and IIA chapters raise awareness and highlight the value of the internal audit activity. The IIA hopes that these efforts help to dispel misperceptions of the profession and to enhance the business community's knowledge of the essential role internal auditing plays in strong organizational governance, internal control, and effective risk management. According to the IIA, when management and the board of directors fully understand and appreciate the value of internal auditing, they ensure the internal audit activity is adequately sourced and effectively utilized.

The Building Awareness Toolkit is available from the IIA here.

FASB Proposes Deferring the Effective Date for Certain Nonpublic Benefit Plan Disclosures

The FASB has issued a proposal to defer indefinitely the effective date for certain disclosures about investments held by a nonpublic employee benefit plan in the plan sponsor's own equity securities. Stakeholders are asked to provide comments on proposed Accounting Standards Update (ASU), Fair Value Measurement (Topic 820): Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04, by Friday, May 31, 2013.

The proposal seeks to address stakeholder concerns about certain disclosure requirements that would potentially provide proprietary information about private companies through the dissemination of their employee benefit plans' financial statements on the plan regulator's website. The deferral would allow time for discussions between the regulator(s) and stakeholders about the specific quantitative disclosures and their potential effect on the plan sponsor as a result of making that information public.

The proposed deferral would be effective upon issuance of the final ASU, expected to be issued in June 2013.

The proposed ASU is available here.

FASB Adds Projects to EITF Agenda and Discusses Other Matters

As reported in its "Summary of Board Decisions" publication, the FASB met on May 1, 2013, and decided to add the following issues to the EITF agenda:

  • Determination of Whether a Performance Condition That Is Allowed to Be Met after the Requisite Service Has Been Provided by the Employee Is a Vesting Condition or a Nonvesting Condition; and
  • Reclassification of Collateralized Mortgage Loans upon a Troubled Debt Restructuring and Accounting for the Effect of a Federal Housing Administration Guarantee.

The FASB considered, but decided not to add to the EITF agenda a project to develop guidance on the application of diluted earnings per share for equity-linked contracts that are accounted for as liabilities.

The FASB also discussed the Private Company Council (PCC) and decided to add to its technical agenda a standing project with the following objectives: (a) to monitor and consider PCC proposed and final alternatives for private companies within U.S. GAAP, in accordance with the endorsement process; and (b) to determine whether PCC proposed and final alternatives are appropriate for public companies, not-for-profit organizations, and employee benefit plans.

In addition, the FASB discussed not-for-profit financial reporting-other financial communications. Specifically, the FASB discussed the results of the research performed to date on existing other financial communication frameworks (e.g., GASB Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments) and financial communications in the not-for-profit sector today. The FASB decided to issue a Discussion Paper to solicit input from the not-for-profit sector; the feedback would be used in assisting the FASB when making a decision of whether to add this project to its standard-setting agenda. The FASB decided that the issuance date should coincide with the issuance date of the Exposure Draft on the "Not-for-Profit Financial Reporting: Financial Statements" project. The FASB noted that this would bring more attention to the Discussion Paper as well as provide a better basis for stakeholders to provide input. Based on the current technical plan, the Discussion Paper would be issued in the fourth quarter of 2013.

The summary of board decisions is available here.

GASB Publishes New Statement for Nonexchange Financial Guarantees

The Governmental Accounting Standards Board (GASB) has published GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, which was approved on April 22, 2013. GASB 70 provides accounting and financial reporting guidance to state and local governments that offer nonexchange financial guarantees and for governments that receive nonexchange financial guarantees on their obligations.

GASB 70 requires a state or local government guarantor that offers a nonexchange financial guarantee to another government, organization, or individual to recognize a liability on its financial statements when it is more likely than not that the guarantor will be required to make a payment to the obligation holders under the agreement.

GASB 70 also requires:

  • A government guarantor to consider qualitative factors when determining if a payment on its guarantee is more likely than not to be required. Such factors may include whether the issuer of the guaranteed obligation is experiencing significant financial difficulty or initiating the process of entering into bankruptcy or financial reorganization;
  • An issuer government that is required to repay a guarantor for guarantee payments made to continue to report a liability unless legally released. When a government is released, the government would recognize revenue as a result of being relieved of the obligation; and
  • A government guarantor or issuer to disclose information about the amounts and nature of nonexchange financial guarantees.

The requirements of GASB 70 are effective for reporting periods beginning after June 15, 2013. Early adoption of the standard is encouraged.

The press release on the publishing of GASB 70 is available here.

GASB 70 is available here.

SEC Regulations Committee Meeting Minutes Published

The Center for Audit Quality SEC Regulations Committee has issued minutes from its joint meeting with the staff of the SEC held on March 19, 2013. This committee meets periodically with the SEC staff to discuss emerging technical accounting and reporting issues relating to SEC rules and regulations. Topics discussed at this meeting included the following:

  • Pro forma adjustments under Rule 11-02(b)(6) of Regulation S-X;
  • Rulemaking under the Jumpstart Our Business Startups Act;
  • Recommendations by the SEC Advisory Committee on Small and Emerging Businesses;
  • Complying with Rule 3-09 of Regulation S-X when the registrant's and investee's fiscal year ends differ by six months;
  • Applying the Annual Report "grace period" in Rule 3-09 of Regulation S-X in connection with a registration statement;
  • Measuring the significance of a recently acquired subsidiary or issuer guarantor under Rule 3-10(g) of Regulation S-X; and
  • Application of the updating requirements for Rule 3-05 financial statements when Rule 3-06 of Regulation S-X has previously been used to satisfy the audited financial statements requirement in the most recent year.

The meeting minutes also indicate that the Division of Corporation Finance plans to hold a "Financial Disclosure Roundtable" on different perspectives about what information should be included in a company's basic financial statements versus its broader financial reporting package (e.g., in MD&A). No date has been set for this roundtable.

The March 19, 2013, meeting minutes are available here.


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