On February 28, the Financial Accounting Standards Board issued Update No. 2013-04- Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force).

Current U.S. Generally Accepted Accounting Principles do not have guidance for these arrangements. This guidance reduces complexity and cost for preparers of financial statements by providing a specific recognition and measurement model for those liabilities. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 5, 2013. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2014.  

On February 21, FASB also issued the following two proposed Accounting Standard Updates, comments due April 22, 2013:

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 (a consensus of the FASB Emerging Issues Task Force). This is a narrow-scoped proposal that would permit the Fed Funds Effective Swap Rate to be included as a benchmark interest rate in addition to U.S. Treasury Rates (UST) and LIBOR.

The second proposal Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward Exists (a consensus of the FASB Emerging Issues Task Force), addresses guidance for presenting unrecognized tax benefits to better reflect an entity’s ability to settle any additional income taxes resulting from the disallowance of a tax position when net operating loss carryforwards or tax credit carryforwards exist.   

On February 14, FASB issued proposed ASU, Financial Instruments-(Overall Subtopic 825-10); Recognition and Measurement of Financial Assets and Financial Liabilities (a consensus of the FASB Emerging Issues Task Force), aimed at providing a comprehensive measurement framework.

On February 18, the International Accounting Standards Board approved four amendments to International Financial Reporting Standards  under its annual improvements project. These are amendments to IFRS 2, Share Based Payment; IFRS 8,Operating Segments – aggregation of operating segments and reconciliation of the total of the reportable segments’ assets to the entity’s assets; and IFRS 13, Fair Value Measurement.

On February 22, the IASB approved its staff to publish a request-for –information document on its rate regulation project but declined to clarify the requirements of IFRS 7: Financial Instruments: Disclosures. The issue is not settled, however, and will return to the IFRS Interpretations Committee for clarification of the disclosure requirements in paragraph 42c of the standard, addressing an entity’s continuing involvement in derecognized financial assets.

On the auditing front, The Public Company Accounting Oversight Board’s report released February 25 shows a decrease in significant audit performance deficiencies among smaller audit firms, those that audited 100 or fewer public companies.  The PCAOB’s 2013 budget of approximately $245.6 million, an increase of around 8 percent from 2012 was approved February13 by the Securities and Exchange Commission.  Commissioner Aguilar specifically addressed the need for the PCAOB to continue to try to resolve China’s resistance to cooperating with U.S. regulators on providing audit information.

It is not only the SEC bringing these cases to court. On February 15, investment funds that bought shares in a Chinese e-learning company sued Deloitte and Touche LLP and its China-based affiliate alleging that the firm failed to properly audit the company’s financials or it would have found it to be a “house of cards” (Special Situations Fund III QP LP v. Deloitte Touche Tohmatsu CPA, S.D.N.Y., 13-01094, 2/15/13).