The Financial Accounting Standards Board has issued two new Accounting Standards Update proposals, the most recent Technical Corrections and Improvements Related to Glossary Terms in its codification literature on May 6, 2013. Comments are due August 5, 2013.

On April 30, 2013, FASB proposed Fair Value Measurement (Topic 820): Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans. Employee benefit plans typically must file their Forms 5550 with the federal labor agency by July 31. Thus, the Employee stock ownership plan trade group chiefs had urged FASB to take concrete action in the first half of this year to prevent companies turning away from ESOPs. The comment deadline is set for May 31 and the plan is to issue it in June.

On April 30, speaking at FASB’s Small Business Advisory Committee, FASB chairman Leslie Seidman, in response to comments that private equity firms are facing substantial negative unintended consequences from implementing ASC 820, said that the Financial Accounting Foundation has targeted accounting for fair value measurement and disclosures for its next post implementation review (PIR), although no date has yet been set.

 At that same meeting FASB chairman said it was setting up a “support group” with aim of facilitating discussions among preparers, auditors, regulators, investors, the Securities and Exchange Commission and the International Accounting Standards Board, and others.  The group will help with the transition from the current detailed requirements to the new principle based requirements of the revenue recognition standard.  

FASB and IASB are expected to issue the final standard, which is currently titled, Revenue from Contracts with Customers, during the second quarter this year. 

The International Accounting Standards Board issued an exposure draft April 25 detailing proposals to introduce an interim rate-regulation accounting regime into international standards. International standards currently offer no guidance on the accounting for regulatory assets and liabilities. IASB last attempted to tackle rate regulation in 2009 but it subsequently dropped the proposals which resulted in Canada carving out rate regulation from its IFRS adoption platform.

IASB followed this up on April 29, 2013 by unveiling the membership of its new rate-regulation advisory body. The London-based standard setter said it has set up the group to “help in its project on rate-regulation by providing a variety of expert perspectives, including those of preparers, auditors and users of financial statements, and regulators.”

The Governmental Accounting Standards Board on April 30 issued Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. It requires a 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.  This statement became relevant in  In re City of Harrisburg, Pa., where the Securities and Exchange Commission settled its case against the city of Harrisburg for fraud, the first time the SEC has charged a municipality with misleading investors in statements made outside of securities documents. SEC officials probing the Harrisburg events have been aware of rulemaking at GASB that led to the new standard.

 Specifically, the SEC alleged that Harrisburg failed to provide ongoing financial information and audited financial statements for the benefit of investors who held hundreds of millions of dollars in bonds it issued or guaranteed. The SEC said the misleading statements came in the city's 2009 budget report, its annual and mid-year financial statements and a "State of the City" address.

Auditing highlights center on the recent activities of the Public Company Accounting Oversight Board. The PCAOB released a policy statement on April 24, 2013, detailing how “extraordinary cooperation” with PCAOB investigations could result in credits with the regulator such as reduced charges or sanctions in a disciplinary proceeding.

Some examples of extraordinary cooperation include self-reporting violations before they come to the attention of the board or another regulator, taking remedial action and providing substantial assistance in the PCAOB’s investigative processes. 

The day following  PCAOB’s statement release, on April 25, 2013, Senators Jack Reed (D.R.I) and Chuck Grassley (R-Iowa) introduced a bill (S.48) that would make the PCAOB’s disciplinary proceedings public (like those of the SEC). The lawmakers assert that the confidential nature of the proceedings allow the “firms that engage in misconduct to drag out the proceedings to for years while the investing public is kept in the dark.”

Although the PCAOB may be satisfied with the congressional mandate to have its disciplinary proceedings confidential, a recently rereleased auditing standard shows that they want to bring more scrutiny to bear upon company relationships and transactions with related parties.  

On May 7, 2013, the PCAOB reproposed for public comment an auditing standard, Related Parties, and related amendments to other standards including AU sec. 316, Consideration of Fraud in a Financial Statement Audit, and Auditing Standard No. 12, Identifying and Assessing Risks of Material Misstatement.

The proffered standard will require additional scrutiny of transactions often involving subsidiaries, affiliates and relatives of company executives, as Chairman Doty said to “help avert the corporate failures and job losses we read about all too often once it’s too late to do so.”

Compiled by Laura Tieger-Salisbury, Accounting Policy and Practice Report Copy Editor