Accounting standards

Ernst & Young has settled charges with the Securities and Exchange Commission for $2.9 million alleging a conflict of interest in its audits of three companies.

The Financial Accounting Standards Board has issued a revised exposure draft of a proposed standard on earnings per share, along with a staff position on endowments for nonprofit organizations.

The Internal Revenue Service and the Treasury Department have issued a ruling to discourage companies from transferring pension plans to unrelated firms.

The Securities and Exchange Commission has issued a warning about the use of 401(k) debit cards that allow employees at some companies to borrow money from their retirement plans.

The Securities and Exchange Commission held a roundtable discussion on the performance of International Financial Reporting Standards and U.S. generally accepted accounting principles during the subprime crisis.

When I am a loss for the subject of a column, all I have to do is go to the Internet and I quickly find something to write about. What I found is a SEC press release that states the SEC has charged a mutual fund manager with violating socially responsible investing restrictions in socially responsible mutual funds that investors were told would not contain securities issued by companies involved with producing weapons, alcohol, tobacco, or gambling products.

The Securities and Exchange Commission’s Advisory Committee on Improvements to Financial Reporting has released a draft of its final report.The draft report updates a progress report released in February. Among the committee’s proposals are putting executive summaries at the beginning of annual and quarterly financial reports. The committee also wants to increase investor representation on the Financial Accounting Standards Board and the Financial Accounting Foundation. The committee proposes creating a Financial Reporting Forum to coordinate the efforts of FASB with the SEC, the Public Company Accounting Oversight Board, investors, auditors and other parties.

The fourth stage of the pending UCITS directives, which sought to introduce a complete “passport” allowing fund managers based in one European Union member state to run and trade funds in another in a pan-European format, has been temporarily tabled following outcries from Ireland and Luxembourg.The controversy surrounds Version IV of the “Undertakings for Collective Investment in Transferable Securities,” or UCITS — a set of EU directives that allow collective investment schemes to operate freely throughout the EU on the basis of a single authorization from one member state.

In a time of volatile energy prices and economic uncertainty, the Governmental Accounting Standards Board has issued a standard that should allow state and local governments to more easily use derivative financial instruments to hedge against changes in prices and interest rates.

Many aspects of business organizations today are challenged to do more with less, and the internal audit activity is no exception. As executive management and boards are increasingly recognizing the criticality of managing risks throughout their organizations, they are expecting more of their internal auditors than ever before.

Phillip Bennett, former chairman and CEO of the investment group Refco, has settled with the Securities and Exchange Commission over charges that he concealed hundreds of millions of dollars in trading losses and operating expenses.

The Internal Revenue Service has proposed amending its regulations to provide further guidance to taxpayers in the home construction industry.

The Securities and Exchange Commission's Advisory Committee on Improvements to Financial Reporting voted Thursday to approve the recommendations in its final report, which the SEC will present publicly on Friday.

Under pressure from banks and regulators, the Financial Accounting Standards Board has decided to reverse itself and postpone the effective date of an accounting rule that would have forced financial institutions to move assets and liabilities from special-purpose entities such as mortgage-backed securities onto their balance sheets.

The Securities and Exchange Commission signed a memorandum of understanding with the Labor Department to make permanent the sharing of information to help protect the retirement savings of American workers.

The Securities and Exchange Commission plans to hold a roundtable discussion on Aug. 4 to compare the performance of International Financial Reporting Standards and U.S. generally accepted accounting principles during the recent period of market turmoil caused by the subprime loan crisis.

The Public Company Accounting Oversight Board has adopted rules and a related form to govern when a firm would be allowed to succeed to the registration status of a predecessor firm following a merger or other change in the registered firm's legal status.

Conrad Hewitt joined the Securities and Exchange Commission as chief accountant in August 2006. Hewitt is charged with establishing and enforcing accounting and auditing policy to enhance the transparency and relevancy of financial reporting at the SEC. His office also aims to improve the professional performance of public company auditors in order to ensure that financial statements used for investment decisions are presented fairly and have credibility. Lately he has been much involved with planning for the transition from U.S. accounting standards to international standards. WebCPA talked with him and his department's chief legal counsel, Jeff Minton, about the convergence of U.S. generally accepted accounting principles and International Financial Reporting Standards.

The Public Company Accounting Oversight Board plans to consider adopting rules on succession to a predecessor's registration status. The PCAOB has scheduled an open meeting for Tuesday, July 29, at 9:30 am in the board's open meeting room at 1666 K St. NW, Washington, D.C. The board will consider adopting rules and a corresponding form that govern when a firm would be allowed to succeed to the registration status of a predecessor firm following a merger or other change in the registered firm's legal form. The meeting will be open to the public and Webcast via a link on the PCAOB's Web site (www.pcaobus.org) that will be made available the day of the meeting. The meeting also will be available via podcast later in the day.

The Securities and Exchange Commission and the Federal Reserve are each pushing to gain regulatory authority over investment banks. At a hearing on Capitol Hill, SEC Chairman Christopher Cox and New York Federal Reserve President Timothy F. Geithner each outlined plans for the monitoring of commercial and investment banks. Both laid blame for the "patchwork" of regulatory agencies in lieu of one overseer for much of the current roiling of the financial markets. Cox urged lawmakers to give his agency responsibility over investment banks pointing out that the commission currently has authority over the markets in which they operate. Earlier this year, the Treasury Department proposed merging the SEC and the Commodity Futures Trading Commission into a single entity while expanding the oversight capacity of the Federal Reserve.