Accounting standards

The Governmental Accounting Standards Board has issued a new standard aimed at improving how state and local governments report information about derivative instruments in their financial statements.

U.S. corporations and accountants concerned over rising audit costs due to Sarbanes-Oxley requirements may soon have more to worry about — including another spike in audit charges as a result of the Public Company Accounting Oversight Board’s proposed new standard for engagement quality review.The stricter standard, which was initially proposed back in February and would apply to audits of public companies performed under PCAOB standards, is risk-based and designed to ease identification and speed correction of audit deficiencies prior to issuing the auditor’s report.

The Public Company Accounting Oversight Board issued the latest inspection report of Big Four firm Deloitte & Touche, noting problems with nine audits performed by the firm last year.With two unidentified clients, the PCAOB said that Deloitte failed to identify a departure from generally accepted accounting principles that it should have addressed before issuing its audit report. In both cases, the clients incorrectly concluded that interest rate swaps qualified for hedge accounting using the short-cut method in Statement of Financial Accounting Standards No. 133.

Last month, a survey released by Big Four Firm Deloitte revealed that U.S. companies require just a tad more preparation and training before International Financial Reporting Standards can be adopted. My guess — as a more-than-casual observer of the profession — is that that finding, which polled chief financial officers and other senior-level financial professionals, probably surprised no one.With convergence of U.S. GAAP with IFRS an inevitability, the profession needs to get proactive, as opposed to its traditional reactive pose, in bracing for the eventual by-product of that union — a single set of global accounting standards.

The state of e-services today can be compared to where e-filing was about five years ago.“If you look back five years, what we were saying about e-filing would sound a lot like what we’re saying about e-services today,” said Roger Harris, president of Padgett Business Services and former chair of the Internal Revenue Service Advisory Council. “As practitioners and the IRS worked together, a lot of problems were solved. And today e-filing is the normal way of doing business. It will be the same with e-services.”

Financial guarantee insurance companies stand behind trillions of dollars in financial obligations — including many of the mortgages that have recently fallen into default.So the Securities and Exchange Commission had good reason to call for new disclosures and clarifications of existing accounting and financial reporting standards.

Continuing a theme, this column is another “Mythbuster” that demonstrates the fallacy behind a couple of longstanding arguments against using values in financial statement reporting.In our prior column, we exploded the myth that an asset’s purchase price is a reliable estimate of its original value. We did this by showing that an asset’s market value is not a single point, but a distribution of amounts observed in a number of actual transactions. Because any particular transaction is a nonrandom sample of only one observation out of a large population, it cannot be relied upon to reflect the asset’s fair value.

Never before has the issue of executive compensation garnered as much of the public’s interest as it has in recent years, due in large part to several highly publicized corporate scandals.The backlash from incidents involving top executives at global organizations, and recent changes in Securities and Exchange Commission proxy and accounting rules, have prompted interesting new trends related to how executives and board members within large public companies are being compensated and to what degree.

Rules and guidance issued last year by the Securities and Exchange Commission and the Public Company Accounting Oversight Board have made it easier for companies to cut the time they spend on Sarbanes-Oxley compliance.

The Treasury and Internal Revenue Service have issued Revenue Procedure 2008-35, TD 9409, and Reg. 121698-08, which update the rules regarding disclosure of tax return information by tax return preparers.The new rules provide an exception that allows a U.S. tax return preparer to obtain consent from a taxpayer to disclose a taxpayer's Social Security number to a non-U.S. tax return preparer when: The U.S. preparer makes the disclosure through the use of an "adequate data return safeguard;" the non-U.S. preparer receives the SSN via an "adequate data protection safeguard;" and the U.S. preparer verifies the maintenance of the adequate data protection safeguards in the request for the taxpayer's consent.

The three new members of the Securities and Exchange Commissioners who have just been approved by the Senate will have to hit the ground running to cope with a multitude of unfinished business.

The Senate has confirmed three new members of the Securities and Exchange Commission by unanimous consent, restoring the SEC to its full strength of five members.

The American Institute of CPAs plans to offer training in International Financial Reporting Standards and the Extensible Business Reporting Language.

Securities and Exchange Commission chief accountant Conrad Hewitt said SEC staff members planned to propose a date for mandating the use of International Financial Reporting Standards by public companies, but the date would not be confirmed for two years, giving accountants some extra leeway.

The International Accounting Standards Committee Foundation has released the IFRS Taxonomy 2008, a complete translation of International Financial Reporting Standards into Extensible Business Reporting Language.

The Securities and Exchange Commission plans to launch an ambitious project to re-examine how companies and other entities should make financial disclosures to take advantage of the latest technologies.

CCH has enhanced the Audit Public Library in its Accounting Research Manager database with a set of questions and answers about Financial Accounting Standard 157 for fair value measurements.

Japanese electronics giant NEC has settled with the U.S. Securities and Exchange Commission over charges that it improperly booked revenue from its customer contracts and did not maintain accurate books and records, causing the company to miss filing financial statements two years in a row.

The Securities and Exchange Commission has approved a one-year extension of the compliance date for smaller public companies to meet the Section 404(b) auditor attestation requirement of the Sarbanes-Oxley Act.

Financial regulators from around the world are setting up a monitoring group that will work with international accounting standards-setters.