Private Co. Financial Reporting: Time for a New Approach?

Join us on June 22 from 1-2:30 pm EDT (1.5 CPE) for a free webcast on: Private Co. Financial Reporting: Time for a New Approach? The webcast, co-sponsored by Grant Thornton and FEI, will provide an update on the Blue Ribbon Panel on Standard-Setting for Private Co's (which met most recently on May 14, next mtg is July 19, minutes have been posted for the April 12 meeting). The Blue Ribbon Panel was formed jointly this year by the Financial Accounting Foundation (which oversees FASB), the AICPA, and the National Association of State Boards of Accountancy (NASBA).

Speakers on the webcast include GT partner John Hepp, who coauthored a white paper with Gary Illiano on this subject, Meredith Vogel, audit senior manager in GT's National Audit Support group and current FAF Staff fellow supporting the Blue Ribbon Panel, and FEI Committee on Private Company Standards (CPC-S) members George Beckwith (incoming vice-chair, CPC-S, and member of the FASB-AICPA Private Co. Financial Reporting Committee) and Andy Thrower (past chair, CPC-S, past member of FASAC, and member of FASB's Small Business Advisory Committee).

See more details about the webcast, and register here .

UPDATE: You will need to know this to register:

You will receive an email confirmation from LearnLive, GT's webcast platform provider, with instructions for attending the webcast.

If you need assistance registering please call LearnLive directly at 888.228.0988. If you have not previously attended a Grant Thornton Thinking webcast powered by LearnLive, follow these instructions:

Go to https://university.learnlivetech.com/gtt

Choose "New Student Registration" to create your account.

Enter company pass code "grant" where prompted.

Locate the webcast in the catalog (Course 16954) and sign up.

If you have attended a Grant Thornton webcast within the past year, simply log in to your account.

Please note: To receive CPE credit for attending this webcast, each individual participant must log on to the webcast separately.
______________________________________

Questions? Contact Loryn Wells at loryn.wells@gt.com or 312.602.8225.

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Senate, House Conf. Cmte. May Provide Sarbox Exemption For Small Co's

PwC reported in its Breaking News publication yesterday that the House and Senate conference committee working on the Financial Regulatory Reform legislation may provide an exemption from Sarbanes-Oxley Section 404b (external audit of internal control) for small companies (non-accelerated filers, generally defined as co's with less than $75 million market cap).

The PwC article states, in part:

Smaller companies have benefited from a series of temporary deferrals from the internal control audit requirements since they became effective for larger companies in 2004. The most recent deferral expired June 15, 2010. That means absent any further relief, smaller companies would be required to comply with the Sarbanes-Oxley internal control audit requirements for fiscal years ending on or after June 15, 2010 (e.g., June 30, 2010 year-end).

A select group of Senators and Congressmen (commonly referred to as a conference committee) is currently working to reconcile the separate versions of the legislation into a single bill. Although changes are still possible, the conference committee recently took steps to provide smaller companies with a permanent exemption from the Sarbanes-Oxley internal control audit1 requirements. The conference committee has also agreed to direct the SEC to conduct a study on how to reduce the cost of complying with the internal control audit requirements for companies with market capitalizations between $75 million and $250 million.

There are a number of steps that must be completed before any permanent exemption would become effective. The provision must be included in the final, agreed-to legislation ? called a conference report; the conference report must be approved by both houses of Congress; and the President must sign the bill into law. It is anticipated that the conference committee will complete its work during the week of June 21, 2010 with a final bill passed and forwarded to the President for his
signature sometime in July. While it is presently unclear, the SEC may need to
amend its rules and forms to facilitate a permanent exemption.

My two cents: (I remind you of the disclaimer on the right side of this blog) I have avoided providing minute-by-minute updates on the Sarbox exemption issue since I think it was very much in play and didn't want to lead anyone down a path of relying on an exemption (or not) until it was fairly certain, particularly given past statements of the SEC last fall when they issued what Chairman Mary Schapiro said at the time would be the final deferral, and given statements issued by organizations such as the Center for Audit Quality, CFA Institute, and Council of Institutional Investors last week arguing against such an exemption. However, as reported by PwC above and others, and in the more detailed Conference Committee Update linked below, it does appear the chance of a potential exemption, even at this very late date, is, if nothing else, a possibility. But it ain't over till its over.

General Conference Committee Update
The House Financial Services Committee, Chaired by Rep. Barney Frank, and the Senate Commitee on Banking, Housing and Urban Affairs, Chaired by Sen. Chris Dodd, issued what appear to be identical press releases yesterday providing a detailed update on the conference committee's progress on the entire bill (not only the Sarbox issue). See House press release, Senate press release.

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House-Senate Conf. Comm. Agrees On Fin Reg Reform Bill (Dodd-Frank Act), For Vote Next Week

After pulling a 20-hour marathon session, the House and Senate conference committees agreed early this morning on the Financial Regulatory Reform Bill, which will be voted on by the full House and Senate next week, and if passed, sent on to President Barack Obama to sign into law. Here are some of the early morning reports on major news websites:

Congress Reaches Deal on Financial Bill (Edward Wyatt, NYT)
U.S. Lawmakers Reach Accord on New Finance Rules (Damian Paletta, WSJ)
House, Senate Leaders Finalize Details of Sweeping Financial Overhaul (Brady Dennis, WashPost)
U.S. Lawmakers Approve Financial Overhaul; Marathon Session Produces $19 bn levy and Softening of Volcker Rule (Tom Braithwaite, Francesco Guerrera and Justin Baer, FT)

As to timing of when the bill could become law, as noted in the WashPost article cited above:

The dawn compromise set up a potential vote in both houses of Congress next week
that could send the landmark legislation to President Obama by July 4.

Proposed Name of Law: Dodd/Frank Act
Damian Paletta reported in the WSJ Blog this morning that the legislation, if signed into law, would be called the Dodd/Frank Act.

In a statement issued today, Sen. Dodd, Chairman of the Senate Committee on Banking, Housing and Urban Affairs, said:

Over the past two years, America has faced the worst financial crisis since the Great Depression. Millions of Americans have lost their homes, their jobs, their savings and their faith in our economy.?

?The American people have called on us to set clear rules of the road for the financial industry to prevent a repeat of the financial collapse that cost so many so dearly.?

?This bill meets that challenge.?

Check Financial Executives International's website, www.financialexecutives.org, and this blog www.financialexecutives.org/blog, for updates on legislation, accounting and tax news news, practical research reports from our research affiliate, the Financial Executives Research Foundation www.ferf.org, and more.

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FASB, IASB Release 'Staff Draft' of Proposal on Financial Statement Presentation

In a special "Action Alert" issued earlier today, FASB and the IASB announced the release of a "Staff Draft" of their upcoming Exposure Draft of significant proposed changes to financial statements, as part of the Financial Statement Project.

The boards note in today's announcement that outreach activities they plan to issue the ED in early 2011, and plan to engage in the outreach activities during the next six months, focusing on two areas:

1. The perceived benefits and costs of the proposals
2. The implications of the proposals for financial reporting by financial services entities.

In particular, the staff plans to:
1. Ask users of financial statements to evaluate how the proposed changes to the organization of, and information presented in, financial statements would benefit their analysis and resource allocation decisions.
2. Ask preparers of financial statements to evaluate the effort and cost involved in adopting these proposed changes in their unique circumstances.
3. Meet with preparers and users of the financial statements of financial services entities to discuss the proposed changes.
4. Gather additional information about benefits and costs by doing more field work on the proposals in the staff draft, including additional field testing, experimental research, or both.

As to timing of release of the actual Exposure Draft (ED), FASB and the IASB say they expect to publish the Exposure Draft (ED) in early 2011.

While an "Staff Draft" is not a formal request for comment (as opposed to the release of a formal Exposure Draft or ED), today's FASB/IASB announcement adds:"While neither the FASB nor the IASB is formally inviting comments, they welcome input from interested parties.

Links to Staff Draft, Related Info
Introduction to the Staff Draft (9 pages)
Staff Draft of an Exposure Draft on Financial Statement Presentation (155 pages)

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If You're Going To San Francisco...AAA Will Be There

If you're going to San Francisco between July 31 and August 4, you can catch the American Accounting Association's (AAA's) Annual meeting. I attended the Annual Meeting in Chicago in 2007, and I highly recommend it. The AAA is the professional association for academics, but many practitioners (financial executives, auditors, audit committee members, and others) belong to AAA as well. (I am a card-carrying member of AAA.)

Here are just a few highlights of the AAA Annual Meeting, and the CPE sessions that precede it:

• Conference on Teaching and Learning - with two tracks - one for practioners interested in learning about teaching now or in the future, and one for current teachers - I highly, highly recommend this program, which I attended in its earlier form in 2007; and again in NYC last year; various FEI members have attended over the years and found it a valuable and high level intro to what you'll face if you decide to enter teaching as an adjunct, part time, or full time prof; contact Dee Harris at AAA immediately if you are interested in this program at deirdre@aaahq.org or 941-556-4119, since space is limited.
• XBRL Teaching Workshop - preceding CPE Sessions and Annual Meeting - July 29-30.
• Concurrent CPE sessions take place from Friday evening July 30 - Sun. Aug. 1
• The AAA Annual Meeting takes place from Mon. Aug. 2 - Wed. Aug. 4
• FEI leadership and members speaking at the AAA CPE Sessions/Annual Meeting Panels include (a) Marie Hollein, FEI President and CEO, FEI, on Panel 1.7: "Auditors, Management and Boards: What They Need to Deter Fraud," moderated by Cindy Fornelli, Executive Director, Center for Audit Quality, with additional panelists Eric Allegakoen, Vice President and Chief Audit Executive of Adobe Systems Incorporated, Randy Fletchall, Americas Vice Chair, Quality and Risk Management, Ernst & Young; b) Betsy Rafael, (VP Corporate Controller and Principal Accounting Officer at Apple, Inc.), as luncheon speaker Tues. Aug. 3 from 12:00 - 1:45 on: "The Future of Accounting: A Preparer's Perspective of the Uncertain and Challenging Future of Accounting as Convergence, Rregulation, and New Business Models Meet"; (c) Rick Brounstein (EVP and CFO, NewCardio, Inc.) and Bob Laux (Senior Director of Financial Accounting and Reporting, Microsoft Corporation), on Panel 3.2: "User and Preparer Views on the Financial Statement Presentation Project," along with panelists Dane Mott (Senior Equity Analyst, J. P. Morgan) and Sandra Peters (Head, Financial Reporting, CFA Institute). Moderator is former SEC Acting Chief Accounting Scott Taub, now of Financial Reporting Advisors. This panel was organized by 2009-2010 AAA Financial Accounting and Reporting Section (FARS) Chair Teri Yohn (also an FEI member, and a former SEC Academic Fellow). Another panel featuring FEI member and former AAA President Gary Previts is described further below.
• Panel 5.1, Tues. Aug. 3, 2-3:30: The Pathways Commission (Charting a National Higher-Education Strategy for the Next Generation of Accountants)Moderator: Bruce Behn, The University of Tennessee; Panelists: Bill Ezzell, Deloitte LLP, Gary Previts, Case Western Reserve University (also an FEI member), Judy Rayburn, University of Minnesota, and Denny Reigle, American Institute of CPAs. The concept of charting a national higher education strategy was one issue identified in U.S. Treasury Advisory Committee on the Audit Profession's (ACAP's) 2008 report; the subcommitee on education/human resources was led by Gary Previts.
• Panel 7.5: "Operating an Accounting Blog,"Moderated by: Bill McCarthy, Michigan State University, Panelists: Dave Albrecht, The Summa (Concordia College), Joe Hoyle, Teaching Financial Accounting (University of Richmond), Ed Ketz, Accounting Cycle (Penn State), Francine McKenna, re: The Auditors
  Tom Selling, The Accounting Onion.
• Additional speakers at the AAA CPE Sessions and Annual Meeting each year include prominent members of the SEC, PCAOB, FASB and IASB board and staff.

The AAA Annual Meeting is a great opportunity to learn, mix and mingle with academics, practitioners and regulators. Think about it! But hurry and register soon if you haven't already!

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FASB/IASB's Rev. Rec.Proposal - GUEST POST by Ron Fink, CFOZone

NOTE: While I am on vacation, I invited some guest posts from some popular bloggers. Today's guest post below is from Ron Fink, Editor, CFOZone.

While convergence of international accounting standards may be a painfully slow process, US and international standard setters took a big if largely unnoticed step forward last June with a joint proposal for a new revenue recognition standard. In fact, no such standard currently exists within US GAAP, as various pronouncements by the Financial Accounting Standard Board over the years have largely been piecemeal responses to developments at the Emerging Issues Task Force that have vexed the board to one degree or another.

Indeed, the lack of an overarching standard for the top line on publicly traded companies' P&Ls has long been considered a huge gap in GAAP, so to speak. But despite its potential significance, the new proposal has gone largely unnoticed or at least remarked upon, particularly in the mainstream press, perhaps because most if not all eyes there have been on new fair-value rules that have stirred intense opposition from within the banking industry.

That said, a new, in-depth analysis of the proposed revenue recognition standard that was recently released could lead to more public awareness, at least for a while. For further details, refer to my August 9 blog post at CFOZone.com, "Better Revenue Recognition at Long Last?"

NOTE: If you have an established blog or publication and would like to submit a guest blog post for the FEI blog, please contact me at eorenstein@financialexecutives.org to discuss.

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Small Co's Relieved of SOX 404(b) Duties, Under Financial Reform Law - GUEST POST by Melissa R. Hoffmann

NOTE: While I am on vacation, I invited some guest posts from popular bloggers. Following is a guest post from Melissa R. Hoffmann, Editor, New York State Society of CPAs, and one of the contributing bloggers on NYSSCPA's CPA Blog.

Owners and auditors of small companies got a gift by way of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which now provides for them a permanent exemption from 404(b) reporting requirements put in place by the 2002 Sarbanes-Oxley Act.

Sarbanes-Oxley, a response to the Enron and WorldCom scandals in 2001, mandated that a publically traded company have an independent auditor attest to management?s assessment of the effectiveness of its internal controls. While large, accelerated filers already comply with this rule, the Securities and Exchange Commission (SEC) repeatedly delayed implementation for smaller companies with public floats of less than $75 million.

Eight years later, that implementation date was still being pushed back?until late 2009, when the SEC went on record saying that there would be no more delays: The smallest companies would be required to obtain the 404(b) attestation for the annual reports of companies with fiscal years ending on or after June 15, 2010.

The commission decided to give that final deadline after the release of a cost-benefit analysis conducted by the SEC showed that smaller companies pay a disproportionately higher cost to comply with 404(b) filing rules but that a significant portion of these costs are non-recurring, with the burden attenuating over time.

But the financial reform bill, signed into law July 21, made that deadline moot. No, there won?t be any more implementation delays. But that?s because there won?t be any implementation at all.

A provision of the financial reform bill?Section 989G?turns these repeated implementation delays into a permanent exemption, saying that the part of Sarbanes-Oxley mandating 404(b) compliance not apply to ?non-large, non-accelerated? filers. That particular section of the legislation also requires the SEC to conduct a study examining how best to reduce 404(b) compliance costs for companies with market capitalization between $75 million and $250 million while still maintaining investor protection. The study is to be released to Congress no later than nine months after the bill becomes law.

NOTE: If you have an established blog or publication and would like to submit a guest blog post for the FEI blog, please contact me at eorenstein@financialexecutives.org to discuss.

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