7-24-06 Reporting Update Slides
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  • Denny Beresford, E&Y Executive Professor of Accounting, U of GA Susan Bies, Federal Reserve Board Governor from 2001 to 2007 J. Michael cook, retired Chairman of D&T Jeffrey Diermeier, President and CEO of CFA Institute Scott Evans, EVP, Asset Management TIAA-CREF Linda Griggs, Partner, Morgan Lewis Joey Grundfest, Professor of Law at Stanford Law School Greg Jonas, Managing Director Moody’s Christopher Liddell, CFO, Microsoft Corp William Mann III, Senior Investment analyst, Motley Fool G. Edward McClammy, Senior VP, CFO, and Treasurer Varian Ed Nusbaum Executive Partner and CEO Grant Thornton James Quigley, Chief Executive Officer, Deloitte ToucheTohmatsu Robert Pozen, Chairman, MFS Investment Management David Sidwell, CFO Morgan Stanley Peter J Wallison, Senior Fellow, American Enterprise Institute for Public Policy Research Thomas Weatherford, serves of various boards
  • Denny Beresford, E&Y Executive Professor of Accounting, U of GA Susan Bies, Federal Reserve Board Governor from 2001 to 2007 J. Michael cook, retired Chairman of D&T Jeffrey Diermeier, President and CEO of CFA Institute Scott Evans, EVP, Asset Management TIAA-CREF Linda Griggs, Partner, Morgan Lewis Joey Grundfest, Professor of Law at Stanford Law School Greg Jonas, Managing Director Moody’s Christopher Liddell, CFO, Microsoft Corp William Mann III, Senior Investment analyst, Motley Fool G. Edward McClammy, Senior VP, CFO, and Treasurer Varian Ed Nusbaum Executive Partner and CEO Grant Thornton James Quigley, Chief Executive Officer, Deloitte ToucheTohmatsu Robert Pozen, Chairman, MFS Investment Management David Sidwell, CFO Morgan Stanley Peter J Wallison, Senior Fellow, American Enterprise Institute for Public Policy Research Thomas Weatherford, serves of various boards
  • Members include former Federal Reserve Chairman Paul Volcker, Xerox Corp. Chairman and Chief Executive Anne Mulcahy, KPMG LLP Chairman and CEO timothy Flynn, and Damon Silvers, associate general counsel for the AFL-CIO, Alan Beller former director of Corp Fin, Lynn turner, former SEC chief accountant, Robert Glauber, a lecturer at Harvard’s Kennedy School of Government, Sarah Smith, controller and chief accounting officer of Goldman Sachs, Amy woods Brinkley, global risk executive at Bank of America, Richard Simonson, executive vice president and CFO of Nokia corp, Ken goldman, CFO of Fortinet, Barry Melancon, president of the AICPA, Mary Bush president of Bush International, H. Rodgin Cohen, chairman of Sullivan and Cromwell, Gaylen Hansen, an audit partner at Ehrhardt Keefe Steiner & Hottman PC, Richard Murray, managing director and chief claims strategist at Swiss Re, Gary John Previts, professor of accountancy at Case Western Reserve, William Travis, president and CEO of Bailiwick Data systems, and Ann Yerger, executive director of the Council of Institutional Investors

7-24-06 Reporting Update Slides 7-24-06 Reporting Update Slides Presentation Transcript

  • BDO SEIDMAN, LLP’S October 2007 FINANCIAL REPORTING UPDATE
    • Speakers
      • Jeff Lenz
      • Ben Neuhausen
    • Replay Access
      • www.bdo.com/about/publications/assurance
    • CPE – Participation Verification
      • 4 key words provided during the call must be confirmed on the evaluation
    Speakers and Replay Information
    • SEC Update
    • GAAP Update
    • Questions and Answers
    Agenda
  • SEC UPDATE October 2007
  • SEC Update – Agenda
    • Practice Issues
    • Rulemaking
    • Other Activities
  • Experts and Consent Requirements
    • Recent “change” in SEC staff policy
    • Application of 33 Act Rule 436(a):
      • If any portion of the report or opinion of an expert or counsel is quoted or summarized as such in the registration statement or in a prospectus, the written consent of the expert or counsel shall be filed as an exhibit to the registration statement and shall expressly state that the expert or counsel consents to such quotations or summarization.
  • Experts and Consent Requirements
    • Registrant refers to the work of a valuation specialist (purchase price allocation, goodwill impairment analysis, stock compensation, pension obligation) but does not name the specialist
    • Prior practice – no consent required
    • “ New” practice – consent required
    • Use caution in drafting 34 Act reports
      • Cannot incorporate by reference if consent needed and expert will not provide it
  • Form S-8 Filing Issues
    • Facts: A company discontinues an operation in Q1 2007 and reflects discops in its 2007 10-Qs. In October 2007, the company plans to file a Form S-8. The S-8 will incorporate by reference the 2007 10-Qs and the 2006 Form 10-K, which includes the 2004-2006 audited financial statements that do not reflect the discops.
    • Question: Can the company simply incorporate the 2006 10-K by reference, or must it file revised financial statements reflecting discontinued operations?
  • Form S-8 Filing Issues
    • Answer: The company must it file revised financial statements reflecting discontinued operations.
  • Form S-8 Filing Issues
    • Facts: A company made a significant acquisition in Q1 2007. It filed an 8-K containing target audited financial statements for 2005 and unaudited financial statements for the nine months ended 9/30/06 and 05. In October 2007, the company plans to file a Form S-8.
    • Question: Can the company simply incorporate the 8-K by reference, or must it file 2006 target audited financial statements?
  • Form S-8 Filing Issues
    • Answer: The staff hasn’t decided. Stay tuned.
  • Shelf Registration Filing Issues
    • Facts: A company files a shelf registration statement for an unspecified amount of debt securities, listing guarantors and collateral entities.
    • Before the takedown:
    • Does the company need to comply with Rule 3-10? Yes.
    • Do the guarantors assume a 34 Act reporting obligation? Yes.
    • Does the company need to comply with Rule 3-16? No.
  • Fair Value Option
    • Facts: A company adopts the fair value method of accounting for an equity method investment.
    • Question: How should the company compute significance of the investee under the income test (e.g., for purposes of Rules 4-08(g) and Rule 3-09)?
    • Answer: Numerator equals the change in the fair value of the investment reflected in earnings.
  • Executive Compensation Disclosures
    • Staff has reviewed 350 issuers and sent comment letters
    • Principal themes include:
      • Provide the how and why of specific comp decisions
      • Presentation – Be clear, specific, direct, and understandable
    • Staff report available at:
      • http://www.sec.gov/divisions/corpfin/guidance/execcompdisclosure.htm
    • “ Where’s the Analysis?” speech available at: http://www.sec.gov/news/speech/2007/spch100907jww.htm
  • Rulemaking ICFR Guidance and Rules
    • Interpretive guidance for management http://www.sec.gov/rules/interp/2007/33-8810.pdf
    • Revised management’s report rules http://www.sec.gov/rules/final/2007/33-8809.pdf
    • Definition of Significant Deficiency http://www.sec.gov/rules/final/2007/33-8829.pdf
    • PCAOB Auditing Standard No. 5 http://www.pcaobus.org/Rules/Rules_of_the_Board/Auditing_Standard_5.pdf
    • Updated SEC staff FAQ http://www.sec.gov/info/accountants/controlfaq.htm
  • Internal Control Reporting Have the Stars Aligned?
    • BDO Seidman AcSense presentation
    • Tomorrow (Oct. 17) 11am – 1pm ET
    • Register at http://www.bdo.com/acsense/stars.asp
  • Proposed Rules Smaller Company Regulations
    • Eliminate small business forms and simplify the small business reporting system http://www.sec.gov/rules/proposed/2007/33-8819.pdf
    • Revise the eligibility requirements for primary offerings on Forms S-3 and F-3 http://www.sec.gov/rules/proposed/2007/33-8812.pdf
    • Exempt compensatory employee stock options from Exchange Act registration requirements http://www.sec.gov/rules/proposed/2007/34-56010.pdf
  • Proposed Rules Smaller Company Regulations
    • Revise Rule 144 and Rule 145 to shorten holding period for requirements http://www.sec.gov/rules/proposed/2007/33-8813.pdf
    • Create a registration exemption under Regulation D for offers and sales to “large accredited investors” http://www.sec.gov/rules/proposed/2007/33-8828.pdf
    • Electronic filing and simplification of Form D http://www.sec.gov/rules/proposed/2007/33-8814.pdf
  • Rulemaking - IFRS
    • Proposed Rule -
    • Acceptance of Foreign Private Issuers’ IFRS financial statements without reconciliation to U.S. GAAP http://www.sec.gov/rules/proposed/2007/33-8818.pdf
    • Concept Release -
    • Allowing U.S. Issuers to prepare IFRS financial statements http://www.sec.gov/rules/concept/2007/33-8831.pdf
  • Rulemaking Proxy Delivery and Access
    • Proxy Delivery – Final Rule
    • Require electronic posting of proxy materials http://www.sec.gov/rules/final/2007/34-56135.pdf
    • Proxy Access – Proposed Rules
    • Shareholder Proposals http://www.sec.gov/rules/proposed/2007/34-56160.pdf
    • Shareholder Proposals Relating to the Election of Directors http://www.sec.gov/rules/proposed/2007/34-56161.pdf
  • Rulemaking On the Horizon?
    • XBRL –
      • Draft taxonomy completed September 2007
      • Proposed rules expected spring 2008; final rules expected fall 2008
    • Oil & gas – proved reserves disclosure
      • Considering allowing new technologies to compute reserves
  • Other Activities Commissioner Departures
    • Both Democratic Commissioners announce their departure
      • Roel Campos
      • Annette Nazareth
  • SEC Advisory Committee on Improvements to Financial Reporting
    • Goals
      • Reduce unnecessary complexity
      • Make information more useful and understandable
    • Chair – Robert Pozen
    • First meeting held August 2, 2007
    • Next meeting November 2, 2007
    • Discussion paper at http://www.sec.gov/about/offices/oca/acifr/acifr_discussion.htm
  • SEC Advisory Committee on Improvements to Financial Reporting
    • Subcommittees –
    • Substantive complexity
    • Standard setting process
    • Audit process and compliance
    • Delivering financial information
    • International coordination
    • http://www.sec.gov/about/offices/oca/acifr.shtml
  • Paulson Committee on the Auditing Profession
    • Focus on key issues affecting auditing profession
      • Concentration
      • Financial soundness
      • Audit quality
      • Employee recruitment and retention
    • Arthur Levitt and Don Nicolaisen co-chair
    • First meeting October 15, 2007
    • Recommendations expected mid-2008
      • http://www.treas.gov/offices/domestic-finance/acap/
  • GAAP Update October 2007
  • Agenda
    • Credit market accounting issues
    • FASB Statement No. 157
    • FASB Exposure Drafts
    • FASB Staff Positions
    • EITF Issues
    • AICPA Statement of Position 07-1
    • Other Developments
  • Credit market accounting issues
    • Abrupt shift in credit markets during Summer 2007
      • Subprime mortgages
      • Alt-A and jumbo mortgages
      • Leveraged buyout loans
      • Asset-backed commercial paper
      • Collateralized debt obligations
      • Auction rate securities
  • Credit market accounting issues
    • Accounting issues
      • Solvency, liquidity, and going concern
      • Valuation of assets
      • Losses on loan commitments
      • Consolidation of commercial paper conduits
  • Credit market accounting issues
    • Valuation of assets, particularly assets carried at fair value
      • Quoted market prices in active markets are the best evidence of fair value, even if volumes are lower than in the past or the investor thinks that the quoted market prices are irrational
      • In the absence of quoted market prices in active markets, alternative valuation techniques should incorporate current market evidence
  • Credit market accounting issues
    • Losses on loan commitments
      • Loans held for sale are carried at lower of cost or market
      • Similarly, if a loan will be carried at lower of cost or market when funded, then the related loan commitment should be carried at lower of cost or market
      • Transfers of loans or commitments from held to sale to held for investment, or vice versa, are done at lower of cost or market on date of transfer
  • Credit market accounting issues
    • Center for Audit Quality (CAQ) white papers
    • Mortgage Bankers Association white paper
  • FASB Statement No. 157
    • Fair value measurements
      • Effective for fiscal years beginning after 11/15/2007
      • Major changes in how to measure fair value, including
        • Exit values
        • Market participant perspective
        • Principal market
      • Fair value measures are pervasive in GAAP
      • Significant implementation issues
      • FEI and IMA request one-year deferral
  • FASB Statement No. 157
    • BDO Financial Reporting Letter with Frequently Asked Questions and implementation guidance
    • http://www.bdo.com/about/publications/assurance/FRL-FairValue9-07-4.pdf
  • FASB Exposure Drafts
    • Exposure Drafts from 2005 on Business Combinations and Noncontrolling Interests likely to be issued as final Statements this quarter (Statements 141(R) and 160)
    • Disclosures about Derivative Instruments and Hedging Activities
    • Accounting for Financial Guarantee Insurance Contracts
    • Invitation to Comment—Accounting for Insurance Contracts
      • Whether to add project to agenda
      • Whether to address insurance company accounting, or accounting by both insurance company and policyholder
  • FASB Staff Positions—Update
    • FSP FAS 154-a, Considering the Effects of Prior-Year Misstatements
    • FSP FAS 128-a, Computational Guidance for Computing Diluted EPS under the Two-Class Method
    • FSP FAS 144-c, Classifying and Accounting for a Depreciable Asset as Held-for-Sale When an Equity Method Investment is Obtained
    • Removed from agenda
    • Rolled into upcoming 3 rd Exposure Draft
    • Delayed until issuance of FASB Statement No. 160
  • FASB Staff Positions—Final
    • None since last call
  • FASB Staff Positions—Proposed
    • FSP FAS 140-d, Transfer of financial assets with repurchase agreement
    • FSP APB 14-a, Convertible debt that may be settled in cash upon conversion
    • FSP SOP 94-3-a and AAG HCO-a, Changes to consolidation and equity method guidance for not-for-profit organizations
  • EITF Update SELECTED EITF ISSUES
  • Open EITF Issues—Update
    • 06-11, Accounting for Tax Benefits from Dividends on Employee Stock Compensation Awards
    • 07-2, Accounting for Convertible Debt that Requires or Permits Cash Settlement
    • 07-D, Application of the Two-Class Method to Master Limited Partnerships
    • Final consensus
    • Now FSP APB 14-a
    • 07-4, Tentative consensus
  • Open EITF Issues—Update
    • 07-1, Joint development, manufacturing, and marketing arrangements
    • 07-3 Nonrefundable advance payment for goods and services to be used in future R&D
    • Tentative consensus
    • Final consensus
  • New Open EITF Issues
    • 07-5, Whether an instrument is indexed to a company’s own stock
    • 07-6, Sale of real estate with buy/sell clause
    • Still under discussion
    • Tentative consensus
  • AICPA Statement of Position 07-1
    • Clarifies scope of AICPA Guide, Audits of Investment Companies
    • Effective for fiscal years beginning after 12/15/2007
    • Implementation questions
      • AICPA may issue Technical Practice Aids
    • Requests to FASB for deferral of effective date
  • Other developments
    • Request to defer implementation of FASB Interpretation No. 48 for private companies
    • FASB Codification
    • XBRL
      • “Taxonomy” nearing completion
      • Potential SEC rulemaking to require filings using XBRL