3. CODIFICATION
Effective for financial statements issued after September
15, 2009 (references to standards, etc.)
Did not change GAAP! Merged authoritative guidance
into single source
90 topics, subtopics, sections and paragraphs arranged
by ASC #
i.e. receivables-overall-recognition-factoring
ASC 310-10-25-3
4. CODIFICATION
Updates are denoted as “ASU 2010-01”
Accounting standards update
Issued in 2010
First update issued in 2010
Codification contains GAAP only – not OCBOA, GAAS,
SSARS, etc.
5. STANDARDS UPDATES EFFECTIVE
IN 2010
ASU 2009-17 (Topic 810 Consolidation)
Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities
QSPEs no longer scoped out of VIE consolidation rules
Eliminates quantitative evaluation of VIEs
Evaluation of affiliated entities who are VIEs -
If equity investors lack sufficient equity at risk, does reporting
entity have the power to direct the activities of the VIE?
6. STANDARDS UPDATES EFFECTIVE
IN 2010
ASU 2010-06 (Topic 820 Fair Value Measurement)
Improving Disclosures about Fair Value
Measurements
Requires more robust disclosures about:
Different classes of assets and liabilities measured at fair value
Valuation techniques and inputs used
Activity in level 3 fair value measurements
Details of and reasons for transfers between levels
7. OTHER UPDATES
EFFECTIVE IN 2010
ASU 2009-16 Transfers of Financial Assets
ASU 2010-07 NFP Entities – Mergers and Acquisitions
ASU 2010-09 Subsequent Events (further amendment)
ASU 2010-25 EBPs – Loans to Participants
8. UPDATES EFFECTIVE AFTER 2010
ASU 2010-15 and 2010-26 for Insurance Companies
ASU 2010-13 Stock Compensation
ASU 2009-13,14 and 2010-17 Revenue Recognition
ASU 2010-20 Credit Quality Disclosures (2010 for public
companies)
ASU 2010-23,24 Healthcare Companies
9. OPEN FASB PROJECTS
Disclosure of Certain Loss Contingencies
Going Concern
Disclosures about an Employer’s Participation in a
Multiemployer Plan
Investment Properties
Disclosure Framework
Troubled debt restructuring
11. CONVERGENCE PROJECTS
FASB and IASB working since 2002 to improve and
converge U.S. GAAP and IFRS.
Memorandum of Understanding (MoU)
Identified 9 major accounting areas needing improvement in both
U.S. GAAP and IFRS
Completed Business Combinations project in 2007 by issuing
FAS 141(R) and 160, and IFRS 3
Remainder of projects still ongoing
12. FASB/IASB PROJECTS AND
TARGET DATES
Project Exposure Draft Comments Due
Financial Instruments May 2010 9/30/10
Reporting OCI May 2010 9/30/10
Fair Value Measurement June 2010 9/17/10
Revenue Recognition June 2010 10/22/10
Insurance (DP) Sept 2010 12/15/10
Leases August 2010 12/15/10
Consolidations Deciding on strategy
Financial Statement Early 2011 TBD
Presentation
Financial Instruments with After June 2011 TBD
Characteristics of Equity
14. FINANCIAL INSTRUMENTS
Fair value balance sheet presentation for most financial
instruments (including loans and deposits)
Exceptions (cost): short term trade receivables and payables;
debt, unless the entity has significant financial assets
Narrowing of Equity Method
Change in fair value included in net income unless
qualifies for OCI
Must be held long-term for collection of cash flows
Must not have embedded derivatives
Derivatives and equity securities do not qualify for OCI
15. FAIR VALUE MEASUREMENT
No significant differences regarding how to measure fair
value, most changes to ASC 820 made to conform words
Major changes to ASC 820 (157)
Eliminate “highest and best use” concept for financial
instruments
Guidance for measuring the fair value of an
instruments included in shareholders’ equity
Clarification of blockage factor
Exception to FV for financial instruments managed as
a portfolio
Additional disclosures about fair value measurements
16. SINGLE STATEMENT OF
COMPREHENSIVE INCOME
OCI would be presented under Net Income, totaling to
Comprehensive Income
EPS still based on Net Income only
US prevalent practice is Statement of Changes in
Stockholder's Equity; not allowed in IFRS
17. REVENUE RECOGNITION
Revenue is recognized as benefits are transferred to
customer and promises are fulfilled. Will change pattern
for some arrangements.
Multi-element contracts are separated and recognized
based on estimated selling prices of elements
Credit risk is initially factored into measurement of
revenue rather than as a hurdle for revenue recognition
Contract costs must be expensed, unless they meet
certain conditions
18. LEASES
Lessees: Obligations recognized on balance sheet, with
a corresponding asset. Interest expense on debt;
amortization of right-to-use asset. Practical expedient for
short (12 months) lease terms.
Lessor: Record lease receivables; tentatively decided
that credit should be to the leased asset (derecognition
approach) or a deferred revenue account (performance
obligation) depending on facts and circumstances.
19. CONSOLIDATIONS
Control based consolidation model
Contractual ability to direct activities
Votingrights
Contractual rights
Combination of voting and contractual rights
Other indicators of ability to direct activities:
Reporting entity’s voting rights relative to size and dispersion
of holdings of other vote holders
Evidence of ability to direct including:
• Approving or appointing key management
• Initiating, approving or vetoing significant transactions
20. FINANCIAL STATEMENT
PRESENTATION
The following comprise a complete set of financial
statements:
Statement of Financial Position
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Cash Flows
Comparative information for previous period is required.
22. “CONVERGENCE”
Merging two separate sets of standards
Best approach of-
US GAAP
IFRS
Jointly developed new standard
23. US GAAP – IFRS CONVERGENCE HISTORY
FASB and IASB commit to
2002 “Norwalk Agreement” compatible accounting
standards; joint effort
FASB and IASB develop
2006 “Memorandum of roadmap for convergence;
Understanding” specific milestones by
2008
SEC accepts IFRS Result of European Union
2007 statements from foreign requiring its listed
issuers companies to use IFRS.
2008 - 2009 Ongoing GAAP-IFRS FASB and IASB reaffirm
convergence projects; commitment to converge
update to MoU all major standards by
2011.
2010 SEC proposes roadmap 2011 decision on if/when
for IFRS adoption IFRS will be mandatory for
US issuers
24. CURRENT SEC POSITION
Will decide on IFRS adoption in 2011
Adoption will occur no earlier than
2015
Withdrew previously proposed rules
permitting early adoption
25. OFFICE OF THE CHIEF
ACCOUNTANT
Will prepare comprehensive Work Plan to address:
Whether IFRS is sufficiently developed
Impact on US Issuers
Investor understanding and education
Changes to regulatory environment
Human capital readiness
Ongoing role of FASB post-adoption?
26. PRIVATE COMPANY SCENARIOS
Conversion to IFRS or IFRS for SMEs
Private company US GAAP (“Blue Ribbon Panel” report
expected in early 2011 recommending separate
standards for private companies)
Existing US GAAP maintained/updated
27. OTHER CONSIDERATIONS
No current guidance in IFRS for not for profits (refer to
IAS 8)
Little industry-specific guidance
Educating the profession, investors, bankers
Costs of conversion