The document summarizes recent updates in accounting standards and the ongoing convergence projects between the FASB and IASB. Several standards were codified in 2009 without changing GAAP. New standards in 2010 related to consolidation of variable interest entities, fair value disclosures, and revenue recognition. Ongoing convergence projects address financial instruments, revenue recognition, leases, and consolidations. The SEC will decide in 2011 whether and when to require US companies to adopt IFRS. Private companies may adopt IFRS, IFRS for SMEs, or continue with US GAAP.

1. ACCOUNTING
UPDATE 2010
November 19, 2010

2. WHAT’S NEW?
 Standards codification
 Significant standards updates
 FASB – IASB joint projects (“convergence”)
 IFRS
 Private company financial reporting

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

10. FASB/IASB JOINT PROJECTS

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

13. SELECTED JOINT PROJECTS

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.

21. CONVERGENCE
VS.
ADOPTION

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

28. QUESTIONS?

29. RENEE B. FORD, CPA
Assurance Principal
Joseph Decosimo and Company, PLLC
www.decosimo.com
reneeford@decosimo.com
800-782-8382