1. The convergence of US GAAP and IFRS is driving standard setters to quickly develop numerous new accounting rules that are intended to converge and improve accounting and reporting. 2. You can expect new proposed standards addressing revenue recognition, lease accounting, financial statement presentation, loss contingencies, and fair value before the end of 2011 and that the new standards may be effective as early as 2012. 3. Because so many changes are forthcoming over a relatively short period of time, it is imperative that public companies remain current on the status of each project and the related required implementation dates so they can adequately assess the potential impact of any new requirements.

1. The Value of Experience
HASKELL & WHITE LLP
SEC Roundtable Series
“Taming the Tidal Wave of Change”
August 25, 2010

2. This Morning’s Agenda
I. Welcome and Brief Introductions
II. A “Tidal Wave” – Really?
• Revenue recognition
• Leases
• Financial statement presentation
• Loss contingencies and going concern
• Financial instruments, fair value and other projects
III. Closing and Questions

3. Haskell & White LLP: Who We Are
We are a middle-market focused firm powered by 60 client-centered professionals and
9 entrepreneurial partners
We practice with the technical competencies and experience of larger accounting firms
and the attentiveness and responsiveness of smaller accounting firms
Our primary focus areas are SEC, Real Estate and M&A
Our SEC clients include both accelerated and non-accelerated filers; we serve pre-
revenue pharma companies, as well as service businesses with revenues in the
hundreds of millions
We have earned a “clean” PCAOB inspection report

4. Revenue Recognition (Topic 605)
• Proposed standard issued June 24, 2010
• Comment deadline October 22, 2010
• Exposure draft runs some 170 pages!
• Entitled “Revenue from Contracts with Customers”
• Modifies or eliminates some familiar revenue recognition “principles”
• Final ASU expected second quarter of 2011

5. Revenue Recognition (Topic 605)
• CORE PRINCIPLE - Recognize revenue when transfer of goods/services to
customer in the amount of consideration expected to be received
• Changes L/T contracts – Revenue from Percentage-of-completion would only be
allowed if customer owns work-in-process as built or developed
• Required to account for all distinct goods or services – may require separation
of a contract into different units of accounting

6. Revenue Recognition (Topic 605)
Additional changes –
Collectability would affect how much revenue is recorded vs. whether
revenue is recorded
Greater use of estimates (Of course!!)
Separation of performance obligations based on relative selling price.
Revenue recognized when performance obligation is satisfied
Increased disclosures (Surprised? Not!!) More on qualitative and
quantitative info in contracts

7. Revenue Recognition (Topic 605)
FASB created a chart reflecting 5 steps to applying the new revenue
recognition proposals
Such is presented as Exhibit 1 in the August 2010 Journal of
Accountancy article Convergence Milestone: Revenue recognition
among proposals released as FASB, IASB commit to new timeline. (See
next slide…)

9. Leases (Topic 840)
• Proposal stand issued August 17, 2010
• Comment deadline December 15, 2010
• Eliminates the operating lease classification and its off-balance sheet
treatment
• Will focus on the entity’s right to use an asset
• Leases of intangible assets, biological assets, leases to explore for or use
minerals, oils, natural gas and similar non-regenerative resource

10. Leases (Topic 840)
Accounting by Lessees
• Lessees would record a right-to-use an asset, along with a corresponding obligation
to pay rentals
Accounting by Lessors
• Lessors would take one of two approaches:
– If the lessor has significant exposure to risks associated with the underlying
asset, it would apply a performance obligation approach.
• The underlying asset would remain on the lessor’s books and the lessor
would recognize both a receivable and a performance obligation liability
– If the lessor does not have significant exposure, it would apply a partial
derecognition approach
• The lessor would recognize a receivable and derecognize a portion of the
underlying asset
• The lessor would recognize sales for the present value of the lease
payments and cost of sales for the portion of the asset derecognized

11. Leases (Topic 840)
• The lease term—for both lessors and lessees—would be defined as the
longest possible lease term that is more likely than not to occur
• The measurement of lease payments would include expected payments for
contingent rentals and residual value guarantees
• Proposed standard would allow for a simplified form of lease accounting for
leases with maximum possible terms of less than 12 months
• Proposed standard would also affect sale leaseback transactions
• No clause to grandfather outstanding leases

12. Leases (Topic 840)
Some of the impacts from this proposal:
• Financial ratios
• Debt covenants
• EBITDA
• Buy versus lease decisions

13. Financial Statement Presentation
I. What is the Big Picture?
II. Why the Change from Today’s Statements?
III. How Will Things Change?
IV. When Will These Changes be Required?

14. The Big Picture: Core Principles
Create a new global standard that requires entities to effectively organize
disaggregated information in a manner that clearly communicates a
cohesive financial picture of the entity
Separate items with different economic characteristics through the
disaggregation of components to better predict future cash flows
Introduce cohesiveness to statements by improving the flow of information
through the various statements so that they complement each other
Facilitate assessments of an entity’s liquidity and financial flexibility

15. Why Change?
Today, US GAAP and IFRS provide very limited presentation guidance;
guidelines provide too many alternatives and are dispersed across various
standards (although the SEC’s Regulation S-X requires particular
presentation and disclosures by public companies)
The result is variation in practice and inconsistencies in presentation that
creates difficulties for financial statement users (for example, SCF and
Comprehensive Income)
There is no guidance on the aggregation and disaggregation of financial
data (for example COS and SG&A expenses); this will create
standardization and facilitate comparisons across global jurisdictions

16. What Exactly Will Change?
A common structure – required sections, categories and subcategories
across all financial statements
Greater disaggregation – separate by activity and by economic
characteristic
Greater cohesiveness – the relationship of items between the statements
is clear and the financial statements complement each other

17. The New and Improved Financial Statements
Statement of financial position Statement of comprehensive Statement of cash flows
income
Business section Business section Business section
Operating category Operating category Operating category
Operating finance Operating finance
subcategory subcategory
Investing category Investing category Investing category
Financing section Financing section Financing section
Debt category Debt category
Equity category
Multi-category transaction Multi-category transaction
section section
Income tax section Income tax section Income tax section
Discontinued operation Discontinued operation Discontinued operation
section section, net of tax section
Other comprehensive income,
net of tax

18. A Few More Noteworthy Changes
The Direct Method must be used to present the Statement of Cash Flows
The Notes to the financial statements must disclose the changes between
opening and closing asset and liability balances that management
regards as important (cash, noncash, impairments, remeasurements, etc.)
Comparative financial statements will be required to be presented
A reconciliation of Operating Income and Operating Cash Flows will be
required

19. When Will All This Really Happen?
A “Staff Draft” is currently available to review; field tests are underway for
financial institutions
The Exposure Draft of a new standard is expected to be released in Q1
2011
The Final Draft of a new standard is expected to be released in Q4 2011
Expected effective dates would likely be in 2013

20. Loss Contingencies (Topic 450)
Proposed standard issued July 20, 2010
Comment deadline September 20, 2010 (extended from August 20,
2010)
The FASB did not rule out being able to issue a final ASU during the
fourth quarter with an effective date of December 2010
The proposed update would lower the current disclosure threshold and
broaden the current disclosure requirements

21. Loss Contingencies (Topic 450)
Significant changes:
Require disclosure of certain remote loss contingencies
Require additional disclosures
Require disclosure of publicly available quantitative information, other
relevant non-privileged information, and, in some cases, information
about possible recoveries
Public entities would be required to provide tabular reconciliations, by
class, of recognized loss contingencies

22. Loss Contingencies (Topic 450)
Disclosure threshold:
Reasonable possibility (more than remote) – required to be disclosed
Remote – disclosure may be necessary based on nature, potential
magnitude, or potential timing
Threshold factors:
Potential impact on the entity’s operations
Cost to the entity for defending its contentions
Amount of effort and resources management may have to devote

23. Going Concern
Initial exposure draft issued on October 9, 2008
Comment period ended December 8, 2008
New exposure draft expected to be issued in Q4 2010, final document
expected to be issued in Q1 2011

24. Going Concern
Decisions Reached by FASB
Definition of Going Concern – the Board decided not to specifically define a
going concern
Time Horizon - information about the foreseeable future, which is generally,
but not limited to, 12 months from the end of the reporting period
Liquidation Basis of Accounting:
– Going concern unless liquidation is imminent
– Liquidation based statements should reflect information about the value
of an entity’s resources and obligations in liquidation

25. Going Concern
Disclosures:
Pertinent conditions and events giving rise to the assessment, including
when such conditions and events are anticipated to occur, if reasonably
estimable
The possible effects of those conditions and events
Possible discontinuance of operations
Management’s evaluation of the significance of those conditions and events
and any mitigating factors
Information about the recoverability or classification of recorded asset
amounts or the amounts or classification of liabilities

26. Financial Instruments
• Change prompted by global financial crisis
• Existing divergence in measurement under US GAAP
• Exposure Draft out in May 2010, comment period ends 9/30
• Present both amortized cost and fair value for FIs held for collection of
payment of contractual cash flows. Effects net income and comprehensive
income
• FIs held for sales or settlement (derivatives and trading instruments) would
be recognized at FV and adjusted through net income
• Simplified criteria for hedging activities

27. Financial Instruments
Loans:
Amortized cost $XXX
Allowance for credit losses $(XX)
Residual FV adjustment $(XX)
Fair Value $XXX
Shareholders Equity
Common stock $XXX
Retained earnings $XXX
AOCI, excluding FV charges $XXX
Equity, excluding FV charges $YYY
FV changes on financial instruments $(XX)
Total comprehensive equity $ZZZ

28. Financial Instruments
Scope
• Public companies with <$1BB in assets get an additional 4 year
implementation. 2013 implementation projected
• Excludes items within equity, pension items, leases, equity investments
(including bifurcated items), guarantees, physically settled forward contracts

29. Financial Instruments
Convergence Issues
• Not a joint release, IASB has split issue into 3 parts
• Differences on classification and measurement, IASB has only issued IFRS
9 on financial assets
• Each body is asking for comments on both and currently working through
the differences
• Stay tuned!

30. Comprehensive Income
• Joint Project issued in May 2010 with comment period ending 9/30/10
• Would eliminate various methods of reporting OCI
• Presentation would be a continuous statement of financial performance that
displays components of OCI
• Items that make up OCI do not change

31. Fair Value
• Joint Project to develop common fair value measurement and guidance
• Issued June 2010, comment period ending Sept. 7, 2010. Final expected
Q1 2011
• Not intended to change US GAAP, but clarify intent of existing guidance
under ASC Topic 820
• Highest and best use concepts are only relevant to nonfinancial assets
• Additional guidance on measuring FIs in equity
• Additional guidance on blockage factors and other premiums and discounts
in a FV measurement
• Adds additional disclosure items

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