As 2012 comes to a close, it is time for accountants in the United States to reflect on new financial reporting rules or developments and what may transpire in 2013. This is the first of two blog articles on the topic. In this article, I cover accounting developments in the United States and internationally. The second article will cover Securities and Exchange Commission (SEC) developments and auditing developments.
U.S. Accounting Changes
The Financial Accounting Standards Board (FASB), the U.S. accounting standard-setter for nongovernmental entities, issued very little new guidance in 2012. Specifically, the FASB issued only seven new Accounting Standards Updates (ASUs) to its Codification as follows:
No. 2012-01: Health Care Entities (Topic 954), Continuing Care Retirement Communities—Refundable Advance Fees;
No. 2012-02: Intangibles—Goodwill and Other (Topic 350), Testing Indefinite-Lived Intangible Assets for Impairment;
No. 2012-03: Technical Amendments and Corrections to SEC Sections, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22;
No. 2012-04: Technical Corrections and Improvements;
No. 2012-05: Statement of Cash Flows (Topic 230), Not-for-Profit Entities: Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows—a consensus of the FASB Emerging Issues Task Force;
No. 2012-06: Business Combinations (Topic 805), Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution—a consensus of the FASB Emerging Issues Task Force; and
No. 2012-07: Entertainment—Films (Topic 926), Accounting for Fair Value Information That Arises after the Measurement Date and Its Inclusion in the Impairment Analysis of Unamortized Film Costs—a consensus of the FASB Emerging Issues Task Force.
When scanning the above list, one might well ask, where is the meat? Many accountants thought the FASB would have issued a new standard for lease accounting (see my prior blog items “Possible New Lease Accounting Rule—An Update” and “Lease Accounting—Will There Be a New Accounting Standard?") as well as a new revenue recognition standard in 2012, but that did not happen. A new revenue standard is scheduled to be finalized in 2013, together with updated guidance on consolidations, investment companies, presentation of items in other comprehensive income, and how an entity, when appropriate, should apply the liquidation basis of accounting. And, the FASB’s Emerging Issues Task Force (EITF) is scheduled to finalize certain guidance affecting not-for-profit entities and clarifying how an entity should account for a joint and several liability when the total amount is fixed. Currently, the FASB is scheduled to finalize all these activities by June 30, 2013, but based on history, the timing will likely change. As to the lease project, another revised exposure draft is expected to be issued in early 2013, so a final rule is a bit farther down the road.
Other Changes Affecting 2012 Reporting
While the above-noted 2012 ASUs may not require accountants to spend hours relearning new accounting principles, there are other changes that need to be considered. For example, some updates to the FASB Codification issued prior to 2012 were not effective until now. Some of the more important topics include clarification of fair value measurements and related disclosures, presentation of other comprehensive income, and enhanced disclosure requirements for companies that participate in multi-employer pension plans.
During 2012, the International Accounting Standards Board (IASB), which issues International Financial Reporting Standards (IFRS), worked on projects with the FASB on leases, revenue recognition, financial instruments, and insurance. Separately, the IASB issued various revisions to IFRS 1, First-Time Adoption of IFRSs, IFRS 10, Consolidated Financial Statements, IFRS 11, Joint Arrangements, and IFRS 12, Disclosure of Interests in Other Entities, and also changes affecting International Accounting Standard (IAS) 34, Interim Financial Reporting.
The IASB’s interpretation committee (IFRIC) last issued an interpretation in October 2011—IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine. However, IFRIC has several topics on its agenda that will likely be addressed in 2013, including the appropriate disclosure when management is aware of material uncertainties about an entity’s ability to continue as a going concern.
During 2012, the Governmental Accounting Standards Board (GASB), which is the accounting standard-setter in the United States for state and local governments, issued four new standards as follows:
GASB Statement No. 65, Items Previously Reported as Assets and Liabilities;
GASB Statement No. 66, Technical Corrections—2012 (an amendment of GASB Statements No. 10 and No. 62);
GASB Statement No. 67, Financial Reporting for Pension Plans (an amendment of GASB Statement No. 25); and
GASB Statement No. 68, Accounting and Financial Reporting for Pensions (an amendment of GASB Statement No. 27).
Observations about GASB Standards
Like the FASB’s ASUs released in 2012, none of these GASB standards are revolutionary. But as discussed in a prior blog article, “New Accounting Principles for State and Local Government Pensions,” the changes to the pension accounting rules are controversial. Though the new rules are not currently effective, auditors that have clients affected by these changes should be discussing them with those clients’ management staff. Auditors may also want to encourage management at state and local governments to disclose in their 2012 financial statements the existence of these new standards, and the likely impact on their financial statements, if known, of adopting the new standards. This is an existing disclosure requirement for SEC registrants and would be considered “best practice” for entities that are not subject to SEC rules.
About the Author
Ron Pippin is an experienced CPA based in Wheaton, IL. His 40 plus year career includes being an audit partner in Arthur Andersen, a member of Andersen’s Professional Standards Group (“national office”) in Chicago, the Director of Financial Reporting for a Fortune 50 company and most recently, the editorial director of CCH’s Accounting Research Manager. Currently, Ron does independent writing and analysis together with accounting consultation on a variety of topics.