Audit, Compliance and Risk Blog

The liability associated with a company’s defined benefit pension has always been hard to measure and, as a result, controversial. Companies in the private sector in the United States were forced to “bite the bullet” on this issue many years ago—in fact, it was in 1985 when Ronald W. Reagan was president.

On July 27, 2012, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2012-02, Intangibles—Goodwill and Other (Topic 350), “Testing Indefinite-Lived Intangible Assets for Impairment.” ASU 2012-02 employs a qualitative concept that is similar to the one developed in ASU 2011-08, Intangibles—Goodwill and Other (Topic 350), “Testing Goodwill for Impairment,” which was issued on September 15, 2011. While the FASB’s issuance of these standards gives companies an option when testing indefinite-lived assets and goodwill for impairment, does it really make impairment testing easier?

 Is Your Board’s Compensation Committee Up to Standard?

Boards of directors are responsible for corporate governance of their companies, although the companies’ executives oversee most day-to-day activities.  To ensure that these executives perform properly, the boards oversee them, and establish compensation and incentives intended to encourage and reward appropriate activities.  State corporation laws and federal and state securities laws, have traditionally left boards to decide how to meet these responsibilities.

On July 13, 2012, the staff in the Securities and Exchange Commission (SEC) issued its long-awaited study on developing and executing the February 2010 “Work Plan” to consider whether and possibly how registrants should incorporate International Financial Reporting Standards (IFRS) into the U.S. reporting system.

Many thought the SEC staff would recommend to the commissioners of the SEC an approach that would either require a certain path to migrate U.S. registrants from generally accepted accounting principles that are developed and issued in the United States (U.S. GAAP) to IFRS or some other path. However, the SEC staff made no such formal recommendation.

While the standard setter for accounting principles in the United States is the Financial Accounting Standards Board (FASB), many countries outside the United States follow accounting standards set by the International Accounting Standards Board (IASB). For the past several years, the FASB and the IASB have been working hard to unite or “converge” their accounting principles such that, effectively, only one set of rules exists. Until recently, the process has worked reasonably well, but now, in the process of developing the standards for insurance contract accounting, the efforts toward conformity have hit a snag—maybe temporarily, maybe not. This snag, together with other developments mentioned below, appears to be slowing down the convergence of accounting standards.

For the foreseeable future, the accounting standard setter in the United States, also known as the Financial Accounting Standards Board (FASB), will continue to set generally accepted accounting principles (GAAP) for private companies. The trustees of the Financial Accounting Foundation (FAF), the oversight body of the FASB, recently rejected the concept of establishing a separate accounting board that would prescribe GAAP for private companies, sometimes termed “baby GAAP.” They concluded that the FASB should continue to set GAAP for all companies that report financial results in the United States.

Latest Congressional Action on Securities | JOBS Act Loosens Regulation on Smaller Companies  Securities requirements in the United States tend to ebb and flow, so that a period of increasing restrictions is followed by a decade of loosening restrictions. Congress propels these changes as lawmakers respond to market needs and political tides. April 2012 marks the latest change, as the imaginatively named Jumpstart Our Business Startups Act (JOBS) introduces legislation that allows small companies to grow before having to register securities or stage an initial public offering (IPO). The JOBS Act also reduces reporting requirements for up to five years after an IPO. These opportunities include: