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5/08/08 - SEC Chair Talks About a Coordinated Response to the Credit Crisis
The introduction of mark-to-market accounting in the 1990s helped financial institutions and regulators address the problems of that era, but with the collapse of the subprime mortgage market, regulators are contending with a host of problems they never expected and wondering if the accounting practice is suitable to the current crisis.

"The apparent pro-cyclicality of fair value accounting has gotten the attention of economists as well as accountants," Securities and Exchange Commission Chairman Christopher Cox said in an April 30, 2008, speech to the Investment Company Institute in Washington, DC.

Some analysts, in looking at the effect fair value rules have had on market behaviors, have wondered if the valuation techniques banks employ exacerbate market cycles on both the way up and the way down. In-demand securities become valued more highly on banks books while investors are interested in them. When the liquidity dries up, valuation services decrease the reported prices, then banks write down the values on their balance sheets, and the result is a vicious cycle.

"The fact that model-based valuations in the absence of an active market can be highly variable across companies in similar circumstances means that almost every estimate of fair value requires significant judgment," Cox said, adding that a roundtable discussion on fair value being planned by the SEC's Chief Accountant may lead to policy recommendations. The issues that will likely be discussed include the application of Level 3 methods, including proprietary models, to lightly traded securities as prescribed in the valuation hierarchy in the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements.

5/06/08 - SEC ADVISORY COMMITTEE TAKES UP FAIR VALUE ACCOUNTING, DROPS DISCUSSION OF IFRS
The jury is still out on the absolute merits of fair value accounting for financial statements, a variety of experts told the Securities and Exchange Commission's Advisory Committee on Improvements to Financial Reporting in an open meeting on May 2, 2008, in Chicago.

"What are users most interested in?" said one of the participants. "Then there's the issue of what's doable. I think we're finding with [the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements] it's challenging for financial statements."

The subcommittee's report cautions against expanding the use of fair value in financial reporting until a number of issues are better understood and resolved, including the FASB's project on the measurement framework, which is looking at developing a consistent approach to determine which measurement attribute should apply to different types of business activities.

"What we have proposed is a framework not based on any one asset, we've based it on activities," said Susan Schmidt Bies, the Chair of CIFR's Substantive Complexity Subcommittee and a member of the Federal Reserve Board from December 2001 through March 2007. "We think that's what users want, and it's more based on what businesses do, because it asks what is the cash flow recognized in the financial statement and how is that related to what's going on in the income statement." The subcommittee report says the SEC should recommend that the FASB "be judicious in issuing new standards and interpretations that expand the use of fair value in areas where it is not already required, until completion of a measurement framework."

5/01/008 - Regulators Will Weigh Costs and Benefits Before Issuing IFRS Rule.
As the Securities and Exchange Commission draws up plans to issue a rule that will either permit, or even mandate, U.S. companies to use the International Financial Reporting Standards, it is wrestling with some questions that are fundamental to almost any public policy debate.

At the outset, the SEC is looking to the examples of other countries that started out with a standard-by-standard approach to accounting convergence, said Julie Erhardt, the SEC's Deputy Chief Accountant, on April 29, 2008, at Pace University's annual Contemporary Accounting Issues Conference in New York.

Since the SEC issued a final rule in Release No. 33-8879, Acceptance From Foreign Private Issuers of Financial Statements Prepared in Accordance With International Financial Reporting Standards Without Reconciliation to U.S. GAAP, in December 2007, only 37 foreign issuers have submitted financial statements in IFRS. Of those, 35 submitted filings without reconciling to U.S. GAAP because they used IFRS as issued by the International Accounting Standards Board. Twenty nine of the 35 said their statements complied with both IFRS as issued by the IASB and their local, national version of the standards.

4/28/08 - Role, Influence of Sovereign Wealth Funds Comes Under the Spotlight.
Recent months have seen weakened U.S. banks turn to overseas investors, in many instances state-operated sovereign wealth funds, to rebuild their capital bases. At the same time, members of Congress and financial regulators have watched with concern as some of the investors backed by foreign governments have become among the largest shareholders in some of the most prominent U.S. financial institutions.

At the moment, unless one of the investors is deemed a threat to a national security or violates the law, there's little the Securities and Exchange Commission (SEC) or any other regulator can do.

"We administer a disclosure based regime," said Ethiopis Tafara, Director of the SEC's Office of International Affairs, in response to a question during an April 24, 2008, hearing of the Senate Banking Committee.

Tafara told Senator Jack Reed (D-RI) that the agency staff can't block a state-sponsored foreign investor from taking a large stake in a U.S. company.

Regulators and lawmakers may not be able to stop the investments, but they've certainly noticed them: Of the $60 billion in equity raised raised by U.S. financial companies since July 2007, $39 billion was supplied by sovereign wealth funds, according to the Congressional Research Office.

The SEC's Form 3 under Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors as well as any holder of 10% or more of a public company to disclose their interest.

Section 13(d) of the 1934 Act requires holders of 5% or more of a company's stock to disclose the purchase within 10 days.

4/25/08 - IFRS Timetable For U.S. Issuers Will Be Ready In 2008, Says Cox.
"The rapidly increasing interest in [the International Financial Reporting Standards] in the U.S., and the rapidly increasing acceptance of IFRS in the rest of the world, reflect a growing consensus that these standards will deliver the high quality, consistency, and global comparability that so many have advocated for so long," said Christopher Cox, Chairman of the Securities and Exchange Commission. He also said the agency's staff was working on a schedule to spell out the pace of IFRS-related rule making for U.S. issuers.

"Our nation has a good deal at stake in seeing IFRS fulfill its promise," Cox said during an April 18, 2008, speech to the U.S. Chamber of Commerce in Washington, DC. He noted that total foreign trading activity by U.S. investors is more than $11 trillion. Total trading activity by foreign investors in U.S. markets is $33 trillion.

"It's for these reasons that our work on converging to a single global accounting standard is so important," he said.

The SEC issued Final Rule Release No. 33-8879, Acceptance From Foreign Private Issuers of Financial Statements Prepared in Accordance With International Financial Reporting Standards Without Reconciliation to U.S. GAAP, in December 2007. It issued Concept Release No. 33-8831, Allowing U.S. Issuers To Prepare Financial Statements In Accordance With International Financial Reporting Standards (Corrected), last August.

Cox also noted that the International Organization of Securities Commissions set up a database for international securities regulators to compare notes on the adoption of IFRS in various markets, and added that it was important for issuers in the U.S. and overseas to follow IFRS as they are written by the International Accounting Standards Board (IASB) and not local versions.

4/22/08 - SEC Delays XBRL Meeting to May 14.
The Securities and Exchange Commission postponed its meeting to discuss a possible rule on the eXtensible Business Reporting Language (XBRL), from Monday, April 21 to May 14, 2008.

A brief statement on the SEC website said, "At times, changes in Commission priorities require alterations in the scheduling of meeting items," and a spokesperson for the agency did not have any information beyond that.

4/16/08 - XBRL Tagged Data Will Highlight Links Among Accounting Concepts.
With the Securities and Exchange Commission preparing its proposed rule on the use of interactive data in the eXtensible Business Reporting Language, the agency staff wants issuers to hear their argument that the new technology offers several advantages over existing methods of statement preparation.

"In time, many companies will be using accounting software that includes XBRL data tagging as an integral part of the system," said Brian Cartwright, the SEC's General Counsel in an April 12, 2008, speech in Dallas, to the American Bar Association's Committee on Federal Regulation of Securities. "That will make it cheaper and easier for those companies to prepare their financial statements, with far less risk of human error. And the financial statements that are produced by that software then will have been tagged automatically."

Cartwright said the Commissioners are likely to consider a rule proposal on XBRL in the near future.

According to Cartwright, basic accounting concepts-whether they be assets, current assets, or inventory-that financial executives are familiar with will be translated into XBRL tags.

"There's a hierarchical character to accounting concepts," Cartwright said. "For example, work-in-process inventory is a type of inventory, which is a type of current asset, which is a type of asset. So users of data tagged with your new system undoubtedly would find it useful to be able to access a database that enumerated the various parent and child relationships between the accounting concepts you've provided tags for. That might help, among other things, in making elegant presentations possible, with, for example, the various kinds of inventory-raw materials, work-in-process, finished goods-indented under the heading inventory."

Cartwright said the software will read the opening and closing tags for each line item and then know that the number that follows belongs to that tag. Financial systems would essentially look for the information surrounded by the appropriate tags.

4/15/08 - How Banks Kept Securitized Mortgages Off Their Balance Sheets
The accounting treatment for special structures that permitted banks to keep assets such as securitized mortgages off of financial statements may have had an unintended role in the subprime mortgage crisis, said Robert Herz, chairman of the Financial Accounting Standards Board during a speech at the Harvard Club in New York on April 11, 2008.

"What has happened in recent years, with the benefit of hindsight, is the realization that these assets are not passive in nature, certainly not subprime mortgages," Herz said. "The modification of the loans, may not be what was anticipated upfront, but that is what was happening."

The qualified special purpose entities (QSPEs) were used by banks as a conduit to distribute pooled assets, such as subprime mortgages, into the secondary market, thus keeping them off their balance sheets.

Assets could qualify for a sale if they met certain qualifications and the entity could demonstrate that it had only had passive control over the assets.

Herz said that the question concerning whether banks can now change the terms of many of these troubled loans to lower the risk that they will default is a strong indication that the control over the assets is not passive, and that the accounting treatment-which permitted them to be treated as sales-was not appropriate.

4/10/08 - SEC, CFTC Consolidation Could Open Door to New Financial Products
A recent cooperative effort between the Securities and Exchange Commission and the Commodity Futures Trading Commission could "mark the beginning of an end to the limbo in which products on which both agencies have a potential regulatory claim have too often found themselves," said SEC Commissioner Paul Atkins in an April 1, 2008, speech to the Securities Industry and Financial Markets Association in Orlando, FL.

The two rulemakers agreed to cooperate on the approval of new products in March, and Atkins said the initial signs of this effort were not only positive, but pointed the way to bigger changes in the financial services industry, particularly in light of the Blueprint for a Modernized Financial Regulatory Structure issued by the Treasury Department just a few weeks after the agencies announced their agreement.

"It is not surprising, then, that calls for a consolidation of the agencies have increased," Atkins said. In his view, the two agencies will benefit greatly if they adopt the CFTC's principles-based approach to market supervision and scrap the SEC's traditional rules-based form of regulation.

He pointed to the expedited approval process the agencies have adopted for two gold-based exchange traded funds

4/08/08 - SEC Content is Added to Codification Website for Verification.
The Financial Accounting Standards Board posted some Securities and Exchange Commission content onto the FASB's Accounting Standards Codification website on April 3, 2008. The content keeps the original wording issued by the SEC, but it has been reorganized into roughly 90 accounting topics that are aligned with content from other standard setters.

The SEC sections contain content related to matters within basic financial statements, but do not include the entire population of SEC rules, regulations, interpretive releases, and staff guidance. For example, topics such as Management's Discussion and Analysis and auditing or independence matters are not included.

Content in the SEC section is expected to change over time as the agency revises its regulations and staff guidance, and while the FASB said it will keep the content up to date, the SEC is not going to revise its procedures for issuing rules and accounting guidance. That may result in delays between SEC changes and the corresponding updates to the Codification website, the FASB said.

The Codification does not replace or affect requirements or guidance issued by the SEC.

4/3/08 - Busy Agenda in Store for a Five-Member SEC.
If Democrats Elisse Walter and Luis Aguilar are confirmed to fill the vacant seats on the Securities and Exchange Commission, the agency's rulemaking may gain the legitimacy it needs at a critical juncture for U.S. capital markets.

House and Senate leaders have expressed their support for the nominees, and noted their considerable experience. Aguilar is a Partner in the Atlanta office of the law firm McKenna, Long & Aldridge. Walter is a Senior Executive Vice President for Regulatory Policy & Programs at the Financial Industry Regulatory Authority (FINRA), the self-regulatory organization for the brokerage industry.

Lawmakers also noted that there is challenging work ahead for the SEC.

"I was pleased to work with the majority leader to put forward these two highly qualified candidates," said Senator Christopher Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, referring to Senator Harry Reid (D-NV), who submitted the nominations to President Bush in 2007. "The SEC faces many important issues. Among these are consolidated supervision, whether to allow mutual recognition, accounting integrity, the role of investment advisers, strong enforcement of the securities laws, and proxy access."

SEC Chairman Christopher Cox said last fall that he would address the issue of proxy access when the two vacant seats had been filled, but some SEC watchers doubt that Cox will push to include this item on the agency's rulemaking agenda, given the little time left before a new administration takes office, the chaos in the financial markets, and the lack of support for improving shareholder access to the proxy process among the three Republicans who hold a voting majority on the five-member Commission.

4/02/08 - Bush Nominees for SEC Openings Appear to Have Support of Democrats, Investors.
The nominations of Democrats Elisse Walter and Luis Aguilar to fill the vacant seats on the Securities and Exchange Commission have been met with cautious optimism in the investment community.

"We very much welcome confirmation hearings," said Amy Borrus, Deputy Director for the Council of Institutional Investors. "We view it as an opportunity to hopefully hear what Walter and Aguilar have to say about any number of important investor issues, including proxy statements and IFRS." The Council's members sponsor more than $3 trillion in public, corporate, and union pension plans, and the group has lobbied the SEC to pass reforms that would increase the ability of shareholders to nominate directors through the proxy process.

Aguilar and Walter were nominated by President Bush on March 28, 2008, to fill two seats that had been vacant for months. The White House had held up the nominations, which were announced on the same weekend as the Treasury Department unveiled a far-reaching overhaul of the financial regulatory system, since late 2007.

3/27/08 - SEC May Be Close to Issuing Rule Proposal for XBRL Filings.
The Securities and Exchange Commission (SEC) has spent years promoting the adoption of the eXtensible Business Reporting Language (XBRL), and in late 2007, the agency promised auditors and public companies that rulemaking on this front would be a priority in 2008.

Three months into the year, the anticipated regulatory timetable is coming into sharper focus. SEC officials won't spell out a specific date for the proposal's release, but there is a sense in the financial reporting community that an announcement is imminent.

"That is the first question I get asked when I go to any company or any group of lawyers," said David Blaszkowsky, Director of the SEC's Office of Interactive Disclosure, who referred to the rough schedule provided by Chairman Christopher Cox in September 2007 when asked about the timing.

With one question all but answered, the response to a second query may have larger implications: How prepared are public companies to submit filings in XBRL? A small minority may be ready, but for a great many financial executives, there's a great deal of uncertainty about the costs and how the switch will affect them.

3/26/08 - SEC Plans to Reach Agreements With Foreign Regulators to Advance Mutual Recognition Program.
On March 24, 2008, the Securities and Exchange Commission outlined the steps it is likely to take in its mutual recognition program to facilitate increased international trading of securities and improve the regulatory oversight of cross-border trading.

The steps are intended to improve the SEC's coordination with its foreign counterparts of international regulation, improve the access U.S. investors have to foreign markets that the SEC deems are properly supervised, and offer U.S. companies easier access to capital from foreign investors.

The steps the SEC is considering include:

• Exploring agreements with one or more foreign regulatory counterparts, which would be based upon a comparability assessment by the SEC and the foreign authority of one another's regulatory regimes;
• Adoption of a formal negotiation process with overseas regulators;
• Building upon the agreements with foreign counterparts with possible rulemaking;
• Developing a framework for mutual recognition discussions with jurisdictions comprising multiple securities regulators tied together by a common legal framework. For example, Canada has no national securities regulator, but each province has its own regulatory authority. The national securities regulators of the European Union's member nations are subject to supranational legislation and directives; and
• Reforming Rule 15a-6 of the Securities Exchange Act of 1934 to improve the process by which U.S. investors have access to foreign broker-dealers. The rule spells out the conditions a foreign broker has to satisfy in order to be exempt from registering with the SEC.

3/21/08 - No Action Letters Give JPMorgan The Regulatory Approval For Bear Stearns' Deal

When JPMorgan Chase & Co. announced its late night deal to acquire its financially crippled rival, Bear Stearns Cos. on March 16, 2008, it did so with an especially assertive helping hand from the Securities and Exchange Commission.

No action letters from the SEC are a routine occurrence, but in the case of the Bear Stearns deal, the SEC took the unusual step of issuing four from three different divisions. Two letters from the Division of Investment Management said there would be no enforcement action against JPMorgan under Sections 15(a) and 17(a) of the Investment Company Act. One from the Division of Corporation Finance said JPMorgan faced no enforcement action for selling securities issued by Bear Stearns without registering them under Section 5 of the Securities Act of 1934. A letter from the Division of Trading Markets said there would be no penalty if JPMorgan failed to meet the prompt filing requirement for Form BD, for broker-dealer registration, so long as the forms were submitted "within a reasonable period."

In a frequently asked question document the SEC posted on its website shortly after the deal was announced, regulators said the no-action letters were part of the assistance they provided during the rushed negotiations to finalize the negotiations. Officials from the Treasury Department and the Federal Reserve were also closely involved with the transaction.

Regulators feared that a bankruptcy by a major investment firm would destabilize financial markets around the globe.

The document also said that an investment banking firm's capital, which in Bear Stearns' case appeared sufficient on the morning of March 11, is not synonymous with the liquidity it needs to trade in the capital markets.

3/19/08 - SEC Proposal in Release No. 33-8901 Would Give ETFS Permission to Begin Trading Without Seeking Exemptive Relief.

The Securities and Exchange Commission issued Release No. 33-8901, Exchange-Traded Funds, on March 11, 2008, a proposal that would grant some funds permission to begin trading without seeking exemptive relief, bypassing the process established when ETFs were introduced in the early 1990s.

The three members of the SEC approved issuing the proposal at an open meeting on March 4, 2008, in Washington, D.C. The comment period ends May 19.

Proposed Rule 6c-11 under the Investment Company Act of 1940 would permit issuers of ETFs to launch new funds without requesting individual exemptions. The blanket exemption would apply to actively managed ETFs that disclose on their websites each day the names and component weightings of each security in their portfolios.

The SEC said the order is intended to codify previous exemptions.

The proposal would grant ETFs a fair amount of latitude in the types of securities they could hold. While ETFs typically invest only in securities with active markets, the new rule would not require them to do so. The agency wants comments to address the effects of investing in illiquid investments, particularly a potential deviation between an ETF's share price and net asset value.

3/18/08 - CIFR is Asked Not to Tamper With Materiality Standard.
Groups representing investors are worried the Securities and Exchange Commission will roll back the rules governing financial statements, and the issue dominated a March 13, 2008, discussion conducted by the SEC's Advisory Committee on Improvements to Financial Reporting in San Francisco.

"We strongly oppose the recommendations that would weaken the materiality standard," said Barbara Roper of the Consumer Federation of America in Pueblo, CO.

The committee members sought to explain their proposals. "We're not suggesting that if it's material, there shouldn't be a restatement," said a committee member. "Our view is all errors must be corrected, and the second question is whether certain errors would be best corrected through disclosure. Once there is a material error, there could be two different methods of correction-one is through a restatement and the other approach is through disclosure and filing an 8-K. We are trying to separate these questions and have discussions about both issues. That is the debate, and we as a committee need to be clearer about that."

The committee will meet twice more on the road, in Chicago in May and in New York in July, before it presents its final recommendations to the SEC in August.

3/17/08 - Improvements to Regulation of Liability Insurance for Auditors Not Yet Addressed
The Treasury Department's Advisory Committee on the Auditing Profession failed to produce a recommendation on liability insurance for auditors during an open meeting on March 13, 2008 in Washington, D.C.

The committee met to review and agree to a series of its draft proposals which will be submitted to Treasury Secretary Henry Paulson and which are designed to improve how the auditing profession operates, yet failed to address one of the most pressing issues facing auditors, that of liability insurance.

Despite receiving testimony from respected experts, the committee decided at this point not to put forward a recommendation to the Treasury Department on possible improvements for how liability insurance is regulated.

The committee also recommended the Securities and Exchange Commission (SEC) amend Form 8-K disclosure requirements to accurately describe and report every public company auditor change and to require auditing firms to notify the Public Company Accounting Oversight Board of any premature engagement partner changes on public company audit clients. This proposal met with opposition from some committee members, while others provided support.

With the ghost of Arthur Andersen looming over the proceedings, firm failure and potential lack of competition in the auditing profession was another focal point for the committee's discussions.

"No auditing firm is too big to fail," wrote Arthur Levitt, Jr., former SEC Chairman and head of the committee in the draft. "However it's clear that the loss of one of the larger auditing firms would have systemic repercussions throughout the global capital markets."

As a result, the committee considered a draft framework for a plan to save a firm facing collapse.

The committee also looked at proposals to change university curricula to be more market-driven and responsive to business needs. The overall viability of the auditing profession remains a concern for committee members.

3/13/08 - SEC and Commodity Futures Trading Commission Sign Agreement to Address New Financial Products
Securities and Exchange Commission Chairman Christopher Cox and Commodity Futures Trading Commission Acting Chairman Walter Lukken signed a Memorandum of Understanding (MOU) designed to give the two agencies a broader scope to cooperate in regulating new financial products, on March 11, 2008 in Washington, D.C.

The current MOU is indicative of greater cooperation between the SEC and the CFTC, supplementing a previously signed an MOU in 2004, which regulated their joint oversight of security futures products and some shared enforcement issues.

Headquartered in Washington, D.C., the Commodity Futures Trading Commission (CFTC) was created by Congress in 1974 as an independent agency designed to regulate commodity futures and option markets in the U.S. and protect market users from fraud and abusive practices.

The agencies also announced they are issuing notices requesting public comment on two new products. One product is an option that would be traded on options exchanges, and the other is a future that would trade on a single stock futures exchange. The requests for comment will be published in the Federal Register within a few days.

The MOU also establishes a permanent regulatory liaison between the agencies and a framework for information sharing on enforcement and mergers, and requires the staff to meet formally every quarter.

3/12/08 - Sovereign Wealth Funds and Disclosure Requirements
The rapid growth in sovereign wealth funds in the past few years has put enforcement officials at the Securities and Exchange Commission on edge, given the obstacles foreign governments could place before regulators trying to investigate suspicious activity.

Yet several SEC rules, although they weren't written with sovereign funds in mind, should adequately address the challenges, because "many of the concerns that sovereign investing raises are similar to concerns about other types of investment," testified Ethiopis Tafara, Director of the SEC's Office of International Affairs, on March 5, 2008, before two House subcommittees.

The disclosure requirements in Form 3 under Section 16(a) of the Securities Exchange Act of 1934 that officers and directors, as well as any holder of 10% or more of a public company, disclose that interest, are among the most important, Tafara said. Other requirements, such as Section 13(d) of the 1934 Act, which requires holders of 5% or more of a company's stock to disclosure a purchase within 10 days, should also aid regulators in their efforts to shore up market transparency with these funds.

Tafara also said that Form 13-F requires disclosure for anyone holding at least $100 million of securities listed on a U.S. exchange.

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5/05/08 -Shift to IFRS May Change Accounting Education, Says FASB Chair.
The adoption of a principles-based accounting system in the U.S. will require major changes to the education and professional training for accountants and auditors, said Robert Herz, Chairman of the Financial Accounting Standards Board, at a May 1, 2008, conference at Baruch College's Zicklin School of Business in New York.

Herz said the transition to the International Financial Reporting System (IFRS) will make necessary both a cultural shift as U.S. practitioners make the shift from a rules-based system to a principles-based one and a broader understanding of economics, in addition to accounting.

"We have become a profession of template rules," said Herz. "When we teach accounting, we teach rules. We don't teach economics. How much are we teaching securities valuation?"

The FASB has begun to adopt a more principles-based approach in the guidance it has issued in recent years, but the standards setting body inevitably receives many questions on how specifically practitioners should interpret the rules, Herz said, who added that he has become less willing to provide such specific clarifications.

"Whether it is companies or auditing firms, I keep hearing, 'we need guidance on these 62 questions,'" he said. "I am increasingly saying no, you are earning the big money, figure it out."

4/30/2008 - Final FSP No. Fas 142-3 Addresses Useful Life of Intangible Assets
The Financial Accounting Standards Board issued Final FASB Staff Position (FSP) No. FAS 142-3, Determination of the Useful Life of Intangible Assets, on April 25, 2008.

The guidance is intended to improve the consistency between the useful life of a recognized intangible asset under Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R), Business Combinations, and other guidance under U.S. generally accepted accounting principles (GAAP).

The Board has noted that the useful life of a recognized intangible asset in SFAS No. 142 is typically much shorter from the period of expected cash flows used to measure the fair value of the asset in a business combination when the underlying arrangement includes renewal or extension terms, such as a phone contract. Board members also had acknowledged that the difference between the useful life of an intangible assets and the cash flow periods use to measure fair value was especially pronounced for longer-lived intangible assets for which the likelihood of renewal or extension is high, but for which the underlying arrangement requires material modifications.

The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Early adoption is prohibited, the FASB said. Paragraph 11(d) of SFAS No. 142 requires entities to base assumptions for determining the useful life of a recognized intangible asset on the legal, regulatory, or contractual provisions that permit extending the asset's useful life without appreciably adding to its cost.

4/29/2008 - In Final FSP SOP No. 90-7-1, the FASB Amends Early Adoption Guidance for Companies Emerging from Bankruptcy
The April 24, 2008, issuance of Final FASB Staff Position (FSP) SOP No. 90-7-1, An Amendment of AICPA Statement of Position 90-7, by the Financial Accounting Standards Board resolves a conflict concerning the early adoption of new guidance by entities emerging from bankruptcy.

The guidance is effective for all financial statements issued following its release.

The American Institute of Certified Public Accountants' (AICPA) Statement of Position (SOP) 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, which was issued in 1990, required early adoption of new accounting standards for entities adopting fresh-start reporting as they emerge from bankruptcy.

Guidance issued by the FASB in the years since 1990 has tended to prohibit early adoption. The result was an ungainly situation in which companies recovering from bankruptcy were required to be the first to implement new standards. The members of the FASB agreed that it was more appropriate to amend (SOP) 90-7, than to continue to encourage entities still struggling financially to adopt provisions that were not required of other, more stable companies.

To resolve this inconsistency, the Board amended the guidance so that entities emerging from bankruptcy are not allowed to early adopt an accounting principle when early adoption is not permitted by that accounting standard.

4/21/08-Board Seeks to Set Clear Path for Credit Default Swaps Project
During an education session following their regular weekly meeting on April 16, 2008, the members of the Financial Accounting Standards Board struggled to reach a clear consensus with the standards-setting body's research staff on the scope and the proper approach for a project on credit default swaps.

The staff proposed a narrowly focused amendment to FASB Interpretation (FIN) No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others-an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. While Board members agreed that disclosures for credit defaults swaps are needed, they differed on the standard that should be amended. Some Board members seemed reluctant to take on another narrowly focused derivatives disclosure project so soon after the March 19 issuance of the FASB's Statement of Financial Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133.

"I look at this, and what I really come out with is, what is wrong with our derivatives disclosure that we need a special project for credit derivatives?" asked Donald Young. "Maybe we've got some issues in our approach."

Some members favored drafting broader guidance that would expand the scope of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, to encompass credit default swaps.

Chairman Robert Herz said he wanted the project to produce amended guidance that subjects all credit derivatives to disclosure.

"Once we scope it that way, whether a credit derivative meets the definition of a 133 derivative or not, will there still be the same disclosure?" he asked. Staff members noted that the derivative instruments that are eligible for the scope exception under SFAS No. 133, tend to fall under FIN No. 45. The staff wants the project to focus on credit derivatives that have similar characteristics to the financial products governed by FIN No. 45 but do not fall under its scope. They believe the adjustment would make hedging disclosures more informative for financial statement users.

"We are not trying to identify products by name, but we have certain definitional types of things," said a staff member in response to questions about whether the project will encompass the full range of derivative products. "Hopefully we are capturing everything."

4/17/08 - Internal Draft Document for Financial Statement Presentation Project Nears Completion
The research staff of the Financial Accounting Standards Board (FASB) is nearing completion of an internal draft of a proposal for the overhaul of financial statement presentation, according to a project update on the FASB's website.

The internal document should be ready for review by the FASB, the Accounting Standards Board of Japan (ASBJ), and the International Accounting Standards Board (IASB), in May 2008. The schedule includes releasing a version of the proposal for public comment in the third quarter.

Each of the three standard setting bodies plans to separately develop their own proposals for each issue in this document and vote on them, and at the same time resolve the differences with the other Boards.

The scope of the FASB financial statement presentation draft will cover the first two phases of the project. The first phase includes what constitutes a complete set of financial statements and the requirements for presenting comparative financial information. The second phase includes principles for aggregating and disaggregating information in each financial statement, defining certain totals and subtotals to be reported and certain decisions on the use of other comprehensive income and cash flow statements.

The intended goal is a common, high-quality standard for presentation of information in financial statements that will provide financial statement users with more useful and relevant financial information, particularly in relation to understanding how operating, financing, and investment activities have caused an entity's financial position to change and the components of those changes.

4/14/08 - Fair Value Hierarchy Provides Challenge for Proposal on Pricing Liabilities
The seven members of the Financial Accounting Standards Board struggled to resolve some sharp differences on the fair value hierarchy at their April 9, 2008, weekly meeting at the Board's Norwalk, CT, headquarters.

The Board members considered modifying the Proposed FASB Staff Position (FSP) No. FAS 157-c, Measuring Liabilities under FASB Statement No. 157, to include more specific guidance on the fair value hierarchy than is provided in Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurement.

But Board members disagreed over new language that the staff added to Proposed FSP No. FAS 157-c on measuring liabilities at fair value if observable inputs were available. The new language specifies that the guidance from paragraph 7 of the proposed FSP should only be used if significant unobservable (Level 3) inputs are used in the fair value measurement. This language had not been in the Proposed document when it was released in January, but was offered by the staff in response to the many comments received.

The Board also approved the recommendation of the staff not to make any further changes to the proposal on other issues constituents raised in comment letters, including realization of a liability, nonperformance risk, scope, the bid/ask spread, blockage of a liability, and disclosures.

The staff is preparing an amended version of the proposed FSP that will be submitted to the Board.

FASB Chairman Robert Herz argued that the staff proposal on measuring unobservable inputs constituted an exception to the fair value principles in SFAS No. 157. While he understood the logic behind the proposal, he wanted it described as a practical expedient in the final FSP.

4/09/08 - Convergence Project May Determine Fate of FIN No. 48.
Because convergence of international accounting standards is still one of the top priorities for the Financial Accounting Standards Board (FASB), the standard setter's plans for income tax accounting may throw a curveball to accounting professionals just getting used to FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes.

Speaking during the 58th midyear Conference of the Tax Executives Institute (TEI) on April 7 in Washington, DC, Allen Shoulders, Director of Tax Internal Control Services for Ernst & Young in Dallas, said people are waiting for an answer on the fate of FIN No. 48.

"There's talk we'll adopt one or the other," said Shoulders, referring to the FASB's Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, and two pieces of guidance from the International Accounting Standards Board (IASB), International Accounting Standard (IAS) 12, Income Taxes, and IAS 37, Provisions, Contingent Liabilities and Contingent Assets. "The concept of convergence is on its way, the challenge is going to be finding something that U.S. auditors can hang their hat on."

4/07/08-Qualified Special Purpose Entities Will Be Removed From SFAS No. 140.
The Financial Accounting Standards Board approved amending Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, to remove the qualified special purpose entity concept from the derecognition language in paragraph 9 of the statement during a lengthy, contentious, and unusually well attended meeting at its Norwalk, CT headquarters, on April 2, 2008.

Under SFAS No. 140, certain off-balance-sheet arrangements can be considered QSPEs if they meet requirements established in the aftermath of the Enron scandal. The statement was part of a broad attempt to provide a clearer picture of the relationship between sponsoring companies and their off-balance-sheet entities.

The planned amendments to SFAS No. 140 will be included by the staff in a draft document and exposed for public comment in the near future.

Board members agreed that with the dizzying growth of derivatives and the sophisticated, and often confusing, extent to which assets are securitized, that SFAS No. 140's treatment of QSPEs was no longer helpful to financial statement users.

3/31/08 - FASB Will Issue Exposure Draft for Project on Discontinued Operations.
The Financial Accounting Standards Board plans to move ahead on proposed guidance for discontinued operations, according to a March 27, 2008, update on its website.

The Board will meet in the second quarter to review the tentative decisions that have been made on the project since a January 24, 2007, meeting, when the Board agreed to a revised definition of a discontinued operation and the disclosures that would be required when reporting a component of an entity that was or will be disposed of.

The Board also plan to discuss the remaining issues that need to be addressed prior to the staff's preparation of an exposure draft, which is scheduled to be released in the second quarter of 2008.

The discontinued operations project was separated from the financial statement presentation project in April 2007, when the Board decided this topic would not be completed in time to be included in a draft preliminary views document on statement presentation.

3/4/08 -- PROPOSED FSP NO. SOP 90-7-a ADDRESSES EARLY ADOPTION OF NEW STANDARDS FOR ENTITIES COMING OUT OF BANKRUPTCY.
The Financial Accounting Standards Board issued proposed FASB Staff Position (FSP) No. SOP 90-7-a, An Amendment of AICPA Statement of Position 90-7, on February 27, 2008. If approved, the draft guidance would nullify the requirement in paragraph 38 of the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, regarding changes in accounting principles. FASB asked constituents to submit comments by March 28. Proposed FSP No. SOP 90-7-a would amend paragraph 38 of SOP 90-7 by inserting a statement requiring that the reorganization value of an entity be "assigned to the entity's assets and liabilities in conformity with the procedures specified by FASB Statement of Financial Accounting Standards (SFAS) No. 141(R), Business Combinations. If any portion of the reorganization value cannot be attributed to specific tangible or identified intangible assets of the emerging entity, such amounts should be reported as goodwill in accordance with paragraph 6 of SFAS No. 142, Goodwill and Other Intangible Assets." The proposed guidance also calls for deferred taxes to be recognized in accordance with U.S. generally accepted accounting principles (GAAP).

2/27/08 -- FASB to Consider Additional Disclosures in Accounting for Contingencies.
When the Financial Accounting Standards Board meets for an educational session on February 27, 2008, it plans to discuss the application of fair value accounting to Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies.

The Board's interest in the issue comes as many preparers and users of financial reports are expressing their frustration with the delayed recognition of assets and liabilities that has occurred from SFAS No. 5 with respect to loss contingencies.

SFAS No. 5 requires that a loss be probable and estimable before it is recorded, but the concern has been expressed that the recognition of a liability occurs long after an event has occurred, such as the filing of a lawsuit. As a result, financial statements may lack significant information.

The SFAS No. 5 project was undertaken in September 2007 and has yet to reach its first public discussion by the Board, but several major public companies are on the record as opposing the application of fair value measurements for contingencies related to litigation from high-profile public constituents.

2/25/08 -- FASB Issues Final FSP No. FAS 140-3 for Transfers and Servicing of Financial Assets.
The Financial Accounting Standards Board issued FASB Staff Position (FSP) No. FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions, on February 20, 2008. The FSP presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement as described in FASB Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, unless four conditions are all met.

The conditions are:

• The initial transfer and the repurchase financing are not contractually contingent on one another,
• The repurchase financing provides the initial transferor with recourse to the initial transferee upon default,
• The financial asset subject to the initial transfer and repurchase financing is readily obtainable in the marketplace, and
• The repurchase agreement matures before the asset.

Transactions that meet all four criteria will be accounted for separately from repurchase financings. The FASB also said that the initial trades should be evaluated to determine if they meet the requirements for sale accounting under SFAS No. 140 without taking into consideration the repurchase financing.

The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after November 15, 2008.

2/20/08 -- FINAL FASB STAFF POSITION (FSP) NO. SOP 07-1-1 DELAYS EFFECTIVE DATE OF THE AICPA'S SOP 07-1.
The Financial Accounting Standards Board issued Final FASB Staff Position (FSP) No. SOP 07-1-1, Effective Date of AICPA Statement of Position 07-1, on February 14, 2008. The guidance delays indefinitely the implementation of the American Institute of Certified Public Accountants’ Statement of Position (SOP) 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies.

The FASB said the delay allows it time to consider issues relating to the implementation of the AICIPA statement.

The Final FSP is effective retroactively to December 15, 2007, the original date when SOP 07-1 was to become effective. The FASB said that entities that early adopted SOP 07-1 may continue to apply it, but are not required to do so. An entity that has not early adopted the guidance can only apply its provisions if a parent company was an early adopter and is continuing to follow the statement.

The FASB said FSP No. SOP 07-1-1 does not amend FSP No. FIN 46(R)-7, Application of FASB Interpretation No. 46(R) to Investment Companies, which will be effective only upon initial adoption of SOP 07-1. In addition, Emerging Issues Task Force (EITF) Issue 85-12, “Retention of Specialized Accounting for Investments in Consolidation,” and EITF Topic D-74, “Issues Concerning the Scope of the AICPA Guide on Investment Companies,” remain effective for entities that have not adopted SOP 07-1.

2/19/08 -- FASB Votes to Amend AICPA SOP 90-7 and Remove Early Adoption Provision.

At its weekly meeting on February 13, 2008, the Financial Accounting Standards Board voted 5-2 to add a project to its agenda for the purpose of removing the requirement that entities emerging from bankruptcy and applying fresh-start reporting to early adopt new standards. To accomplish the change, the Board instructed the staff to draft a proposed amendment to the American Institute of Certified Public Accountants' (AICPA) Statement of Position (SOP) 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.

The proposed amendments will be issued with the FASB's standard 30-day comment period.

SOP 90-7 provides guidance for entities that have filed petitions with a Bankruptcy Court and expect to reorganize as a going concern under Chapter 11. The statement requires entities adopting fresh-start reporting to adopt any changes in accounting standards within the 12 months following the date that they started using the fresh-start reporting.

The project addresses the conflict that had arisen between SOP 90-7 and other authoritative accounting standards. When SOP 90-7 was issued in 1990, it was common for early adoption to be required. Standards issued in more recent years typically prohibited early adoption, which led to a conflict with SOP 90-7.

2/14/08 -- PCFRC Recommends Using Nonissuer Label to Define Private Companies.
The most appropriate terms for distinguishing public companies from private companies are "issuer" and "nonissuer," respectively, the Private Company Financial Reporting Committee wrote in a February 1, 2008, comment letter to the Financial Accounting Standards Board. The letter is in response to a request from the FASB staff to the PCFRC, which is jointly sponsored by the FASB and the American Institute of Certified Public Accountants.

The recommendation to the FASB follows from a decision reached by the PCFRC at a December 2007 meeting.

The terms "issuer" and "nonissuer" should be used because they are already established in existing securities laws, wrote the PCFRC. Specifically, the definition of an issuer is in the Sarbanes-Oxley Act of 2002 and the Securities Exchange Act of 1934, and "an entity that does not meet that definition is a 'non-issuer.'"

The PCFRC also noted that both the Auditing Standards Board--the AICPA's senior technical committee for auditing, attestation, and quality control standards and guidance--and the Public Company Accounting Oversight Board (PCAOB) use "issuer," as defined in the U.S. Code, in their literature.

2/13/08 -- FASAC Member Survey Will Be Used to Advise FASB on Its Priorities.
The Financial Accounting Standards Advisory Council is querying its members regarding the issues they want the Financial Accounting Standards Board to place on its agenda for the year.

The FASAC's 2008 "Survey On the Priorities of the FASB" survey asks members to consider the proper role the International Financial Reporting Standards (IFRS) should have in the U.S. Members were asked to consider several options, including allowing both U.S. and foreign issuers a choice between U.S. generally accepted accounting principles (GAAP) standards or IFRS; extending the option granted to foreign issuers in the December 2007 rule issued by the Securities and Exchange Commission in Release No. 33-8879, Acceptance From Foreign Private Issuers of Financial Statements Prepared in Accordance With International Financial Reporting Standards Without Reconciliation to U.S. GAAP; or replacing GAAP with IFRS for all issuers, including U.S. companies.

The survey also raises the issue as to whether all authoritative guidance in the U.S. should eventually come from a single, global standards setter and not the FASB.

Members have until March 3, 2008, to submit their responses.

2/12/08 -- FASB to Consider Amending SFAS No. 132(R) to Reflect Pension Risks.
Disclosing risks, such as that which turned the financial world on its ear through its investments in subprime mortgages, may soon be added to the list of items that pension funds will be required to include in their financial statements.

A new project on possible additional disclosures for pension funds will be reviewed when the Financial Accounting Standards Board meets on February 13, 2008. If accepted, the proposals may at a future point amend the FASB's Statement of Financial Accounting Standards (SFAS) No. 132(R), Employers' Disclosures About Pensions and Other Postretirement Benefits.

The project was taken on at the November 14, 2007 Board meeting, in response to acknowledgment that the current disclosure requirements in SFAS No. 157, Fair Value Measurements, do not include an employer's reporting of plan assets held in a pension within its scope.

2/12/08 -- Financial Accounting Foundation Trustees to Meet on February 26.
The Financial Accounting Foundation Board of Trustees will meet at 10:30 on February 26, 2008 at the Roosevelt Hotel in New York City, the Foundation's first meeting since it proposed its reorganization.

The Financial Accounting Foundation, which oversees the Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB) and other related entities, will give a report from the FAF Chairman.

There will also be remarks from the Chairman of the International Accounting Standards Committee Foundation. The meeting is open to the public.

An additional meeting on international activities, appointments and evaluations and the summary of the executive committee, will be closed to the public.

The FAF Board of Trustees is responsible for the oversight, funding, and appointment of members of the FASB and the GASB. The FAF proposed a reorganization of all three bodies in December 2007.

2/11/08 -- SOP No. 07-1 is Deferred Indefinitely By Board Decision.
The Financial Accounting Standards Board decided in a 5-2 vote at its meeting on February 6, 2008, to approve proposed FASB Staff Position (FSP) No. SOP 07-1-a, Effective Date of AICPA Statement of Position 07-1. The decision indefinitely defers the effective date of AICPA Statement of Position (SOP) No. 07-1, Clarification of the Scope of the "Audit and Accounting Guide Investment Companies" and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies, which clarifies which companies are eligible to use accounting standards for investment companies.

To avoid penalizing companies that had adopted the provision early, the Board decided to allow those entities to either rescind or retain the accounting applied upon adoption.

In addition, the Board agreed that entities who elect to retain their adoption of the guidance must also apply it to all consolidated entities going forward, including those formed or acquired after the adoption of SOP No. 07-1.

2/8/08 -- Board Approves Proposed FSP No. FAS 157-a, Instructs Staff to Draft Final Guidance.
At its February 6, 2008, meeting, the Financial Accounting Standards Board instructed its staff to move proposed FASB Staff Position (FSP) No. FAS 157-a, Application of FASB Statement No. 157 to FASB Statement No. 13 and Its Related Interpretative Accounting Pronouncements that Address Leasing Transactions, to final guidance.

The final FSP would defer application of FASB Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, to SFAS No. 13, Accounting for Leases.

The Board agreed that the proposal was intended to include in its scope for deferral other pronouncements, including SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets; SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities; and SFAS No. 141(R), Business Combinations.

Several FASB constituents, in their comments on proposed FSP No. FAS 157-a, said SFAS No. 144, SFAS No. 146, and SFAS No. 141(R) should all be included in the FSP's scope exception, because the implementation problems would be the same as had been identified for SFAS No. 13, and there is a high risk of non-compliance.

2/5/08--FASB Issues FASB Staff Position (FSP) FIN 48-2, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises.
The Financial Accounting Standards Board issued FASB Staff Position (FSP) FIN 48-2, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises, on February 1, 2008.

The FSP defers the effective date of FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, for nonpublic enterprises as they are defined in the amended version of paragraph 289 in the FASB's Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. The definition includes nonpublic not-for-profit organizations.

For entities covered by the deferral, FIN No. 48 will be effective for annual financial statements for fiscal years beginning after December 15, 2007, and entities should apply it as of the beginning of their fiscal years, the FASB said.

Early adoption is permitted as of the beginning of an enterprise's fiscal year.

2/4/08 -- Action Alert 08-05: FASB to Review Application of Fair Value Rules At Next Meeting.
The intersection between accounting for leases and fair value measurements will be the key areas of discussion when the Financial Accounting Standards Board has its weekly meeting on February 6, 2008, the Board announced in Action Alert 08-05.

The Board plans to discuss a proposed standard dealing with the application of Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, to SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions, including Proposed FASB Staff Position (FSP) No. FAS 157-a, Application of FASB Statement No. 157 to FASB Statement No. 13 and Its Related Interpretive Accounting Pronouncements That Address Leasing Transactions.

The Board also intends to also discuss a partial deferral of the effective date for SFAS No. 157, and will discuss various issues raised by constituents regarding proposed FSP FAS157-b, Effective Date of FASB Statement No.157. The Board will discuss whether to issue the FSP as final.

The Board will also consider the effective date for proposed FSP SOP 07-1-a, Effective Date of AICPA Statement of Position 07-1. The FSP would grant a deferral for the American Institute of Certified Public Accountants (AICPA) Statement of Position, which provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide, Investment Companies.

Following the February 6 meeting, the Board plans to hold an open discussion with staff members on technical projects and will also hold an educational session.

At its January 23 meeting, the Board reviewed Exposure Draft (ED) No. 1240-001, Earnings per Share: An Amendment of FASB Statement No. 128. It decided to exclude certain instruments from the denominator of the diluted earnings per share, including those measured at fair value that can be settled in cash or shares and some instruments that are recognized as liability and measured under its share-based payment fair value approach. The Board also decided not to require specific additional disclosures for earnings per share that had been proposed.

The Board resumed deliberations of a draft of a proposed FASB Staff Position (FSP) on whether Accounting Research Bulletin (ARB) No. 43, "Restatement and Revision of Accounting Research Bulletins," should be amended to require fair value accounting for certain assets that are being held for trading. The Board discussed scope, disclosure requirements, transition, and comment period, authorizing the staff to proceed to a draft of a proposed FSP for vote by written ballot, with a 45-day comment period.

The Board discussed issues raised in proposed FSP No. FIN 48-b, Effective Date of FASB Interpretation No. 48 for Nonpublic Enterprises. The Board made decisions about the eligibility for the deferral, amending it to exclude a nonpublic subsidiary of a public company from the scope of deferral and qualifying it based on issuance of financial statements. The Board extended the deferral to annual periods beginning after December 15, 2007. The Board authorized the staff to proceed to a draft of the final FSP for vote by written ballot. The final FSP was issued on February 1.

The Board last met on January 30, 2008.

2/1/08 -- FASB Rejects Plan to Adopt SFAS No. 5 for Troubled Mortgages.
In a six-to-one vote, the Financial Accounting Standards Board rejected a proposal from the Mortgage Banker's Association to adopt a project that would explore using less stringent rules to account for mortgage loan restructurings.

The proposal put before the Board at its weekly meeting on January 30, 2008, in Norwalk, Connecticut, asked that lenders be permitted to use FASB Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, in lieu of SFAS No. 114, Accounting by Creditors for Impairment of a Loan. The MBA sought the change because the downturn in the housing market has exposed an unprecedented number of mortgages to the risk of default. The MBA also said that the wording of SFAS No. 114 could be interpreted so as to exclude home mortgages, which are typically smaller than most commercial and industrial loans, but the Board rejected that argument.

The downturn in the debt markets has forced mortgage originators to hold a rising number of loans on their balance sheets instead of securitizing them through the secondary markets. Lenders have been accounting for the troubled loans they hold under SFAS No. 5 rather than SFAS No. 114, and they have been growing concerned that under SFAS No. 114, the massive amount of restructurings they will have to perform in 2008 will both strain their technology systems and magnify the value of the losses they record. "To me it is just very clear that when a lender grants a concession, a loss recognition threshold has been triggered," said Board member Leslie Seidman. Statement "114 is applicable when any loan has been modified."

Board members also agreed that SFAS No. 114 would provide more transparent information to investors about the condition of the balance sheets on which the troubled loans are recorded.

2/1/08 -- FASB Approves New Guidance for Financial Guarantee Insurance Contracts.
At its weekly meeting on January 30, 2008, the Financial Accounting Standards Board agreed with recommendations from its staff that disclosures for financial guarantee insurance contracts include the interest rates used to discount claim liabilities, a schedule of nominal receipts related to premium receivables stratified by year, and where the accretion of the discount on the claim liability is recorded in income statements.

With the decision, the Board concluded its redeliberations on the April 2007 Exposure Draft, (ED) No. 1530-100, Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60, and instructed the staff to incorporate the changes into a document that will then be voted on by the Board at a future meeting. The staff is expected to have the document finished near the end of March.

The updated guidance will become effective for fiscal years beginning after December 15, 2007.

1/30/08 -- Board to Consider Starting Project on Alternative Loan Loss Recognition Rules.
When the Financial Accounting Standards Board meets on January 30, 2008, it will consider whether to add a new project to its agenda on which standards are the most applicable to impaired residential mortgage loans.

The consideration of the project comes after a request from the Mortgage Bankers Association (MBA) that banks be allowed to use FASB Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, rather than the more stringent requirements of SFAS No. 114, Accounting by Creditors for Impairment of a Loan.

The MBA argues that SFAS No. 114 was never intended for loans with a smaller balance, such as home mortgages, and that the thousands of loans that would need to be calculated on an individual basis would overwhelm banks' computer systems.

At the heart of the difference between the two standards is the method for accounting for the cash flow that loan payments generate and the resulting carrying value of the loan. SFAS No. 114 requires loans that represent troubled debt restructurings be evaluated for impairment on a loan-by-loan basis. The earlier SFAS No. 5 permitted a calculation of loan valuations based on historical default rates, which would result in lower loan losses being recorded for the banks.

The MBA also says that SFAS No. 114 would emphasize the loss of interest income from having restructured the loan, even though the restructuring might have saved the loan from foreclosure.

The MBA also argues that because the approach required in SFAS No. 114 relies upon fair value measurements, it would result in losses for the loans being recorded due to changes in other market factors other the impairment of the loan itself.

1/28/09 -- FASB to Consider Proposal on Customer Consideration Model of Revenue Recognition. As reported in Action Alert No. 08-04, the Financial Accounting Standards Board will meet on Wednesday, January 30, 2008, when it will:

• Discuss various aspects of revenue recognition, as part of its convergence project with the International Accounting Standards Board (IASB);
• Conclude redeliberations of Exposure Draft (ED) No. 1530-100, Accounting for Financial Guarantee Insurance Contracts;
• Consider adding a project to its agenda to consider permitting lenders to measure impairments of residential mortgage loans that are troubled restructurings under the FASB's Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies; and
• Hold an open discussion session, if necessary, with staff members on technical projects.

1/25/08 -- FASB Approves Deferral of FIN No. 48 For Nonpublic Companies.
The Financial Accounting Standards Board approved proposed FASB Staff Position (FSP) No. FIN 48-b, Effective Date of FASB Interpretation No. 48 for Nonpublic Enterprises, permitting nonpublic enterprises to defer application of the guidance for annual periods beginning after December 15, 2007, unless they have issued a full set of annual financial statements incorporating the recognition, measurement, and disclosure requirements of FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes.

The decision was made as part of the final review of the proposed FSP at the Board's January 23, 2008, weekly meeting at its Norwalk, Connecticut, headquarters.

1/24/08 -- Proposed FSP No. FAS 57-c Seeks to Clarify Guidance on Application of Fair Value for Liabilities.
The Financial Accounting Standards Board issued proposed FASB Staff Position (FSP) No. FAS 157-c, Measuring Liabilities under FASB Statement No. 157, on January 18, 2007. The comment deadline is February 18.

The Proposed FSP seeks to clarify the principles in FASB Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, on the fair value measurement of liabilities by inserting two paragraphs that read as follows:

• 15A. A quoted price for the identical liability (unadjusted) in an active market (Level 1 input) shall be used to measure the fair value of the reporting entity's liability when available, and
• 15B. In the absence of a quoted price for the identical liability in an active market, the reporting entity may measure the fair value of its liability at the amount that it would receive as proceeds if it were to issue that liability at the measurement date. A reporting entity shall evaluate fair value inputs and prioritize observable inputs over unobservable inputs in determining whether it should use the amount that it would receive as proceeds if it were to issue that liability at the measurement date.

1/22/08 -- FASB to Consider Possible New Rules on Trading Inventory Accounting.
As reported in Action Alert No. 08-03, the Financial Accounting Standards Board will hold its next meeting on Wednesday, January 23, when it will:

• Discuss possible modifications to Exposure Draft No. 1240-001, Earnings per Share: An Amendment of FASB Statement No. 128, that are part of a longer-term effort to converge FASB Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share, with International Accounting Standards Board (IASB) International Accounting Standard (IAS) 33, Earnings per Share;
• Decide whether to issue a proposed FASB Staff Position (FSP) to require fair value accounting for trading inventory, which would amend Accounting Research Bulletin (ARB) No. 43, Restatement and Revision of Accounting Research Bulletins;
• Discuss issues raised by respondents to proposed FSP No. FIN 48-b, Effective Date of FASB Interpretation No. 48 for Nonpublic Enterprises, and whether to issue that proposed FSP as final; and
• Hold an open discussion session, if necessary, with staff members on technical projects.

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1/08/08 - Private Company Panel Issues Questionnaire on the Costs and Benefits of FIN No. 48.
On January 4, 2008, the Private Company Financial Reporting Committee (PCFRC), a year-old-group jointly sponsored by the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA), emailed to its constituents a questionnaire on the costs and benefits of the FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.

Responses will be used to develop implementation guidance for private companies that the PCFRC will recommend to the AICPA staff.

The PCFRC believes private companies need further implementation guidance because preparers of their financial statements are often inexperienced at financial reporting of income taxes under FIN No. 48.

1/3/08 -- Auditing Standards Board Issues Meeting Agenda.
The Auditing Standards Board of the American Institute of Certified Public Accountants recently released an agenda for its meeting scheduled for January 8-10, 2008, in Amelia Island, Florida.

The ASB will take up:

• The reports of ASB Chair Harold Monk, Jr. and AICPA Vice President Charles E. Landes;
• A proposed redrafted AU Section 339, "Audit Documentation";
• A proposed Statement on Auditing Standards (SAS), The Auditor's Communication with Those Charged With Governance;
• The first draft of the revised SAS 108, Planning and Supervision;
• A revised draft of AU Section 341, "The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern";
• A first draft of a proposed SAS, Audit Considerations Relating to an Entity Using a Service Organization;
• A proposed Statement on Standards for Attestation Engagements (SSAE), Reporting on Controls at a Service Organization;
• AU Section 801, "Compliance Auditing Considerations in Audits of Governmental Entities and Recipients of Governmental Financial Assistance";
• A proposed SSAE that would revise AT Section 501, "Reporting on an Entity's Internal Control Over Financial Reporting";
• A proposed SAS, Required Supplementary Information;
• A proposed amendment to SAS 100, Interim Financial Statements, and
• The presentation format for ASB standards and policy for the placement of specific topic material in the standards.

Also, during the Wednesday, January 9 session the ASB will hold a liaison meeting with members of the Private Companies Practice Section, an AICPA body that represents and provides practice management resources to local and regional firms.

1/3/08 -- Technical Plan Issued for First Four Months of 2008.
The Governmental Accounting Standards Board published on December 21, 2007, its updated technical plan for January through April of 2008. The document includes a description of each project on the current technical agenda, as well as its history, background, accounting issues, and work plan, and was approved at the December Board meeting.

The current technical agenda projects are:

• Recognition and Measurement Attributes.
• Derivative Instruments.
• Fund Balance Reporting and Governmental Fund Type Definitions.
• Service Efforts and Accomplishments Reporting.
• Comprehensive Implementation Guide-Update.

The Technical Plan also describes current GASB research projects and potential projects.

12/3/07 -- Updated AICPA Audit Risk Alerts Are Now Available.
The American Institute of Certified Public Accountants (AICPA) recently updated six Audit Risk Alerts (ARAs) for 2007/2008:

• ARA, Compilation and Review Alert;
• ARA, Independence and Ethics Alert;
• ARA, SEC and PCAOB Alert;
• ARA, Real Estate Industry Developments;
• ARA, Construction Contractors Industry Developments; and
• ARA, Investment Companies Industry Developments.

  ARAs are Other Auditing Publications, as defined in AU Section 150, Generally Accepted Auditing Standards, and have no authoritative status, nor have they been approved, or otherwise acted on by an AICPA senior technical committee. According to the AICPA, an auditor applying the auditing guidance included in an ARA should be satisfied that, in her or his judgment, it is both appropriate and relevant.

11/6/07 -- AICPA Partners With U.S. Small Business Administration.
On November 1 the American Institute of Certified Public Accountants (AICPA) signed a Strategic Alliance Agreement with the U.S. Small Business Administration (SBA). It also endorsed legislation that would limit the authority of states to withhold the income tax of nonresidents. Both steps were taken to streamline and simplify accounting for small businesses.

An AICPA press release said that greater access to the SBA's programs and nationwide network will benefit accounting firms with small business clients that are financing start-ups or expansions, or recovering from natural disasters such as the recent fires in California. The SBA will be able to market and deliver its products and services through the AICPA's network of 44,000 accounting firms nationwide.

A press release from the SBA added that to maintain their alliance, the organizations will provide each other with (a) timely information on their programs and services, (b) speakers for events upon request, and (c) hyperlinks to each other's websites. The AICPA and SBA will also choose points of contact to serve as liaisons between each other.

H.R. 3359, the Mobile Workforce State Income Tax Fairness and Simplification Act of 2007, would create a uniform national standard for state withholding of nonresident income tax. The AICPA said in a press release that such a standard would be especially helpful to small businesses.

11/1/2007 -- AICPA Issues Brief on Implementing Its New Risk Assessment Standards.
The American Institute of Certified Public Accountants (AICPA) recently issued a brief entitled, The Risk Assessment Standards: Key Points to Remember, to assist practitioners with first-time implementation of Statements on Auditing Standards (SAS) Nos. 104 through 111 (the Risk Assessment Standards).

The standards, which apply to audits of financial statements for periods beginning or after December 15, 2006, contain significant changes for audit practice.

The brief has no authoritative status, and has not been approved, or otherwise acted on by an AICPA senior technical committee.

10/25/07 -- ERNST & YOUNG PARTNER RANDY FLETCHALL ELECTED AICPA CHAIRMAN.
Randy Fletchall, a Partner with Ernst & Young, was elected Chairman of the Board of Directors of the American Institute of Certified Public Accountants on October 23, 2007, at the fall meeting of the association's governing council. Fletchall will serve a one-year term, and he replaces Jimmy Williamson, Chairman, MDA Professional Group, in Albertville, Alabama.

At Ernst & Young, Fletchall is Americas Vice Chairman—Assurance & Advisory Business Services (AABS) Professional Practice & Risk Management. He is responsible for accounting, auditing, regulatory reporting, quality control, and risk management functions.
Fletchall also serves on the Center for Audit Quality's (CAQ) Executive Committee and its Professional Practice Executive Committee and the Public Company Accounting Oversight Board's (PCAOB) Standing Advisory Group (SAG).

10/19/07 -- Auditing Standards Board Issues Meeting Agenda.
The Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) released an agenda to its October 23-24, 2007, meeting, when it will take up:

• The reports of (a) ASB Chair Harold Monk, Jr., and (b) AICPA Vice President Charles E. Landes, who is responsible for oversight of the ASB's technical activities;
• The proposed Statement on Auditing Standards (SAS), Overall Objective of the Independent Auditor, and the Conduct of an Audit in Accordance with Generally Accepted Auditing Standards;
• Issues related to the redrafted Risk Assessment Standards ( SAS 106 - 111 );
• XBRL (eXtensible Business Reporting Language);
• A draft of a proposed revision of AU Section 341, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern;
• Issues that will affect the development of a replacement Statement on Standards for Attestation Engagements (SSAE) for extant AT Section 501, Reporting on an Entity's Internal Control Over Financial Reporting; and
• The exposure draft of ISA 505 (Revised and Redrafted), External Confirmations.

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2/28/2008 -- PCAOB Issues Proposed Standard on Engagement Quality Review.
The Public Company Accounting Oversight Board unanimously approved issuing for public comment Auditing Standard No. 7 (AS 7), Proposed Auditing Standard on Engagement Quality Review (PCAOB Release No. 2008-002), at an open board meeting on February 26, 2008, in Washington, D.C.

The proposed standard was published on the PCAOB's website, and the public comment period will be 75 days ending on May 12, 2008.

The proposal takes a risk-based approach to engagement quality reviews and was developed with similar existing international standards in mind.

Section 103 of the Sarbanes-Oxley Act of 2002 directs the Board to include in its auditing standards a requirement that each registered public accounting firm provide a concurring or second partner review and approval of each audit report and concurring approval in its issuance. Since April 2003, PCAOB Rule 3400T on interim quality control standards required a registered public accounting firm to comply with the AICPA's Auditing Standard Board's Statements on Quality Control Standards, QC 20-40 (AICPA 2002), and the AICPA SEC Practice Section's Requirement for Membership Section 1000.08(f).

The proposal, if adopted, builds on the interim standard and includes four main changes:

• A more explicit standard for risk assessment;
• A requirement for the reviewer to approve the issuance of the audit report;
• A requirement for the issuer of the audit report to not proceed if they know or should know that the report is inappropriate; and
• More detailed documentation for the concurrent review.

2/19/08 -- PCAOB Standing Advisory Group to Discuss the Use of Professional Judgment.
The Public Company Accounting Oversight Board's Standing Advisory Group released an agenda to its first open meeting of 2008, scheduled for Wednesday, February 27, in Washington, D.C.

The meeting will include a panel discussion on the use of professional judgment, based on the proposed framework for judgments developed by the Securities and Exchange Commission's (SEC) Advisory Committee on Improvements to Financial Reporting (CIFR), which were included in the panel's interim progress report.

The SAG will also hold discussions on (a) the supervision of audit work performed by registered public accounting firms, and (b) quality control practices of global audit networks in audits of financial statements, including financial statements prepared in accordance with International Financial Reporting Standards (IFRS).

1/31/08 -- PCAOB Approves Auditing Standard No. 6 on Financial Statement Consistency.
The Public Company Accounting Oversight Board approved an auditing standard designed to bring the Board's rulemaking in line with that of the Financial Accounting Standards Board, at an open meeting in Washington, D.C. on January 29, 2008.

Auditing Standard No. 6 (AS 6), Evaluating Consistency of Financial Statements, updates the PCAOB's interim standards to align them with FASB Statement of Financial Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections, and the proposed SFAS, The Hierarchy of Generally Accepted Accounting Principles (Exposure Draft No. 1300-001), which is related to the Codification Project.

The standard also removes the GAAP hierarchy from the PCAOB's interim auditing standards, based upon the Board's view that it is no longer necessary to have the hierarchy there because of the FASB's decision to address the hierarchy in its proposed standard.

While AS 6 will not fundamentally alter the interim standard's requirement that an auditor must explain a change in accounting principle or the correction of misstatements, it does add a level of transparency.

AS 6 will be forwarded to the SEC for its approval, as mandated by the Sarbanes-Oxley Act of 2002.

The PCAOB's changes would supersede the American Institute of Certified Public Accountants' (AICPA) AU Section 420, "Consistency of Application of Generally Accepted Accounting Principles."

12/12/07 -- PCAOB Issues Staff Audit Practice Alert on Fair Value.
The Public Company Accounting Oversight Board issued on December 10, 2007, Staff Audit Practice Alert No. 2, Matters Related to Auditing Fair Value Measurements of Financial Instruments and the Use of Specialists, to provide auditors with information related to auditing fair value measurements and disclosures and the use of specialists in this area.

The alert addresses:

• Auditing fair value measurements,
• Classification of fair value measurements within the fair value hierarchy established by the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements,
• The use of specialists in fair value measurements, and
• The use of pricing services in fair value measurements.

11/19/07 -- PCAOB to Set 2008 Budget.
The Public Company Accounting Oversight Board will meet on Monday, November 19, 2007, to consider a budget for 2008.

Section 109(b) of the Sarbanes-Oxley Act of 2002 requires the PCAOB to submit to the Securities and Exchange Commission a budget for its upcoming fiscal year before the end of November.

Also, according to the Sarbanes-Oxley Act, the PCAOB will derive its 2008 assessment of accounting support fees on public companies by subtracting registration fees collected from accounting firms in 2007 from its 2008 budget.

The meeting will take place at the PCAOB's Washington, D.C., office, and be open to the public.

11/01/07 -- PCAOB Chief Financial Officer Thomas Hohman Resigns.
Thomas Hohman resigned as Chief Financial Officer of the Public Company Accounting Oversight Board (PCAOB) on October 29, 2007. He will leave on November 2 to become CFO of a private company in Maryland.

A PCAOB spokesperson said a successor has not been named.

Hohman joined the PCAOB in July 2003. Previously he was CFO at several technology companies and at a venture capital firm. He began his career as an auditor with Ernst & Young and is a certified public accountant.

10/31/07 -- PCAOB Appoints Eleven New Standing Advisory Group Members.
On October 29, 2007, the Public Company Accounting Oversight Board (PCAOB) appointed eleven new members and reappointed nine existing members for the 2008 term of its Standing Advisory Group. The SAG helps the Board draft and revise the rules and standards that govern auditors.

The SAG meets three times a year and held its most recent meeting on October 18, 2007, in Washington. The new members' two-year terms will begin in January 2008. Thomas Ray, the PCAOB's Chief Auditor and Director of Professional Standards, is the group's Chairman.

10/19/07 -- PCAOB Issues Guidance Issued for Audits of Small Company Internal Controls.
The Public Company Accounting Oversight Board (PCAOB) said on October 17, 2007, that it is seeking comments on its staff guidance on audits of internal controls over financial reporting for small public companies.

The guidance explains how auditors can apply the PCAOB's Auditing Standard No. 5 (AS 5), An Audit of Internal Control Over Financial Reporting That Is Integrated with an Audit of Financial Statements, to audits of smaller, less complex public companies. When the PCAOB approved AS 5 in May, it promised to issue guidance that addressed issues related to small company compliance.

Comments are due December 17, 2007.

10/18/07 -- PCAOB Approves Amendments to Inspection Requirements.
The Public Company Accounting Oversight Board (PCAOB) voted to adopt on October 16, 2007, two amendments to PCAOB Rule 4003, regarding the inspection frequency for firms that do not regularly issue audit reports. The amendments were issued for public comment on May 24, 2007, with a comment period ending July 23.

The amendments would eliminate the Board's self-imposed requirements under Rule 4003, that the PCAOB staff inspect each registered public accounting firm that (a) plays a "substantial role" in audits but does not issue audit reports, or (b) issues an audit report, even if the firm does not regularly issue audit reports. The Board said the amendments reflect the risk-based approach the Board employs in staff assignments and would allow it to devote the necessary people to examining the approximately 800 firms that do issue audit reports on a regular basis.

The amendments await final approval by the Securities and Exchange Commission (SEC), which is required by Section 107(b) of the Sarbanes-Oxley Act of 2002.

10/15/07 -- PCAOB TO VOTE ON AMENDMENTS TO INSPECTION REQUIREMENTS.
The Public Company Accounting Oversight Board was scheduled to meet on Tuesday, October 16, 2007, at its Washington, D.C., headquarters to vote on whether to adopt amendments to PCAOB Rule 4003. The proposal's comment period ended on July 23.

If adopted, the amendments would eliminate the Board's self-imposed requirements under Rule 4003 that the PCAOB staff inspect each registered public accounting firm that (a) plays a "substantial role" in audits but does not issue audit reports, or (b) issues an audit report, even if the firm does not regularly issue audit reports. The amendments would not affect the rule's requirements concerning the frequency of Board inspections of registered firms that regularly issue audit reports.

Pursuant to Section 107(b) of the Sarbanes-Oxley Act, the Securities and Exchange Commission (SEC) would be responsible for final approval of the amendments.

10/15/07 -- PCAOB to Vote on Amendments to Inspection Requirements.
The Public Company Accounting Oversight Board will meet on Tuesday, October 16, 2007, at its Washington, D.C., headquarters to vote on whether to adopt amendments to PCAOB Rule 4003. The proposal's comment period ended on July 23.

If adopted, the amendments would eliminate the Board's self-imposed requirements under Rule 4003 that the PCAOB staff inspect each registered public accounting firm that (a) plays a "substantial role" in audits but does not issue audit reports, or (b) issues an audit report, even if the firm does not regularly issue audit reports. The amendments would not affect the rule's requirements concerning the frequency of Board inspections of registered firms that regularly issue audit reports.

The meeting will be open to the public.

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3/4/08 -- GASAC to Receive an Update on the Board's Derivative Instruments Project.
The Governmental Accounting Standards Advisory Council, which advises the Governmental Accounting Standards Board, will meet on March 6-7, 2008, to take up:

• A report on the meetings and activities of the Financial Accounting Foundation (FAF), and a report from the GASB Chairman;
• Comments from other Board members, including an update on the Board's derivative instruments project; and
• GASAC feedback on technical agenda topics, communications and public relations topics, project prospectuses and proposals, and project priorities.

The meeting will take place at the GASB office in Norwalk, Connecticut, and be open to the public.

11/21/07 -- GASB Announces Project Updates.
The Governmental Accounting Standards Board announced updates to the following projects:

• Endowment Funds-Accounting and Reporting for Land and Other Real Property Held as Investments-Recent Developments;
• Fund Balance Reporting;
• Intergovernmental Financial Dependency Risk; and
• Service Accomplishments and Reporting (SEA).

9/25/07 -- GOVERNMENTAL ACCOUNTING STANDARDS ADVISORY COUNCIL ISSUES MEETING AGENDA.
The Governmental Accounting Standards Advisory Council (GASAC) of the Governmental Accounting Standards Board (GASB) issued an agenda to its October 8-9, 2007 meeting in Pittsburgh, when it will take up:

• Approval of the July 12-13, 2007 meeting minutes.
• A report on the Financial Accounting Foundation’s meetings and activities.
• The report of the GASB Chairman and comments from other members.
• GASAC feedback on the GASB’s Strategic Plan, service efforts and accomplishments (SEA) reporting project, and fund balance reporting project.
• Committee reports.

The meeting coincides with the annual conference of the International City/County Management Association, an international association of appointed local government administrators.

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The Boards agreed that a common set of principles needs to be established for revenue recognition that will apply to all transactions.

Some members of the IASB gave cautious support to the customer consideration approach to measuring performance obligations, one of the two models that were developed over the past year.

"Revenue recognition is fundamental to investors," said an IASB Board member. "The majority of the Board supports or does not object to the customer consideration approach."

In the customer consideration approach, assets and liabilities would be measured by reference to the customer consideration. The other approach calls for measuring assets and liabilities at fair value.

2/21/08 -- AUDITING STANDARDS BOARD VOTES TO ISSUE TWO EXPOSURE DRAFTS.
The Auditing Standards Board, the senior technical committee of the American Institute of Certified Public Accountants designated for issuing auditing, attestation, and quality control standards and guidance, voted to issue for public comment an exposure draft of proposed clarified Statement on Auditing Standards (SAS) 103, Audit Documentation, and an ED of proposed clarified SAS 114, The Auditor’s Communication with Those Charged with Governance, during a conference call on January 29, 2008.

SAS 103 and SAS 114 are the first standards to be redrafted as part of the ASB’s clarity project, which calls for the redrafting of all SASs so they are easier to read, understand, and implement.

SAS 103 was redrafted to converge with finalized and clarified International Standard on Auditing (ISA) 230, Audit Documentation. According to the Audit Documentation Task Force, there are no substantive differences between ISA 230 and the proposed clarified SAS.

SAS 114 was redrafted to converge with Redrafted ISA 260, The Auditor’s Communication with Those Charged with Governance. The revisions to SAS 114 reflect the changes made to the ED of ISA 260, which was rewritten for the International Auditing and Attestation Board's (IAASB) clarity project, the first stage of which was completed on January 14.

2/14/08 -- Trustees Announce Strategy to Advance Review Of Constitution.
The Trustees of the International Accounting Standards Committee Foundation, the oversight body of the International Accounting Standards Board, agreed on a strategy for their upcoming review of the IASCF's Constitution at their January 29-30, 2008, meeting.

The strategy calls for the Trustees to accelerate their review of three proposals that are intended to enhance the their public accountability:

• A representative monitoring group of official organizations, which would approve Trustee appointments and review the Trustees' oversight activities. The Trustees plan to reach their conclusions on the size, composition, and mandate of the group in the second half of 2008;
• A gradual expansion of the IASB from 14 to 16 members. The Trustees also will consider whether the Constitution should explicitly require geographical balance among members; and
• An extended consultation process on other Constitutional matters, including a request for comments and suggestions on other elements of the Constitution. The Trustees plan to conclude their broader review of the Constitution by the end of 2009.

The Trustees also said they plan to broaden their discussions with stakeholder groups on both these proposals and on the review of the Constitution more generally.

2/11/08 -- IASB to Discuss International Convergence With Its Analyst Representative Group.
The International Accounting Standards Board will meet with its Analyst Representative Group, which provides the views of professional investors on financial reporting issues, on Wednesday, February 13, 2008, to discuss:

• Market issues;
• Recent updates to the IASB work plan;
• Current matters concerning the International Financial Reporting Interpretations Committee (IFRIC);
• The IASB's joint projects with the Financial Accounting Standards Board (FASB) on financial reporting for consolidated entities, financial instruments, and earnings per share; and
• The measurement phase (Phase C) and reporting entity phase (Phase D) of the Boards' joint conceptual framework project.

1/29/08 -- Consumer Groups Request New Rule on Disclosure by Money Market Funds.
The Consumer Federation of America, Consumer Action, the AFL-CIO, the Financial Planning Association, Fund Democracy, and the National Association of Personal Financial Advisors submitted a request to the Securities and Exchange Commission asking for a rule requiring money market funds to make nonpublic monthly electronic filings of their portfolios.

The groups made the request in order to enable the Commission to monitor more closely the funds' risk of loss of principal, according to the January 16, 2008, letter, Petition No. 4-554, Request for rulemaking under the Investment Company Act of 1940 to adopt a rule requiring that money market funds make nonpublic monthly electronic filings of their portfolios to enable the Commission to monitor more closely the funds' risk of loss of principal.

Citing the recent downturn in financial markets, the group takes aim at the practice of managers of money market funds purchasing assets from their funds in order to forestall loss of principal, a practice commonly known as breaking the buck.

Questioning the prudence of such a mechanism, the group thinks it's only a matter of time before something goes seriously wrong.

1/29/08 -- Real Estate Industry Group Supports International Convergence.
Officials from the National Association of Real Estate Investment Trusts expressed their support for the convergence of international accounting standards as it relates to the application of fair value rules for investment property, when they met with the Financial Accounting Standards Board on January 25, 2008, in Norwalk, Connecticut.

NAREIT representatives expressed enthusiasm for the adoption of International Accounti