FASB ADMITS ISSUES IN INCOME TAX ACCOUNTING STANDARD
Norwalk, Ct. -- The Financial Accounting Standards Board acknowledged in mid-November that a 1992 standard on accounting for income taxes did little to simplify the accounting. The admission came in response to a recent post-implementation review of the standard by FASB's parent organization, the Financial Accounting Foundation. The review focused on FASB Statement No. 109, Accounting for Income Taxes. The standard requires organizations that prepare U.S. GAAP financial statements to recognize the amount of taxes payable or refundable for the current year, along with the deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the organization's financial statements or tax returns.
AICPA CLARIFIES COMPILATION AND REVIEW ENGAGEMENTS
New York -- The American Institute of CPAs' Accounting and Review Services Committee has issued a Proposed Statement on Standards for Accounting and Review Services, Framework for Performing and Reporting on Compilation and Review Engagements, as a result of its Clarity Project. The committee decided that it would be in the public interest to have all the professional literature for engagements performed in accordance with Statements on Auditing Standards and Statements on Standards for Accounting and Review Services drafted using the same conventions. It has therefore mostly used the clarity drafting conventions also used by the Auditing Standards Board in its Clarity Project. The resulting clarified SSARSs are intended to be easier to read, understand and apply. The proposed SSARS have been drafted in accordance with clarity drafting conventions, by establishing objectives for each clarified section; including a Definitions section when relevant; separating any requirements from the application and other explanatory material; numbering application and other explanatory material paragraphs using an "A-" prefix; and presenting them in a separate section that follows the Requirements section.
E&Y SETTLES LEHMAN INVESTOR LAWSUIT FOR $99 MILLION
New York -- Big Four firm Ernst & Young LLP agreed to pay investors $99 million to settle litigation over its auditing of the bankrupt Lehman Brothers Holdings Inc., according to a filing in federal court in Manhattan. The proposed settlement is the result of more than three years of litigation that included more than 50 depositions and the review of 26 million pages of documents, lawyers for the investors stated in the filing.
Ernst & Young denies all liability to the plaintiffs. "Lehman's bankruptcy was not caused by any accounting issues," spokesperson Amy Call Well said in an e-mail. "Lehman's audited financial statements clearly portrayed Lehman as what it was -- a highly leveraged entity operating in a risky and volatile industry."
A 2010 report by attorney Anton Valukas, appointed Lehman's bankruptcy examiner, said that the accounting firm could be accused of "professional malpractice" for its auditing work.
GASB'S AUTHORITY CLARIFIED
Norwalk, Ct. -- The Financial Accounting Foundation's Board of Trustees, which oversees the Governmental Accounting Standards Board and the Financial Accounting Standards Board, has adopted a new policy clarifying the characteristics of the information that GASB can incorporate into the financial accounting and reporting concepts, standards, and guidance that it issues for state and local governments. The new policy, described in GASB Scope of Authority: Consultation Process Policy, which was issued in late November, is effective immediately, and key elements of the new policy will be included in GASB's Rules of Procedure. The policy outlines a pre-agenda consultation process for GASB and the FAF's Standard-Setting Process Oversight Committee to follow in determining whether information that the GASB might consider for standard-setting activity is "financial accounting and reporting information" within the scope of the GASB's standard-setting mission.
GASB's and the oversight committee's scope considerations will be based on accounting and reporting characteristics currently in the GASB's Concepts Statements. The consultation will not focus on a specific standard-setting project.
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