FAF ISSUES GLIMPSE OF 'THE ROAD AHEAD'

Norwalk, Conn. -- The Financial Accounting Foundation has issued its 2013 annual report, titled The Road Ahead, outlining the future direction of the FAF and the standard-setting boards it oversees, the Financial Accounting Standards Board and the Governmental Accounting Standards Board.

"The issues we face are varied and complex," the document stated. "How should we continue to work toward more comparable global accounting standards? To what degree should we provide accounting alternatives for private companies while preserving the strength and consistency of GAAP? How can we make the financial position of governments more transparent for taxpayers, bond buyers and other users of financial statements?"

The report includes perspectives from the leaders of all three organizations: FAF board chair Jeffrey Diermeier, FAF president and CEO Teresa Polley, FASB chair Russell Golden, and GASB chair David Vaudt.

The report also provides overviews of the accomplishments of the organizations in the past year, along with color photos of both current and past FAF, FASB and GASB leaders, staff and other stakeholders. The document also includes listings of all FAF, FASB and GASB advisory groups, including the Private Company Council and the Emerging Issues Task Force; and a complete 2013 management's discussion and analysis and audited financial statements.

 

FINANCIAL RESTATEMENTS ARE LEVELLING OFF

The amount of financial restatements from public companies has leveled off in the past four years, and the severity of those restatements has remained low, according to a new report from the research firm Audit Analytics, but financial restatements have increased from accelerated filers for the third straight year.

During 2010, 157 accelerated filers -- that is, issuers with a public float of at least $75 million -- disclosed restatements, followed by 210 in 2011; 282 in 2012 and 290 in 2013, according to the report.

In 2013, revision restatements (restatements revealed in a periodic report without a prior 8-K, Item 4.02 disclosure that a company's past financials can no longer be relied upon) represented about 68.8 percent of the restatements disclosed by 10-K filers. This percentage represents the highest percentage calculated since the disclosure requirement came into effect in August 2004.

During 2013, the average income adjustment per restatement by publicly traded companies on the Amex, Nasdaq or NYSE markets was about $3.2 million, the lowest during the last seven years reviewed, according to Audit Analytics.

Last year, about 52.8 percent (or 235 out of 445) of the restatements disclosed by publicly traded companies (on Amex, Nasdaq or NYSE) had no impact on earnings, the highest during the last seven years reviewed.

The average restatement period was 548 days during 2013, the sixth year in a row with a period above but near 500 days.

Audit Analytics noted that the filing status designation is based on the company's own disclosure to the Securities and Exchange Commission in the box it checks. After gaining an accelerated filer status, a company does not lose the designation unless it drops below $50 million in float. The report doesn't distinguish between accelerated filers with a public float of between $75 million and $700 million, and the SEC designation of "large accelerated filers" with a float of $700 million or more.

 

IASB DEBUTS RESEARCH CENTER

London -- The International Accounting Standards Board, the independent standard-setting body of the IFRS Foundation, has launched the Web-based IFRS Research Centre, which aims to facilitate communication between the IASB and the broader research community.

Its main objectives are to increase awareness of the issues that the IASB will be considering in the coming two to three years, to encourage research professionals to undertake targeted research projects, and to contribute to the IASB moving to more evidence-based standard-setting.

To achieve these objectives, the IFRS Research Centre will highlight ways for academics to participate in the standard-setting process and enable those engaged in research to stay informed about the IASB's research activities.

 

AICPA ISSUES NEW TECHNICAL PRACTICE AIDS

New York -- The American Institute of CPAs has issued new technical practice aids to help accountants dealing with recent changes by the Financial Accounting Standards Board stemming from recommendations from the Private Company Council. Following FASB's issuance of Accounting Standards Update No. 2014-07 to amend the Accounting Standards Codification to provide an elective accounting alternative for private companies in applying variable interest entity guidance to lessor entities under common control, the AICPA has issued AICPA Technical Questions and Answers (TPAs) 9150.34 and 9160.30 to provide nonauthoritative guidance regarding the modification to the accountant's compilation or review report when a client adopts a Private Company Council accounting alternative that results in a change to a previously issued report, and to the auditor's report when a client adopts a PCC accounting alternative that results in a change to a previously issued report.

 

ACCOUNTING CLASS-ACTION SETTLEMENTS ON THE RISE

Los Angeles -- The number of accounting class-action settlements increased for the second straight year in 2013, but remained relatively low compared to the previous decade, according to a new study from Cornerstone Research, which found that in 2013, a total of 44 accounting class actions - cases involving alleged violations of generally accepted accounting principles and weaknesses in internal control over financial reporting - were settled, with an average settlement amount of $26.6 million.

In contrast, the 23 non-accounting securities class actions that were settled in 2013 had an average settlement amount of $156.7 million. While the number of securities class-action filings that included accounting allegations remained relatively constant at 47 in 2013 compared with 2012, the market capitalization losses associated with the filings more than doubled.

At 28 percent of all cases, the proportion of accounting cases filed in 2013 reached a 10-year low, however. Cases are considered "accounting cases" if they involve allegations related to violations of U.S. GAAP, auditing violations or internal control weaknesses.

 

CAQ, AICPA ISSUE ALERT ON BROKER-DEALER AUDITS

The Center for Audit Quality and the American Institute of CPAs have issued a member alert discussing regulatory changes for audits and attestation engagements of brokers and dealers and futures commission merchants, including entities that are dually registered.

The alert aims to highlight certain auditing considerations in response to regulatory changes from the Securities and Exchange Commission and the Commodity Futures Trading Commission, along with related guidance and standards issued by the Public Company Accounting Oversight Board.

The alert addresses: SEC Amendments to Rule 17a-5 and PCAOB Attestation Standards No. 1 and No. 2; PCAOB Auditing Standard No. 17; CFTC Customer Protection Rules for Futures Commission Merchants; and CFTC-Registered Introducing Brokers.

"Several significant regulatory changes will soon go into effect that are critical to the auditor, and this document is an example of the profession looking forward in preparing for such changes," said CAQ executive director Cindy Fornelli in a statement.

The new amendments represent significant areas of change as they relate to the annual reporting requirements of broker-dealers and futures commission merchants. The CAQ and the AICPA are encouraging audit firms to discuss the potential ramifications of these amendments with their broker and dealer and futures commission merchant clients as soon as practical, and assess the changes that are applicable based on the operations of the entity being audited and the regulatory agencies with which the entity is registered.

"This member alert, part of a profession-wide effort to identify ways to boost investor confidence in the integrity of audited financial statements, will help auditors of brokers and dealers and futures commission merchants navigate recent regulatory changes," said AICPA president and CEO Barry Melancon in a statement.

The new rules addressed in the alert are generally effective for audits and attestation engagements of broker-dealers and futures commission merchants with fiscal years ending on or after June 1, 2014. Other changes in the rules have effective dates prior or subsequent to June 1, 2014, but the alert is intended to address the major changes that were due to take effect on June 1.

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