Thursday, December 31, 2009

Subsequent Events Proposal Issued By FASB; Final ASUs Incorporating FAS 166, 167 Into Codification

A few days prior to year-end, FASB released a Proposed Accounting Standards Update—Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. (See the Proposed ASU-Subsequent Events). The main provisions are as follows:

  • An entity that files or furnishes financial statements with the SEC would be required to evaluate subsequent events through the date that the financial statements are issued.
  • If an entity does not file or furnish financial statements with the SEC, it would evaluate subsequent events through the date the financial statements are available to be issued unless the entity has a current expectation of widely distributing its financial statements to its shareholders and other financial statements users, in which case it would evaluate subsequent events through the date that the financial statements are issued.
  • An entity that files or furnishes fiancial statements with the SEC would not be required to disclose the date through wich subsequent events have been evaluated. This change would alleviate potential conflicts between Subtopic 855-10 and the SEC's requiremens.
  • The glossary of Topic 855 would be amended to remove the definition of a public entity. The definition of a public entity in Topic 855 was used to determine the date through which subsequent events should be evaluated. Based on the proposed amendments, that definition would no longer be necessary for purposes of Topic 855.

Issue Raised Following Issuance of FAS 165, Subsequent Events
As noted in the Background Information and Basis for Conclusions section in the proposed ASU, an issue regarding application of FAS 165, Subsequent Events, arose after that statement was issued on May 28, 2009. As described in para. BC2 and BC3 of the proposed ASU (reformatted into bullets):

  • After the issuance of its guidance on subsequent events in Topic 855 (originally issued as FASB Statement No. 165, Subsequent Events), the Board was informed that the SEC has specific requirements related to the identification and disclosure of subsequent events that potnetially conflucted with certain aspects of the guidance.
  • Furthermore, SEC requirements are clear on registrants' responsiblities for evaluating subsequent events.
  • This proposed Update would amend U.S. GAAP to no longer require disclosure of either the original issuance date when an entity files or furnishes financial statements with the SEC.
  • However, the board decided to clarify that this proposed Update would have no effect on disclosure of the original issuance date for an entity that does not file or furnish financial statements with the SEC.
  • When the Board issued its subequent events guidance, it was primarily concerned that the disclosure of the date for the evaluation of subsequent events be updated when an entity resated its financial statements, that is, revised for either correction of an error or retrospective application of U.S. GAAP.
  • Therefore, the Board decided to clarify which reissuances would be subject to those disclosures by replacing the term reissuance with restated. Restated financial statements include financial statements revised as a result of correction of an error or retrospective application of U.S. GAAP.

The comment deadline on the Proposed ASU on Subsequent Events is Jan. 28, 2010.

Final ASUs Issued Incorporating FAS 166, 167 Into Codification
Separately, on December 23, FASB posted two final ASUs, which communicate that FASB has formally place FAS 166 and FAS 167 into the FASB codification:

· ASU No. 2009-17—Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities
· ASU No. 2009-16—Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets

Read about some earlier FASB-IASB-SEC-PCAOB releases here, and see info about an upcoming deadline to apply for the SEC Professional Accounting Fellow (PAF) program here.

Happy New Year to all of our readers, your families, colleagues and friends!

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