FASB Votes To Issue Additional Guidance Relating To FIN 48; Focus On Pass-Throughs

At its board meeting earlier today, FASB voted to issue additional guidance relating to FIN 48, Accounting for Uncertainty in Income Taxes. Although the guidance is aimed primarily at private companies and not-for-profits - specifically as relates to pass-through entities - FASB board members encouraged the staff to consider amending the title of the new guidance, to reflect the fact that all entities are technically within the scope of the guidance, in that all entities need to determine their tax status (including, according to FASB, whether they are a pass-through entity) as part of implementing FIN 48.

The proposed guidance, released earlier this year as Proposed FSP FIn 48-d, was entitled: Application Guidance for Pass-through Entities and Tax-Exempt Not-for Profit Entities and Disclosure Modifications for Nonpublic Entities. FASB received fourteen comment letters on the proposal, including this letter from FEI's Committee on Private Companies, Standards Subcommittee.

During today's board meeting, FASB Project Manager Paul Glotzer summarized for FASB board members that commenters were generally supportive of the proposed guidance; he presented certain issues to the board for their consideration in finalizing the guidance.

Among the issues discussed, Glotzer noted there was one request to permit private companies to use a FAS 5 model rather than a FIN 48 model for uncertain income taxes, since the FAS 5 model would be simpler, but the board agreed with the staff's view not to change the model for private companies (although private companies that are pass-throughs will be able to make use of additional guidance and examples pertaining to pass-throughs in the new guidance, and will benefit from reduced disclosure requirements applicable to pass-through entities set forth in the new guidance).

Another issue discussed, raised in the comment letter of the FASB-AICPA Private Company Financial Reporting Committee (PCFRC) was that: "[T]he PCFRC believes that the FASB should make clear in the proposed FSP that the accounting for transactions with owners (for example, loans and distributions) has not changed and such transactions should be accounted for under existing applicable standards." At today's board meeting, FASB board members did not object to clarifying this point, and Glotzer noted: "I don’t think there’s a problem putting that in there, if it makes it clearer because some people have questions, it's more of a drafting issue."

Following the meeting, Glotzer summed up for us, "There were no substantive changes to proposed FSP FIN 48-d, other than the title will likely be changed to something broader in that the FSP applies to all entities (public and private), although the elimination of certain disclosure requirements applies only to non-public entities. In addition, the board voted the effective date of the final FSP will be for periods ending after Sept. 15, 2009."

Further details on this matter and the other issue deliberated by FASB today - finalizing proposed FSP FAS 157-f, Measuring Liabilities under FASB Statement No. 157 - refer to FASB's Summary of Board Decisions which is generally posted same-day or next day in FASB’s News Center; a related summary will be posted on FEI’s website.

See also our separate blog post about FASB's announcement earlier today that they are launching a new project on the Disclosure Framework.

SEC Eliminates Broker Votes On Directors; Agrees To Release Proposals On Exec. Comp., Proxies

At an open commission meeting yesterday (July 1), the U.S. Securities and Exchange Commission voted to release for public comment proposed rules relating to Shareholder Approval of Executive Compensation of TARP Recipients, and Proxy Disclosure & Solicitation Enhancements. There will be a 60-day comment period on the proposals, which are described further in this SEC press release.

Additionally, the SEC voted to approve an NYSE proposal that would eliminate broker discretionary voting for all elections of directors, whether contested or not. Currently, NYSE Rule 452 and corresponding Listed Company Manual Section 401.08 permit brokers to vote on behalf of their beneficial owner customers in uncontested elections of directors if the customers have not returned voting instructions. As noted in the SEC press release, “The NYSE’s proposal will apply to shareholder meetings held on or after Jan. 1, 2010. The SEC’s approval order will be published in the Federal Register and posted on the SEC Web site as soon as possible.”

Statements made at the July 1 open commission meeting currently posted on the SEC website y include those of: SEC Chairman Mary L. Schapiro, Commissioner Luis A. Aguilar, Commissioner Troy A. Paredes, Commissioner Elisse B. Walter, and remarks of Corp Fin staffers John Harrington and Sean Harrison describing the proposed rules on Exec. Comp. and Proxy Solicititations, respectively.

For color commentary, see Live Blogging SEC Meeting On Pay by Michelle Leder of Footnoted.org, The Big Kahuna: SEC Approves NYSE's Elimination of Broker Discretionary Voting , by Broc Romanek in The Corporate Counsel.net Blog, A Momentous Day For Investors by Ted Allen in Risk Metrics Group's Risk and Governance Blog, and A Trinity of Issues for the SEC by Tom Quaadman in the U.S. Chamber of Commerce's ChamberPost Blog.

SEC Celebrates 75th Anniversary

On June 25, 2009 the SEC Historical Society hosted a dinner in honor of the U.S. Securities and Exchange Commission’s 75th anniversary. Close to 1,000 guests were in attendance, including current and former SEC chairmen, commissioners, staff and other dignitaries. SEC Chairman Mary L. Schapiro and others spoke at the event, we understand remarks and photos from the event will be posted on the newly redesigned SEC Historical Society website, http://www.sechistorical.org/, later this summer.

The June 25th dinner capped off a year of special programs hosted by the SEC Historical Society, including online 'fireside chats' and a series of special programs held at the SEC's regional offices in conjunction with the Association of SEC Alumni (ASECA); I enjoyed attending the program at the SEC's New York Regional Office in May. The SEC Historical Society, founded as a virtual museum and archive to preserve the SEC's history, is celebrating its own 10th anniversary this year.

FEI was among a number of professional associations and firms in attendance at the June 25th dinner honoring the SEC's 75th anniversary; leadership representing FEI's global headquarters, FEI’s Washington D.C. chapter, and FEI's Committee on Corporate Reporting are pictured here.

Photo: Courtesy of Securities and Exchange Commission Historical Society

Pictured l-r in the photo are: Seated: Marie Hollein, president and CEO, FEI; Deborah Lansford, president, FEI Washington D.C. Chapter and CFO, Cort Business Services; Marsha Hunt, national vp at large, FEI, member of FEI’s Committee on Corporate Reporting (CCR), and vice president and controller, Cummins Inc.; Loretta Cangialosi, vice chairman, CCR and senior vice president and controller, Pfizer Inc. Standing: Lorraine Malonza, senior manager, Technical Accounting, FEI; Billie Rawot, member CCR and senior vice president and controller, Eaton Corp.; Christine DiFabio, vice president, Advocacy and Accounting Policy, FEI; Jamie Miller, member CCR and vice president, controller and chief accounting officer, General Electric Co.