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Weekly Summary
December 1-5, 2003
Accounting Research
Manager
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Weekly Summary
December 1-5, 2003 Edition
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Accounting and SEC Headlines
• EITF Minutes Released -- Minutes Reflect Consensuses on Three Issues and Other Matters at November
12-13, 2003 Meeting
• Exclusion of Certain Decision Maker Fees from FIN 46 -- FASB Issues FSP
• Pension Plan Disclosures -- FASB Discusses Pension Plan Disclosures and Other Matters at November
25-26, 2003 Meeting
• Derivatives and Hedging -- Guidance Revised and Added in Our Interpretations of FASB Statement 133
• Equity-Based Compensation -- FASB Discusses Equity-Based Compensation and Other Matters at
November 19, 2003 Meeting
• General Alert -- AICPA Issues Audit Risk Alert, General Alert: Strengthening Audit Integrity, Safeguarding
Financial Reporting - 2003/2004
• Rules of Practice -- SEC Proposes Rule
Auditing Headlines
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Miller GAAS Practice Manual -- Publication of 2004 Edition
Miller Audit Procedures -- Publication of 2004 Edition
CPA's Guide to Management Letter Comments -- Publication of 2004 Edition
Audit and Attestation Engagements -- New Content Added to Our Engagement Standards
General Alert -- AICPA Issues Audit Risk Alert, General Alert: Strengthening Audit Integrity, Safeguarding
Financial Reporting - 2003/2004
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Accounting and SEC Summaries
EITF Minutes Released -- Minutes Reflect Consensuses on Three Issues and Other Matters at November 12-13,
2003 Meeting
The final minutes of the November 12-13, 2003 EITF meeting have been issued which reflect the consensuses reached
on Issue 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments;" Issue 0310, "Application of EITF Issue No. 02-16, 'Accounting by a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor,' by Resellers to Sales Incentives Offered to Consumers by Manufacturers;" and Issue 03-12,
"Impact of FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, on EITF Issue No. 95-1, 'Revenue Recognition on Sales with a
Guaranteed Minimum Resale Value.'" Specifically on Issue 03-1, the EITF reached a partial consensus as to disclosures
that are effective for fiscal years ending after December 15, 2003 (i.e., includes 2003 year-end reporting). However, these
disclosure requirements are required only for certain "available-for-sale" or "held-to-maturity" debt and marketable equity
securities accounted for under FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities , and FASB Statement No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations .
On Issue 03-10, the EITF reached a consensus that a retailer accepting manufacturers' coupons should reflect the value
of the coupon as revenue and not as a reduction in cost of sales when certain criteria have been met. The consensus is
applicable to new arrangements, including modifications to existing arrangements, entered into in fiscal years beginning
after November 25, 2003. The consensus permits retroactive presentation to the date a company originally adopted Issue
02-16 .
On Issue 03-12, the EITF reached a consensus that FIN 45 does not affect the consensus reached in Issue 95-1,
because FIN 45 does not apply to a guarantee for which the underlying is related to an asset of the guarantor.
The minutes also include an announcement by the SEC Observer regarding Topic D-98, "Classification and Measurement
of Redeemable Securities ." The FASB has deferred certain effective dates to implement FASB Statement No. 150,
Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity , with the issuance of
FASB Staff Position (FSP) FAS 150-3, "Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial
Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Instruments under FASB
Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ." As
a result of this deferral, the SEC staff believes registrants should continue to follow the guidance in Topic D-98 for those
securities that, for the time being, will not be accounted for in accordance with Statement 150.
Exclusion of Certain Decision Maker Fees from FIN 46 -- FASB Issues FSP
The FASB has issued its seventh FSP affecting FASB Interpretation (FIN) No. 46, Consolidation of Variable Interest
Entities . On November 26, 2003, the FASB issued FSP FIN 46-7, "Exclusion of Certain Decision Maker Fees from
Paragraph 8(c) of FASB Interpretation No. 46, Consolidation of Variable Interest Entities ." This FSP was issued to
clarify that certain fees paid to a "decision maker" should be excluded when calculating the expected residual returns of a
variable interest entity. The FSP is not effective until the FASB finishes its work on a pending modification to FIN 46,
Consolidation of Variable Interest Entities--A Modification of FASB Interpretation No. 46 . The FASB plans to
incorporate the guidance in this FSP into the modification of FIN 46 when it is issued and will be subject to the same
effective date and transition provisions elsewhere in the modification to FIN 46.
Pension Plan Disclosures -- FASB Discusses Pension Plan Disclosures and Other Matters at November 25-26,
2003 Meeting
As reported in its "Action Alert" publication, the FASB met on November 25-26, 2003, and discussed the following:
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•
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Disclosure about Pension Plans
EITF Consensus Ratification
Progress by the IASB on Its Insurance Project
FSP on FIN 46 (Approved Issuance of FSP FIN 46-7)
Equity-Based Compensation
The more significant developments at this meeting, not otherwise discussed in this Weekly Summary follow.
The FASB completed its redeliberations after considering the comments received on its Exposure Draft, Employers'
Disclosures about Pensions and Other Postretirement Benefits - An Amendment of FASB Statements No. 87, 88, and 106
and a Replacement of FASB Statement No. 132 . The final standard is expected to be issued by the FASB on or around
December 23, 2003, and will be issued as FASB Statement No. 132 (revised 2003) rather than FASB Statement No. 151.
The FASB agreed to the following at this meeting:
1. A description of investment strategies will be required for all entities, and that disclosure should include a
description of target asset allocations if they are used.
2. Disclosure of benefit payments used in the calculation of the expected benefit obligation (includes estimated
future employee service) will be required, and should be presented separately for years 1–5 and in the aggregate
for years 6–10.
3. Disclosure of domestic plan asset information will be required for annual periods ending after December 15,
2003. The FASB reaffirmed that all new disclosure requirements related to foreign plans (including plan asset
information) could be deferred until annual periods ending after June 15, 2004. For companies that defer
disclosure of foreign plan asset information until annual periods ending after June 15, 2004, domestic and foreign
information should be shown separately in financial statements in which only domestic information is presented.
This is a transitional issue only, and it applies to certain information such as the total fair value of plan assets, the
projected benefit obligation, and the expected long-term rate of return on assets.
4. Disclosure of interim-period information will be required for interim periods beginning after the issuance of the
final Statement.
The FASB also discussed its Equity-Based Compensation project at this meeting and concluded on various disclosure,
transition and effective date requirements. The FASB intends to issue an Exposure Draft on this project in the first quarter
of 2004, and expects to issue a final standard later in 2004.
Derivatives and Hedging -- Guidance Revised and Added in Our Interpretations of FASB Statement 133
We have revised and updated the interpretations in our publication, Derivatives and Hedging - Interpretations of
Statement 133 . In particular, we added, modified or deleted certain interpretations as a result of changes in FASB staff
guidance on Statement 133 Implementation Issues (also known as Derivatives Implementation Group "DIG" issues ).
We also updated our guidance to reflect final consensuses in EITF Issue No. 02-3, "Issues Involved in Accounting for
Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management
Activities ," EITF Issue No. 03-11, "Reporting Realized Gains and Losses on Derivative Instruments That Are Subject to
FASB Statement No. 133 and Not 'Held for Trading Purposes' As Defined in Issue No. 02-3 ," and EITF Issue No. 01-5,
"Application of FASB Statement No. 52 to an Investment Being Evaluated for Impairment That Will Be Disposed Of ."
Our interpretations of Statement 133 were also updated to reflect the issuance of FSP FAS 150-1, "Issuer's Accounting
for Freestanding Financial Instruments Composed of More Than One Option or Forward Contract Embodying Obligations
under FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity ," and FSP FAS 150-3, "Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial
Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under FASB
Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ."
Equity-Based Compensation -- FASB Discusses Equity-Based Compensation and Other Matters at November 19,
2003 Meeting
As reported in its "Action Alert" publication, the FASB met on November 19, 2003, and discussed the following:
• Fair Value Measurement
• Equity-Based Compensation
• AcSEC Documents
The more significant developments resulting from this meeting follow.
The FASB made certain decisions regarding the income tax effects on Equity-Based Compensation (EBC)
arrangements.The FASB also discussed certain convergence issues on EBC arrangements relating to modifications and
transactions with related parties.
The FASB met with representatives of the AICPA's Accounting Standards Executive Committee (AcSEC) and cleared two
AICPA Statements of Position -- (a) Financial Highlights of Separate Accounts: An Amendment to the Audit and
Accounting Guide 'Audits of Investment Companies ,' and (b) Reporting Financial Highlights and Schedule of
Investments by Nonregistered Investment Partnerships: An Amendment to the Audit and Accounting Guide 'Audits of
Investment Companies' and AICPA Statement of Position 95-2, 'Financial Reporting by Nonpublic Investment
Partnerships .'
General Alert -- AICPA Issues Audit Risk Alert, General Alert: Strengthening Audit Integrity, Safeguarding
Financial Reporting - 2003/2004
The AICPA has issued an Audit Risk Alert, General Alert: Strengthening Audit Integrity, Safeguarding Financial Reporting
- 2003/2004. This publication was designed to enhance an auditor's general knowledge and awareness of a client's
business and economic environment, which may be useful when conducting a financial statement audit. This Alert also
includes a discussion of emerging practice issues and current accounting developments that may be useful to preparers,
as well as auditors.
Rules of Practice -- SEC Proposes Rule
On November 23, 2003, the SEC proposed rules that would amend the Rules of Practice for the Sarbanes-Oxley Act of
2002 (the Act ). The Act authorizes the SEC to review disciplinary actions of the Public Company Accounting Oversight
Board and to create "Fair Funds" for distribution to the victims of violations of the securities laws. The proposed rules
result from this authorization. Comments on this proposal are due January 5, 2004.
Auditing Summaries
Miller GAAS Practice Manual -- Publication of 2004 Edition
We have published the 2004 Edition of the Miller GAAS Practice Manual. The primary objective of this publication is to
provide the practitioner with a complete, quick, and valuable reference source for the currently effective pronouncements
of Statements on Auditing Standards (SAS), Statements on Standards for Attestation Engagements (SSAE), Statements
on Standards for Accounting and Review Services (SSARS), and the interpretations of these standards. This publication
includes frequently asked questions and answers and a variety of illustrations and practice aids. The new Edition has
been updated with the latest information on recently-issued AICPA authoritative literature, including: (a) SASs through No.
101, Auditing Fair Value Measurements and Disclosures, (b) SSAE No. 12, Amendment to Statement on Standards for
Attestation Engagements No. 10, "Attestation Standards: Revision and Recodification ," and (c) SSARS No. 9, Omnibus
Statement on Standards for Accounting and Review Services--2002 .
Miller Audit Procedures -- Publication of 2004 Edition
We have published the 2004 Edition of Miller Audit Procedures. The primary objective of this publication is to show
practitioners the most cost-effective approach for conducting high-quality audits of nonpublic commercial entities. This
publication provides practical discussion and consideration of the day-to-day management of audit engagements,
featuring various audit efficiency, effectiveness, and cost-saving measures and numerous practice aids. The new Edition
has been updated with the latest information on recently issued AICPA authoritative literature, including: (a) SAS No. 99,
Consideration of Fraud in a Financial Statement Audit , (b) SAS No. 101, Auditing Fair Value Measurements and
Disclosures , and (c) several accounting pronouncements, including FASB Statement No. 148, Accounting for StockBased Compensation--Transition and Disclosure, An Amendment of FASB Statement No. 123 .
CPA's Guide to Management Letter Comments -- Publication of 2004 Edition
We have published the 2004 Edition of CPA's Guide to Management Letter Comments. This publication is a
comprehensive resource providing users with vital information on the preparation of management letter comments,
including (a) numerous management letter comment examples for "real-life" situations involving all critical areas generally
encountered during an audit, and (b) suggestions and examples related to the opening and closing paragraphs of the
management letter. The management letter comment examples in the new Edition have been updated to reflect the
effects of AICPA SAS No. 99, Consideration of Fraud in a Financial Statement Audit, and the Sarbanes-Oxley Act of 2002
. In addition, the latest management letter comments on the subjects of revenue recognition, federal grant reporting,
financial condition, and communication with the audit committee are included in this new Edition.
Audit and Attestation Engagements -- New Content Added to Our Engagement Standards
In connection with the above described publication of the 2004 Editions of the Miller GAAS Practice Manual, Miller Audit
Procedures, and CPA's Guide to Management Letter Comments, we have added new content to various sections in the
"Audit Engagements " and "Attestation Engagements " chapters of Engagement Standards. This new content includes
(a) plain-English summaries, by subtopic, of the standards governing the performance of audits and attestation
engagements, and (b) links to the relevant authoritative literature. Accordingly, the new content provides a comprehensive
research tool with an overview for each subtopic along with links to both the relevant authoritative and interpretive
literature. These links provide easy access to additional information on the subtopic, if such information is desired.
General Alert -- AICPA Issues Audit Risk Alert, General Alert: Strengthening Audit Integrity, Safeguarding
Financial Reporting - 2003/2004
As noted above in our Accounting and SEC Summaries, the AICPA has issued an Audit Risk Alert, General Alert:
Strengthening Audit Integrity, Safeguarding Financial Reporting - 2003/2004. This publication was designed to enhance
an auditor's general knowledge and awareness of a client's business and economic environment, which may be useful
when conducting a financial statement audit. This Alert also includes a discussion of emerging practice issues and current
accounting developments that may be useful to preparers, as well as auditors.
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Archive
September 22-26, 2003
September 29 - October 3, 2003
October 6-10, 2003
October 13-17, 2003
October 20-24, 2003
October 27-31, 2003
November 3-7, 2003
November 10-14, 2003
November 17-21, 2003
November 24-26, 2003
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