Accounting Today - August 16 2010

FASB, IASB mull fair value changes
assurancenews

NORWALK, CONN.

The Financial Accounting Standards Board and the International Accounting Standards Board have each recently issued exposure drafts proposing changes in the standards for fair value measurement and disclosure in U.S. GAAP and International Financial Reporting Standards. Simultaneous exposures aim to clarify and unify fair value rules

FASB’s proposed Accounting Standards Update contains amendments that the boards believe would improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS.

The proposed update is the result of joint efforts to ensure that fair value will have the same meaning under U.S. GAAP and IFRS, and that their respective measurement and disclosure requirements will be virtually the same, except for minor differences. The amendments would apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in shareholders’ equity in financial statements.

The IASB is also publishing a measurement
uncertainty analysis disclosure proposal,
Measurement Uncertainty Analysis Disclosure
for Fair Value Measurements, which is the
same as a proposed disclosure requirement
in FASB’s proposed update. Both boards will
jointly consider the comments received on
their respective exposure drafts as they con-
tinue their discussions about fair value mea-
surement after the exposure periods end.

As part of their ongoing flood of projects, the Financial Accounting Standards Board and the International Accounting Standards Board have also jointly published a draft standard to improve and align the financial reporting of revenue from contracts with customers and the related costs.

The proposed standard would replace IAS 18, Revenue, IAS 11,

Construction Contracts, and related interpretations. In U.S. GAAP, it would supersede most of the guidance on revenue recognition in Topic 605 of the Accounting Standards Codification.

The core principle of the draft stan-
dard is that an entity should recognize
revenue from contracts with customers
when it transfers goods or services to
the customer in the amount of consid-
eration the entity receives, or expects
to receive, from the customer.

In developing the proposals, the boards considered more than 220 comment letters they received on a discussion paper, in addition to feedback received from interested parties through an extensive outreach program, including workshops with preparers. The boards will undertake further outreach activities during the exposure draft’s comment period to ensure that the views of all interested parties are taken into consideration when finalizing the standard.

The exposure draft, Revenue from Contracts with Customers, is open for comment until Oct. 22, 2010, and can be accessed on www.iasb.org or on www.fasb.org.

WAIT—THERE’S MORE!

following topics covered in ASC 820: highest and best use and valuation premise; measuring the fair value of financial instruments within a portfolio and financial instruments classified in shareholders’ equity; blockage factors and other premiums and discounts; and additional disclosures.

The comment period for FASB’s proposed update extends through Sept. 7, 2010. The proposed ASU does not yet specify an effective date; however, FASB plans to add one after considering the comments it receives.

In the IASB’s draft, the board has proposed a three-level fair value hierarchy that categorizes observable and non-observable market data used as inputs for fair value measurements. According to that hierarchy, Level 3 inputs are “unobservable inputs” used for the measurement of assets or liabilities for which market data are not available.

In response to the comments it has received on earlier drafts of the standards, the IASB proposes to enhance its original proposal by requiring the measurement uncertainty analysis disclosure to reflect the inter-dependencies between unobservable inputs used to measure fair value in Level 3. Statement users commented that this information would allow them to assess the effect that the use of different unobservable inputs would have had on the fair value measurement.

“Companies impacted by fair value measurements should stay informed of these proposed changes, particularly as this ED moves swiftly to a finalized standard,” said Forsythe. “Investors, regulators and lawmakers are focusing more intently than ever on how companies value assets.”

Measurement Uncertainty Analysis Disclosure for Fair Value Measurements is also open for comment until Sept. 7, 2010.

FASB is publishing the proposals in the exposure draft Amendments for Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. Both boards will consider the comments received on the exposure drafts jointly.

The drafts are available on the boards’ Web sites. The IASB also plans to publish on its site a comprehensive summary of the progress of its fair value project, of which these proposals form a part. AT

GASB LOOKS TO IMPROVE
PENSION STANDARDS

NORWALK, CONN. — The Governmental Accounting Standards Board has issued a document outlining its preliminary views on how to improve pension accounting and financial reporting by government employers. The approach presented in the preliminary views would move governmental pension accounting and reporting away from the funding orientation that now exists, and instead introduce recognition and measurement standards that would be based on GASB’s conceptual framework, including information that would help financial statement users better assess the degree to which inter-period equity has been achieved.

The document is available for down-load at www.gasb.org. The deadline for submitting comments is Sept. 17, 2010. GASB will host public hearings on the issue in Dallas, San Francisco and New York in mid-October.

FRAUD COSTS COMPANIES
AN AVERAGE OF $105K

AUSTIN, TEXAS — The median fraud loss for U.S. organizations is $105,000, according to a new study by the Association of Certified Fraud Examiners, with billing and corruption schemes the most common types of fraud reported.

Among the 1,021 U.S. cases in the study, the median fraud loss was $105,000. Billing schemes were present in 27.6 percent of these cases, while corruption was reported in 21. 9 percent. While 46.2 percent of U.S. frauds in the study were committed by lower-level employees who caused a median fraud loss of $50,000, it was the 17. 1 percent of frauds committed by owners and executives that did the most damage, with a median loss of $485,000. Another 36. 7 percent of frauds committed by managers had a median loss of $150,000.

Anonymous fraud hotlines have made a major impact, with 37. 8 percent of the U.S. frauds in the study detected through tips. Management review detected 17. 1 percent, and internal audit detected 13.7 percent of the frauds.