A&A Update

From the Standards Setters

Updated Revenue Recognition ED released 14 November

December 2011

The Technical Standards Update of Crowe Horwath International

The FASB/IASB released the long awaited updated ED on Revenue. The release is made up of three documents: the ED itself; examples; and basis of conclusions. The documents can be downloaded from the IASB website. Comments are requested by 13 March 2012. You can access the documents here . The main changes from the original exposure draft include:

Amending the principle for identifying separate performance obligations in a contract; Simplifying the measurement of the transaction price (the effects of customer credit risk would not be considered); Adding criteria to determine when a performance obligation is satisfied over time and when revenue may be recognized over time; Aligning more closely the accounting for product warranties with the existing requirements; Limiting the scope of the onerous test to apply to long-term services only; Adding a practical expedient that permits, in some cases, recognizing as an expense the costs of obtaining a contract; and Providing exemptions from some disclosures for nonpublic entities.

The Boards current expectation is that the effective date will be no earlier than for annual reporting periods beginning on or after 1 January 2015. The FASB proposal would not permit early implementation; the IASB would allow early implementation.

IFAC Updates Audit Guide for Small and Midsized Entities

The IFAC Small and Medium Practices Committee recently released the third edition of its Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities. The Guide is available at no charge. www.ifac.org/publications-resources/guide-using-international-standards-auditing-audits-small-and-medium-sized-en

IASB Chairman Hoogervorst announces that IFRS 9 needs revision

The announcement on 25 November 2011 will likely raise fears that standard setters are again acting under political influence. Hoogervorst said that he hopes any changes to IFRS 9, now slated to become effective in 2015, would be minor tweaks. IFRS 9 will be reworked even though countries like Australia already use it by virtue of the ability to adopt early. Hoogervorst said the coming changes would make IFRS 9 fit better with a separate reform of insurance accounting and help bridge a gap with a U.S. fair value accounting. See more here.

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From the Regulators

European Commission Proposes Regulatory Changes for Audits
The EC released its proposed new regulations over the auditing profession. The changes include:

Auditor rotation - Limiting to six years the period that an outside auditing firm can perform audits for a company. A cooling-off period of four years would be imposed before a firm could audit again for the same client. Companies that opt for a voluntary joint audit would be allowed a nine-year window. Non-attest services - Prohibiting audit firms from providing non-audit consultancy services to their audit clients, and requiring large audit firms to separate audit activities from non-audit activities. Public-interest entities would be required to have an open and transparent tender procedure when picking a new auditor. Creating a single market for statutory audits by introducing a European passport for the audit profession, allowing firms to provide services across the European Union.

The proposed changes have to be approved by European Union states and the European Parliament and could be changed, perhaps significantly, in that process. Stay tuned.

SEC tightens rules on reverse mergers

In November, the SEC approved new rules proposed by stock exchanges to make it harder for private companies to go public by merging with a shell company. This action was motivated by concerns surrounding recent transactions, primarily involving Chinese companies using this technique to avoid more stringent SEC registration requirements.

SEC Releases IFRS Comparison Papers

In November, the SEC released two staff papers comparing International Financial Reporting Standards with U.S. GAAP and analyzing IFRS in practice at foreign companies. Whether or not you have a keen interest in what the SEC will decide about actually adopting IFRS, these two documents are useful research resources.

FSC signs cooperation accord with US accounting oversight group

In November, the Financial Supervisory Commission (FSC), Taiwan's top financial supervisor, signed a statement of protocol with the PCAOB in an effort to improve the audits of listed companies and better protect investors. Under the agreement, the two organizations will cooperate more fully in the oversight of auditors.

Headlines from Around the World

Scamming the Auditors Is As Simple As Cut and Paste
The following article is worth reading. Scamming the Auditors Is As Simple As Cut And Paste - Forbes

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