FICPA: Accounting and Auditing Section News

When Is a Lease a Lease?

The answer will prove pivotal to companies' balance sheets when a new lease accounting standard comes out. A revamped lease accounting standard in the works will likely put hundreds of billions of dollars in assets and obligations onto some companies' balance sheets. That has had companies that will be most affected by the changes � such as airlines, retailers, and railroads � dreading any progress the rule-makers might make in creating a new standard. And executives of those companies have been pushing for the United States and international accounting boards not to apply the new rule to all leases.

Chairman of the IASB Provides Update to ECOFIN on Reform of IAS 39

Sir David and I welcome the opportunity to appear before you today. Sir David is accompanied by Gavin Francis, director of capital markets, the lead IASB staff director on the IAS 39 reform project. Gerrit Zalm, our chairman and your former colleague, apologises for not being able to attend. As one of the eight European-based trustees, I have been asked to accompany Sir David today.

FASB Creates Not-for-Profit Advisory Committee

The Financial Accounting Standards Board has established a Not-for-Profit Advisory Committee to offer input to the board on guidance, current and future technical projects, and longer-term issues affecting nonprofits.

Shared Responsibility in Audits

Taking responsibility for audits has turned out to be an increasingly thorny issue. The Public Company Accounting Oversight Board has drawn mostly negative comments with its proposal to require the engagement partner with final responsibility for an audit to sign off on it (see Audit Firm Regulation: No Autographs). Currently only the firm as a whole signs off on an audit for a public company. At an auditing conference held by the New York State Society of CPAs� Foundation for Accounting Education on Monday, PCAOB Deputy Chief Auditor Greg Scates told the audience that the barrage of negative comments is prompting the PCAOB to reconsider the whole idea (see PCAOB May Scrap Auditor Sign-off Proposal). But that�s not the only place where individual vs. shared responsibility for audits has been drawing attention.

Accounting Irregularities May Be on the Rise in U.S.

Corporate balance sheets may be showing signs of the wear and tear from the prolonged U.S. recession as accounting irregularities are starting to surface at growing numbers at U.S. companies. "When things get difficult companies tend to stretch even further and utilize whatever games that they can get away with and sometimes they don't get away with them," David Tice, chief portfolio strategist for bear markets at Federated Investors, said in an interview with Reuters television on Wednesday. Accounting irregularities are increasingly showing up in U.S. regulatory filings and corporate announcements. Shares of Apollo Group Inc (APOL: 57.94, -0.21, -0.36%) sank 18% on Wednesday after the parent of University of Phoenix said the U.S. Securities and Exchange Commission had launched an informal inquiry into its revenue recognition practices.

Auditing at the Speed of Change

Henry Keizer is the global head of audit for KPMG International and U.S. vice chair of audit for KPMG LLP. He also is a member of the AICPA board of directors. He spoke with JofA Publisher and Editor-in-Chief Joanne Fiore following the AICPA�s board of directors meeting in August and in a follow-up e-mail interview. The following are excerpts from those conversations:

Balancing Governmental Budgets Under GASB 54

Fund balance is an important measure that represents the difference between a fund�s assets and liabilities. The overall objective of fund balance reporting is to isolate that portion of fund balance that is unavailable to support the following period�s budget. Because governmental funds� measurement focus is the flow of financial resources, the balance sheet primarily reports assets and liabilities that represent net spendable and available resources for these funds. In many ways, fund balance represents working capital, which can either be used as a liquidity reserve or for spending in future years.

Noise: A Land Use Dilemma? A Case Study of the City of Jacksonville

Numerous studies have shown that mixed land uses, high density populations, and amenities for pedestrians can present challenges for achieving noise levels that protect citizens from the effects of noise.1 Based on field investigations and anecdotal evidence of what appeared to be a combination of the above mentioned factors, the City of Jacksonville�s Environmental Quality Division (EQD) decided to investigate whether zoning changes were having an impact on the increase in noise complaints.2

Auditor General Report 2010-037: Agency for Persons with Disabilities - Residential Facility Licensing and Follow-up on Prior Audit Findings - Operational Audit (PDF)

AGENCY FOR PERSONS WITH DISABILITIES RESIDENTIAL FACILITY LICENSING AND FOLLOW-UP ON PRIOR AUDIT FINDINGS This operational audit of the Agency for Persons with Disabilities (Agency) focused on the Agency�s residential facility licensing process and tests of expenditures related to two intermediate care facilities managed by the Agency (Sunland Marianna and Tacachale). The audit covered the period July 2007 through January 2009, and selected actions through March 2009, and included a follow-up on prior audit findings. Those matters requiring corrective actions are described below.

IFRS Risk Planning and Controls Execution

Conversion to IFRS will be far more than a technical accounting exercise. Implementing IFRS will impact many, if not all, aspects of your business operations, including information technology. It may bring companywide changes that will spawn new risks. These include system changes, modifications to processes impacting employees� day-to-day duties, and new accounting policies. U.S. GAAP and IFRS share many similarities, but they are also different in many areas.

Highlights

U.S. private companies may have a new choice for accounting and financial reporting�a slimmed-down version of IFRS tailored more to their needs. IFRS for SMEs (small- and medium-size entities) is a simplification of full IFRS. The International Accounting Standards Board (IASB), which released the new standard in July after five years of work on the project, defines SMEs as businesses that publish general-purpose financial statements for external users and do not have public accountability. Many U.S. private companies would fit that definition.

Simplified Reporting: Forgotten in the Crisis?

It's been a year since an SEC advisory committee made suggestions for improving the standard-setting and preparation that goes into financial statements. August 2008 was a hopeful time for advocates of principles-based accounting. The United States had a new plan to adopt global accounting standards, which are considered to allow for more judgment than U.S. generally accepted accounting principles. And an advisory group to the Securities and Exchange Commission unveiled a 170-page report recommending ways financial reporting could be simplified, including the belief that bright lines should not exist.