AN OFFERING FROM BDO S NATIONAL ASSURANCE PRACTICE SIGNIFICANT ACCOUNTING & REPORTING MATTERS

Transcription

1 AN OFFERING FROM BDO S NATIONAL ASSURANCE PRACTICE SIGNIFICANT ACCOUNTING & REPORTING MATTERS Significant Accounting & Reporting Matters Second Quarter SECOND QUARTER 2012 BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through 40 offices and more than 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,082 offices in 119 countries. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. For more information, please visit: Material discussed in this publication is meant to provide general information and should not be acted on without professional advice tailored to your individual needs BDO USA, LLP. All rights reserved.

2 Significant Accounting & Reporting Matters Second Quarter 2012 TABLE OF CONTENTS Financial Accounting Standards Board (FASB)... 3 Final FASB Guidance... 3 Proposed FASB Guidance... 3 Other Activities... 5 Public Company Accounting Oversight Board (PCAOB)... 8 Final PCAOB Guidance Proposed PCAOB Guidance Securities Exchange Commission (SEC)... 9 Final Rules... 9 Proposed Rules Other Activities International Accounting Standards Board (IASB) Final IASB Guidance Proposed IASB Guidance Other Activities Effective Dates of U.S. Accounting Pronouncements BDO Resources for Clients and Contacts BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through 40 offices and more than 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,082 offices in 119 countries. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. For more information, please visit: Material discussed in this publication is meant to provide general information and should not be acted on without professional advice tailored to your individual needs BDO USA, LLP. All rights reserved.

3 Significant Accounting & Reporting Matters Second Quarter FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) FINAL FASB GUIDANCE All final FASB guidance can be accessed on the FASB website at located under the Standards tab, Accounting Standards Updates. As of the date of this publication, the FASB had not issued any final guidance for the second quarter. PROPOSED FASB GUIDANCE The following is a summary of all proposed guidance that was issued or remained open for comment during the quarter. All proposed FASB guidance can be accessed on the FASB website at located under the Exposure Documents tab. Proposed Accounting Standards Update Statement of Cash Flows (Topic 230) Not-for-Profit Entities: Classification of the Sale of Donated Securities in the Statement of Cash Flows (a consensus of the FASB Emerging Issues Task Force) Issued: April 17, 2012 Comment Deadline: July 16, 2012 Summary: Currently, there is diversity in practice under U.S. GAAP about not-for-profit entities presentation of the cash receipts from the sale of donated securities in the statement of cash flows as either an investing activity or a noninvesting (operating or financing) activity. The amendments in this proposed Update would require a not-for-profit entity (NFP) to classify cash receipts from the sale of donated securities consistently with cash donations received in the statement of cash flows if those cash receipts were from the sale of donated securities (a) that upon receipt are directed for sale and (b) for which the NFP has the ability to avoid significant investment risks and rewards through near immediate conversion into cash. Accordingly, the cash receipts from the sale of those securities would be classified as cash inflows from operating activities, unless the donor restricted the use of the contributed resources to long-term purposes, in which case those cash receipts would be classified as cash flows from financing activities. Otherwise, receipts from the sale of donated securities would be classified as cash flows from investing activities by the NFP. Effective Date: The amendments in this proposed Update would be applied prospectively to cash received on or after the date of adoption from the sale of donated securities. The proposed amendments would permit retrospective application. Early adoption would be permitted. The effective date will be determined after the Task Force considers stakeholder feedback on the proposed Update.

4 Significant Accounting & Reporting Matters Second Quarter Proposed Accounting Standards Update Business Combinations (Topic 805) Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution (a consensus of the FASB Emerging Issues Task Force) Issued: April 17, 2012 Comment Deadline: July 16, 2012 Summary: The amendments in this proposed Update would clarify the applicable guidance for subsequently measuring an indemnification asset recognized as a result of a government-assisted acquisition of a financial institution, thereby resolving current diversity in practice on the subsequent measurement of these types of indemnification assets. When a reporting entity recognizes an indemnification asset (in accordance with Subtopic ) as a result of a government-assisted acquisition of a financial institution and subsequently a change in the cash flows expected to be collected on the indemnification asset occurs (as a result of a change in cash flows expected to be collected on the assets subject to indemnification), the amendments in this proposed Update would require the entity to subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value would be limited to the contractual term of the indemnification agreement (that is, the lesser of the term of the indemnification agreement and the remaining term of the indemnified assets). Effective Date: The proposed amendments would be applied prospectively to any new indemnification assets acquired and to changes in expected cash flows of existing indemnification assets arising from a government-assisted acquisition of a financial institution occurring on or after the date of adoption. Early adoption would be permitted. The effective date will be determined after the Task Force considers stakeholder feedback on the proposed Update. Proposed Accounting Standards Update Entertainment Films (Topic 926) Accounting for Fair Value Information That Arises after the Measurement Date and Its Inclusion in the Impairment Analysis of Unamortized Film Costs (a consensus of the FASB Emerging Issues Task Force) Issued: April 17, 2012 Comment Deadline: July 16, 2012 Summary: The amendments in this proposed Update would eliminate certain requirements related to an impairment test of unamortized film costs, but would not add any new guidance to the FASB Accounting Standards Codification (ASC). As such, the guidance in Topic 926 would be the relevant guidance for performing an impairment test of unamortized film costs. The existing guidance in Topic 820, Fair Value Measurements and Disclosures and Topic 855, Subsequent Events, would be the relevant guidance for estimating fair value and accounting for subsequent events, respectively. The amendments in this proposed Update would eliminate the rebuttable presumption that the conditions leading to the writedown of unamortized film costs after the balance sheet date existed as of the balance sheet date. The proposed amendments also would eliminate the requirement that an entity incorporate into fair value measurements used in the impairment tests the effects of any changes in estimates resulting from the consideration of subsequent evidence if the information would not have been considered by market participants at the measurement date. Because fair value, as defined by Topic 820, is the measurement basis that is used to assess impairment of unamortized film costs, an entity should include, in a valuation model, assumptions that market participants would have made about uncertainty in timing and amount of cash flows as of the measurement date. To the extent that uncertainties are resolved or other

5 Significant Accounting & Reporting Matters Second Quarter information becomes known after the balance sheet date, but before the financial statements are issued or available to be issued, such effects should not be incorporated with certainty into the fair value measurement as of the balance sheet date unless market participants would have made such assumptions. Amending the guidance to remove the rebuttable presumption does not imply that the subsequent evidence should be ignored in estimating a fair value measurement. The amendments in this proposed Update would not change an entity s responsibility to analyze and consider any relevant subsequent events and information to assess whether the fair value measurement reflects all relevant information and assumptions that market participants would have considered under the current conditions at the measurement date. Effective Date: The amendments in this proposed Update would be effective for impairment tests performed after the effective date. Early adoption would be permitted if a public entity s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, if the entity s financial statements have not yet been made available for issuance. The effective date will be determined after the Task Force considers stakeholder feedback on the proposed amendments. OTHER ACTIVITIES The following section provides high level summaries of other relevant FASB publications and activities, with particular focus on the recent developments and prioritization of the FASB and IASB s joint efforts to work towards convergence of U.S. GAAP and IFRS. Update on International Convergence The FASB and the IASB continue their efforts on a number of joint projects, including revenue recognition, financial instruments, leases, and other topics. In June 2012, the Boards reversed a previous decision in the leasing project by tentatively agreeing to proceed with a dualapproach for lessee accounting. While all leases would still be reflected on the balance sheet by recording a right to use asset and a lease payment liability (other than short term leases), the income statement effect would differ based upon the type of lease. If the lessee consumes more than an insignificant amount of the underlying asset, the income statement would reflect an accelerated expense recognition pattern in the earlier period of the lease (i.e., a front-loaded pattern). Otherwise, a straightline method of expense recognition would be used. The straight-line category of leases is designed to capture real estate leases that do not consume a major part of the property s economic life. The Boards affirmed their intent to re-expose the leasing guidance in the fourth quarter of The FASB press release is available at: The Boards hosted a series of outreach meetings in April and May 2012 on their revised joint revenue recognition proposal that was published in November For additional information on the proposed guidance, refer to: BDO Flash Report: FASB Issues Revised Exposure Draft on Revenue from Contracts with Customers BDO Ac sense Self Study Course: FASB Revenue Recognition Exposure Draft Update (January 2012) BDO s comment letter on the exposure draft

6 Significant Accounting & Reporting Matters Second Quarter The FASB and the IASB issued a joint progress report to the Financial Stability Board (FSB) in April The report states that most of the short-term projects undertaken by the Boards have been completed or are close to completion, while one (income tax) has been determined to be a lower priority. The report also reiterated that the Boards expect to begin redeliberations of the joint project on revenue in the second quarter of 2012, and also to re-expose the projects on financial instrument classification, measurement, and impairment, as well as leases and insurance in the second half of The Boards expect to issue final standards on these projects by mid The full report is available at: For current status of joint FASB/IASB projects, refer to the FASB s Current Technical Plan and Project Updates page at: Update on Standard Setting for Private Companies Summary of Current Developments: In May 2012, the Financial Accounting Foundation (FAF) established the Private Company Council to improve the standards-setting process in U.S. GAAP for private companies. Its purpose will be to determine whether exceptions or modifications to existing standards are necessary to meet the needs of private company financial statement users. The Council will also serve in an advisory capacity to the FASB. In that role, the Council will emphasize private company perspectives as the FASB develops accounting standards in the future. The FAF established the Council after an extensive outreach program that was designed to address concerns raised by private company constituents, including the AICPA, about the usefulness of U.S. GAAP in a non-public setting. Most recently, the FAF sought public comments on its proposal to establish the Council (refer to BDO's comment letter at The FAF modified its initial proposal based on stakeholder feedback to establish the final Council. The FAF released its final report detailing the Council s structure, governance, and operating procedures, as well as a request for nominations for Council candidates. For more information, refer to BDO s Flash Report: U.S. GAAP Private Company Council at and the FASB website. For further background information for this project, please refer to BDO s Significant Accounting and Reporting Matters First Quarter 2012 edition available at: FASB Chairman Announces Plans for Disclosure Framework and Analysis of Costs and Benefits Considered in Standard Setting During the June 2012 Compliance Week Annual Conference, FASB Chairman Leslie Seidman discussed the FASB s plans to unveil proposals aimed at reducing disclosure overload through establishment of a disclosure framework designed to improve disclosure quality and effectiveness and make financial statements more understandable. The FASB is poised to release a Discussion Paper detailing its three-prong approach, which involves: (1) establishing consistent disclosure requirements to focus on what is most important to users; (2) explaining how entities should evaluate which disclosures are necessary under different circumstances at different times (including when it is appropriate to exclude certain disclosures); and (3) exploring ways to emphasize the more newsworthy (material) information and to make it easier for users to find the information most relevant to them. Included in the Discussion Paper will be the opportunity for readers to comment on the approach to interim disclosures and how to evaluate materiality in the context of disclosures. Following completion of this Framework, Chairman Seidman indicated the FASB then intends to review existing disclosure requirements, which will involve working with the SEC to address overlap in U.S. GAAP footnotes and Management Discussion & Analysis (MD&A). Additionally, the FASB will hold workshops in the fall of 2012 which will include both preparers and users of financial statements, in order to work through proposed requirements with an emphasis on greater focus and efficiency in disclosure. The second part of Chairman Seidman s speech addressed how the FASB analyzes the costs and benefits in standard setting and how this ties into its consideration of economic consequences. Benefits considered include: economic growth; lowering cost of capital; and greater corporate accountability through transparency. Costs considered include: understanding the requirements;

7 Significant Accounting & Reporting Matters Second Quarter developing systems to collect and process new information; training; and auditing the information. For more information, refer to:

8 Significant Accounting & Reporting Matters Second Quarter PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD (PCAOB) FINAL PCAOB GUIDANCE All final PCAOB guidance can be accessed on the PCAOB website at located under the Rules of the Board tab. As of the date of this publication, the PCAOB had not issued any final guidance for the second quarter. PROPOSED PCAOB GUIDANCE All proposed PCAOB guidance can be accessed on the PCAOB website at located under the Rules of the Board tab. As of the date of this publication, the PCAOB had not issued any proposed guidance for the second quarter. Please refer to archived editions of BDO s Significant Accounting & Reporting Matters publications for further information on PCAOB proposed standard setting along with various BDO publications available at: For an update on the May 17th PCAOB Standards Advisory Group (SAG) meeting which addressed recent developments and current and future standard setting, refer to BDO s Ac sense Self Study Course: Quarterly Technical Update Q (June 2012) a available at: a Expected to be released as a self-study course in mid-july 2012.

9 Significant Accounting & Reporting Matters Second Quarter SECURITIES AND EXCHANGE COMMISSION (SEC) FINAL SEC GUIDANCE All SEC Final Rules can be accessed on the SEC website at located under the Regulatory Actions section, Final Rules. (Note: The following pertains to significant accounting and reporting SEC releases. For a complete listing of SEC rules, please refer to the SEC website.) Final Rule Listing Standards for Compensation Committees Releases: and Issued: June 20, 2012 Summary: On June 20, 2012, the SEC voted to adopt compensation committee rules mandated by Section 952 of The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). The new rule 10C-1, implements the Act s requirement to direct the national securities exchanges to adopt listing standards related to the compensation committees of companies boards of directors as well as their compensation advisors. In particular, Rule 10C-1 requires the listing standards of the national securities exchanges to address the independence of the members on a compensation committee, the committee s authority to retain compensation advisers, the committee s consideration of the independence of any compensation advisors, and the committee s responsibility for the appointment, payment and work of any compensation adviser. A listed company must meet these standards in order for its shares to continue trading on the exchange. The final rule also amends the SEC proxy disclosure rules. These amendments will require additional disclosures about the use of compensation consultants and any conflicts of interest raised by the work of those consultants. BDO will publish a Flash Report summarizing the specific requirements of Rule 10C-1 in more detail; the Flash Report will be accessible at: Effective Date: The national securities exchanges have one year from the date of publication of the final rules in the Federal Register to adopt and receive the approval of the SEC for the required compensation committee listing standards.

10 Significant Accounting & Reporting Matters Second Quarter PROPOSED SEC GUIDANCE All SEC Proposed Rules can be accessed on the SEC website at located under the Regulatory Actions section, Proposed Rules. (Note: The following pertains to significant accounting and reporting SEC releases. For a complete listing of SEC rules, please refer to the SEC website.) As of the date of this publication, the SEC had not issued any significant proposed rules for the second quarter. OTHER ACTIVITIES The following section provides high level summaries of other relevant SEC publications and activities. The Jumpstart Our Business Startups Act Summary: On April 5, 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law. The Act was approved by Congress in late March. A primary goal of the JOBS Act is to improve small companies access to public capital markets. The Act amends a number of provisions of the securities laws to ease the process and costs associated with raising capital from the public. To encourage private companies to complete initial public offerings (IPOs) of their equity, the Act creates a new category of filers called emerging growth companies (EGCs) which are entitled to certain reporting relief. Since the Act was signed into law, the SEC staff has issued several sets of frequently asked questions to assist companies with the application of the Act s provisions, which are available at: For more information, refer to the following BDO publications and archived webcasts on the JOBS Act: BDO Knows Newsletter: The Jumpstart Our Business Startups Act BDO Flash Report: Emerging Growth Company Status and Accounting Policy Elections Ac sense Self Study Course: 2012 JOBS Act Implications and Considerations (May 2012) Ac sense Self Study Course: Quarterly Technical Update Q (April 2012) Ac sense Self Study Course: Quarterly Technical Update Q (June 2012) b b Expected to be released as a self-study course in mid-july 2012.

11 Significant Accounting & Reporting Matters Second Quarter Update on Work Plan for Global Accounting Standards Summary: Entering 2011, the Securities and Exchange Commission had expected to decide whether, and if so, how and when, to incorporate International Financial Reporting Standards (IFRS) into financial reporting by domestic issuers. The SEC staff made substantial progress toward completing the Work Plan it had developed in 2010 to support the Commission s decision, publishing papers that assessed the development and application of IFRS. The staff also published and obtained comments on a potential framework for incorporating IFRS into the U.S. financial reporting system. However, the staff did not finish its final report on the Work Plan in 2011, and Commission did not have the information it needed to make a decision. In February 2012, the Chief Accountant of the SEC, James Kroeker indicated in a speech to the IFRS Advisory Council meeting in London that an SEC decision on the use of IFRS by U.S. public companies is still a few months away. SEC Chairman Mary Schapiro also explained in February 2012 that the SEC will not be rushed to make a decision on IFRS and the primary goal from her perspective is to do the right thing for U.S. markets and U.S. investors. In May 2012 at a Baruch College conference, Chief Accountant Kroeker indicated that the SEC was weeks away from issuing its final report under the Work Plan. Later in May, Commissioner Elisse Walter echoed his remarks at a Financial Accounting Foundation dinner. In June 2012, IASB Chairman Hans Hoogervorst also confirmed this expectation at a speech in Washington, D.C., saying he anticipates the SEC will make a decision about whether the U.S. should adopt IFRS by the end of July. However, as of June 2012, the final report has not yet been published. Additionally, in June 2012, the SEC announced that Chief Accountant Kroeker will leave the SEC in July to enter the private sector. It is not yet clear how his departure will impact the issuance of the final report under the Work Plan or the timing of the final decision on if, how, and when IFRS is incorporated into the U.S. financial reporting system. Some are speculating that his departure will further delay the progress on the Work Plan and the ultimate decision. Stay tuned in the coming months for further communications on an SEC decision on IFRS! Implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act Summary: The Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank Act ), signed into law by President Obama in July 2010, contains more than 90 provisions that require SEC rulemaking, and dozens of other provisions that give the SEC discretionary rulemaking authority. Of the mandatory rulemaking provisions, the SEC has proposed or adopted rules for about three-quarters of them. As indicated above, the SEC finalized a rule in the second quarter related to compensation committees and compensation advisors. Significant upcoming activities include rulemaking regarding disclosure of pay-for-performance, pay ratios, hedging by employees and directors, and recovery of executive compensation ( clawbacks ). For more information, refer to the SEC s Dodd-Frank Act spotlight page at: Additionally, refer to the following BDO publications and archived webcasts: BDO Knows Newsletter: Impact of Dodd-Frank Act on Executive Compensation in BDO Knows Newsletter: SEC Year in Review BDO Flash Report: SEC Finalizes Whistleblower Rules Mandated by the Dodd-Frank Act Ac sense Self Study Course: Whistleblowing: Responding to the Race to Report (February 2011)

12 Significant Accounting & Reporting Matters Second Quarter Ac sense Self Study Course: Executive Compensation: Impact of Dodd-Frank Act and Next Steps (February 2011) CF Disclosure Guidance Summary: In 2011, the staff of the Division of Corporation Finance introduced a new form of guidance, CF Disclosure Guidance. The staff has commented that it previously issued this type of guidance in the form of Dear CFO letters, and this new approach is designed to address a wider group of registrants. In April 2012, the staff issued CF Disclosure Guidance Topic No. 5, Staff Observations Regarding Disclosures of Smaller Financial Institutions. This staff guidance on Management s Discussion and Analysis and accounting policy disclosures focuses on three key topics: asset quality and loan accounting issues, deferred taxes, and FDIC-assisted transactions. While the guidance is directed toward smaller financial institutions, it may be applicable to other companies with finance receivables or cumulative net operating loss carryforwards. The CF Disclosure Guidance Topic No. 5 can be accessed at:

13 Significant Accounting & Reporting Matters Second Quarter INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) FINAL IASB GUIDANCE All final IASB guidance can be accessed on the IASB website at located under the IFRS tab, Standards and Interpretations. Annual Improvements Cycle Issued: May 2012 Summary: The publication includes a collection of amendments to International Financial Reporting Standards (IFRSs), in response to six issues addressed during the cycle, as its latest set of annual improvements. The IASB uses the Annual Improvements process to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of any other project. Issues included in the cycle are: clarification of the borrowing costs exemption in IFRS 1 First-time Adoption of International Financial Reporting Standards, as well as repeat application of IFRS 1; comparative information under IAS 1 and amendments from the Conceptual Framework project affecting IAS 1 Presentation of Financial Statements; clarification of accounting for servicing equipment under IAS 16 Property, Plant and Equipment; tax effect of distributions to holders of equity instruments under IAS 32 Financial Instruments: Presentation; and consistency in disclosure of total segment assets under IAS 34 Interim Financial Reporting. Effective Date: The amendments are effective for annual periods beginning on or after January 1, 2013, although entities are permitted to apply them earlier. PROPOSED IASB GUIDANCE The following is a summary of all proposed guidance that was issued or remained open for comment during the quarter. All proposed IASB guidance can be accessed on the IASB website at located under the Get Involved tab, Comment on a Proposal. Exposure Draft Annual Improvements to IFRSs, Cycle Issued: May 2012 Comment Deadline: September 5, 2012 Summary: The exposure draft proposes amendments to eleven existing IFRSs under its annual improvements project. The proposed amendments include, among other topics: accounting for contingent consideration in a business combination under IFRS

14 Significant Accounting & Reporting Matters Second Quarter Business Combinations; aggregation of operating segments and reconciling total reportable segments assets to the entity s assets under IFRS 8 Operating Segments; and recognition of deferred tax assets for unrealized losses under IAS 12 Income Taxes. Effective Date: The proposed effective date for the amendments is for annual periods beginning on or after January 1, 2014, while the amendment to IFRS 3 Business Combinations and the proposed consequential amendment to IFRS 9 Financial Instruments are for annual periods beginning on or after January 1, Early adoption is permitted for all the proposed amendments. Draft Interpretation Levies Charged by Public Authorities on Entities that Operate in a Specific Market Issued: May 2012 Comment Deadline: September 5, 2012 Summary: The IFRS Interpretations Committee (IFRIC) has issued proposed guidance on the accounting for levies charged by public authorities on entities that operate in a specific market. A public authority may impose a levy on entities that operate in a specific market, such as a specific country, a specific region or a specific market in a specific country. The IFRIC was asked to consider how an entity would account for the payment of levies, other than income taxes, in its financial statements; specifically, when the liability to pay a levy should be recognized. The proposed guidance clarifies that the obligating event that gives rise to a liability to pay a levy is the activity that triggers the payment of the levy as identified by the legislation. Effective Date: The draft interpretation proposes that it will be applied retrospectively with earlier application permitted. The IFRIC will determine an effective date after considering feedback received on the draft interpretation. Draft Interpretation Put Options Written on Non-controlling Interests Issued: May 2012 Comment Deadline: October 1, 2012 Summary: The IFRIC has issued proposed guidance on the accounting for a put option written by a parent entity on the shares of its subsidiary held by a non-controlling-interest shareholder. If a parent entity is obliged to purchase the shares of its subsidiary for cash or for another financial asset, the parent must recognize a financial liability in its consolidated financial statements for the present value of the option exercise price. The IFRIC was asked to consider how to subsequently measure that financial liability, because diversity exists in practice. The IFRIC has proposed that all changes in the measurement of that financial liability should be recognized in profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments. Effective Date: The draft interpretation proposes that it will be applied retrospectively with earlier application permitted. The IFRIC will determine an effective date after considering feedback received on the draft interpretation.

15 Significant Accounting & Reporting Matters Second Quarter OTHER ACTIVITIES The following section provides high level summaries of other relevant IASB publications and activities, with particular focus on the recent developments and prioritization of the FASB and IASB s joint efforts to work towards convergence of U.S. GAAP and IFRS. Updates on IASB Public Consultation on Future Work Program Summary: The Board discussed during its May 2012 meeting the agenda consultation process and feedback received. The Board intends to proceed with development of its strategy during the second half of More information on the agenda consultation is available at: Background: In July 2011, the IASB launched a public consultation to seek broad public input on the strategic direction and overall balance of its future work program. The consultation document published asks deliberately open questions to gather views on the IASB s future work program from all those involved in or affected by financial reporting. In particular, the IASB is seeking feedback on how it should balance the development of financial reporting with the maintenance of IFRS and with consideration of our time and resource constraints those areas of financial reporting that should be given the highest priority for further improvement. The consultation period on the future work program of the IASB closed on November 30, The Request for Views Agenda Consultation 2011 document is available at: Update on International Convergence For a summary of international convergence efforts, please refer to the FASB: Other Activities section above.

16 Significant Accounting & Reporting Matters Second Quarter EFFECTIVE DATES OF U.S. ACCOUNTING PRONOUNCEMENTS This appendix was prepared with a calendar-year end company in mind. Therefore standards with an effective date in 2011 have been included since many companies applied them for the first time in 2012, e.g., the first interim or annual period beginning on or after December 15, Standards that do not require adoption before 2013 are highlighted in gray. PRONOUNCEMENT EFFECTIVE DATE ASC 210, Balance Sheet ASU , Disclosures about Offsetting Assets and Liabilities An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. ASC 220, Comprehensive Income ASU , Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No ASU , Presentation of Comprehensive Income For public entities, effective for interim and annual periods beginning after 12/15/2011. For nonpublic entities, effective for fiscal years ending after 12/15/2012, and interim and annual periods thereafter. Retrospective adoption is required. The amendments in ASU are effective simultaneously with ASU For public entities, effective for interim and annual periods beginning after 12/15/2011. For nonpublic entities, effective for fiscal years ending after 12/15/2012, and interim and annual periods thereafter. Retrospective adoption is required. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. ASC 310, Receivables ASU , A Creditor s Determination of Whether a Restructuring Is a Troubled Debt Restructuring Effective for public entities for the first interim or annual period beginning on or after 6/15/2011, and should be applied retrospectively to modifications occurring on or after the beginning of the annual period of adoption. Effective for nonpublic entities for annual periods ending on or after 12/15/2012, including interim periods within those annual periods. Early adoption is permitted for public and nonpublic entities, with certain stipulations for nonpublic entities.

17 Significant Accounting & Reporting Matters Second Quarter PRONOUNCEMENT ASU , Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No ASU , Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses EFFECTIVE DATE ASU temporarily delayed the effective date of ASU for public companies, while the Board completed its deliberations on what constitutes a TDR for a creditor. See ASU for current effective date requirements. For public entities, disclosures at period end are effective for interim and annual reporting periods ending on or after 12/15/10. Disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after 12/15/10. For nonpublic entities, the disclosures required by ASU are effective for annual reporting periods ending on or after 12/15/2011. ASC 350, Intangibles Goodwill and Other ASU , Intangibles Goodwill and Other (Topic 350): Testing Goodwill for Impairment ASU , When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts Effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance Effective for public entities for fiscal years, and interim periods within those years, beginning after 12/15/2010. Early adoption is not permitted. Effective for nonpublic entities for fiscal years, and interim periods within those years, beginning after 12/15/2011. Nonpublic entities may elect early adoption using the same effective date as public entities. ASC 360, Property, Plant, and Equipment ASU , Derecognition of in Substance Real Estate a Scope Clarification (a consensus of the FASB Emerging Issues Task Force) The amendments in this Update should be applied on a prospective basis to deconsolidation events occurring after the effective date. Prior periods should not be adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2013, and interim and annual periods thereafter. Early adoption is permitted.

18 Significant Accounting & Reporting Matters Second Quarter PRONOUNCEMENT EFFECTIVE DATE ASC 715, Compensation ASU , Compensation Retirement Benefits Multiemployer Plans (Subtopic ): Disclosures about an Employer s Participation in a Multiemployer Plan For public entities, effective for annual periods for fiscal years ending after December 15, 2011, with early adoption permitted. For nonpublic entities, effective for annual periods for fiscal years ending after December 15, 2012, with early adoption permitted. The amendments should be applied retrospectively for all prior periods presented. ASC 720, Other Expenses ASU , Fees Paid to the Federal Government by Health Insurers (a consensus of the FASB Emerging Issues Task Force) Effective for calendar years beginning after December 31, 2013, when the fee initially becomes effective. ASC 820, Fair Value Measurements and Disclosures ASU , Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after 12/15/2011; early application is not permitted. For nonpublic entities, the amendments are effective for annual periods beginning after 12/15/2011. Nonpublic entities may apply the amendments in this Update early, but no earlier than for interim periods beginning after 12/15/2011. ASC 860, Transfers and Servicing ASU , Reconsideration of Effective Control for Repurchase Agreements Effective for all entities, both public and nonpublic, for the first interim or annual period beginning on or after 12/15/2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted ASC 944, Financial Services Insurance ASU , Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts Effective for fiscal years, and interim periods within those fiscal years, beginning after 12/15/2011 through prospective adoption. Retrospective application for all periods presented is permitted. Early adoption is permitted, but only at the beginning of an entity s annual reporting period. ASC 954, Health Care Entities ASU , Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities (a consensus of the FASB Emerging Issues Task Force) Effective for public entities for fiscal years beginning after 12/15/ 2011, and interim periods within those fiscal years. For nonpublic entities, the Issue will be effective for fiscal years ending after 12/15/2012, and interim and annual periods thereafter. Early adoption is permitted. Entities must apply the presentation requirements retrospectively; however, the qualitative and quantitative disclosures are only required to be provided prospectively.

19 Significant Accounting & Reporting Matters Second Quarter BDO RESOURCES FOR CLIENTS AND CONTACTS The following is a sample of recent BDO thought leadership materials that may be of interest. For additional publications and resources, please refer to: BDO AC SENSE SM UPCOMING WEBINAR EVENTS AND ARCHIVES Please check for current and upcoming programs. Upcoming Webinars NEW! Quarterly Financial Update Q October 3, 4, and 5, NEW! Quarterly Financial Update Q January 8, 9, and 10, Archives NEW! Quarterly Financial Update Q June 26, 27, and 28, 2012 c NEW! 2012 JOBS Act: Implications and Considerations May 31, Quarterly Financial Update Q April 4, Focus on Fraud Employee Fraud, From Discovery to Recovery March 20, Institutional Shareholder Services (ISS): New Approach to Evaluating Executive Compensation February 8, FASB Revenue Recognition Exposure Draft Update - January 18, Quarterly Financial Update Q January 6, c Expected to be released as a self-study course in mid-july 2012.

20 Significant Accounting & Reporting Matters Second Quarter Complex Financial Instruments December 15, BDO Board Reflections BDO Board Survey Results - December 7, Quarterly Financial Update Q October 5, FCPA Series: Doing Business Abroad - Spotlight on Russia- September 26, Focus on Fraud September 15, Effective Audit Committees in the Ever Changing Marketplace July 21, Quarterly Financial Update Q July 7, Mergers & Acquisitions: Opportunities and Obstacles in a Recovering Marketplace May 16, FCPA Series: Doing Business Abroad Spotlight on China April 28, Quarterly Financial Update Q April 6, Uncertain Tax Positions Planning for New IRS Schedule March 23, Executive Compensation: Impact of the Dodd-Frank Act and Next Steps February 23, Whistleblowing: Responding to the Race to Report February 3, Quarterly Financial Update Q January 7, BDO BOARD REFLECTIONS BDO continues to refine its Board Reflections resource center designed with public and private company boards of directors in mind. Understanding the roles, responsibilities and risks associated with each committee, BDO routinely provides guidance to directors as they navigate through ever changing challenges in today's corporate climate. BDO's proprietary studies, publications, practice aids and educational programs help fuel conversations among those charged with corporate governance who are making the tough decisions. Within this site, BDO has included resources across our various disciplines to help keep board

21 Significant Accounting & Reporting Matters Second Quarter members ahead of the trends while meeting compliance obligations. Please take a moment to complete our brief survey ( and weigh in on the governance topics that are of interest to you and your company. BDO CLIENT ADVISORIES NEW! Initial Offerings Newsletter (April 2012) BDO Board Reflections: Top Issues at 2012 Shareholder Meetings (March 2012) Considerations for Nominating Committees (January 2012) 2012 BDO IPO Outlook (January 2012) 2011 BDO IPO Halftime Report (July 2011) Effective Audit Committees in the Ever Changing Marketplace (January 2011; Effective Audit Committee for Nonprofit Organizations (June 2012; BDO FINANCIAL REPORTING LETTERS & FLASH REPORTS NEW! BDO Knows: The Jumpstart Our Business Startups Act (April 2012) UPDATED! BDO Flash Reports - Flash reports are intended to highlight certain financial reporting developments in a timely and brief flash format. (Various) BDO Knows: Multiemployer Pension Plans (January 2012) Report on 2011 AICPA SEC and PCAOB Conference (January 2012) SEC Year in Review Significant 2011 Developments (January 2012) Accounting Year in Review 2011 (January 2012) BDO Knows: Goodwill Impairment (September 2011) BDO Knows: Comprehensive Income Newsletter (August 2011) BDO Knows: Contingent Consideration (June 2011) BDO IFRS RESOURCE CENTER Refer to the above website to keep current on the latest developments with regard to IFRS and the practical considerations involved in the convergence toward and implementation of global standards. NEW! In addition to several Ac sense IFRS self-study courses currently available at BDO has expanded its course offerings by building a library of brief IFRS modules on various topics of significant interest, ranging from adoption and implementation to specific accounting topics including financial instruments and income taxes. Additional courses will be added to the library during Access these courses at: See also: BDO Knows: IFRS SEC s Progress Report on Work Plan for Global Accounting Standards available at: BDO Knows: IFRS SEC Seeks Comments on Incorporation of IFRS available at: