FASB Accounting Standards Update 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. Specifically, this guidance amends the criteria in Subtopic 605-25, Revenue Recognition - Multiple-Element Arrangements, for separating consideration in multiple-deliverable arrangements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) estimates. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. In addition, this guidance significantly expands required disclosures related to a vendor's multiple-deliverable revenue arrangements.
FASB Accounting Standards Update 2009-14 changes the accounting model for revenue arrangements that include both tangible products and software elements. Under this guidance, tangible products containing software components and nonsoftware components that function together to deliver the tangible product's essential functionality are excluded from the software revenue guidance in Subtopic 985-605, Software - Revenue Recognition. In addition, hardware components of a tangible product containing software components are always excluded from the software revenue guidance.
FASB Accounting Standards Updates 2009-13 and 2009-14 are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted under both.
These FASB Accounting Standards Updates represent consensuses reached in Issue 08-1 (2009-13) and Issue 09-3 (2009-14) by the EITF at its September 9-10, 2009 meeting.
Friday, October 16, 2009
Sox 404 - Public Companies
SEC Issues Formal Rule Deferring Auditor Attestation of ICFR by Small Public Companies. As reported in our Daily News for October 5, 2009, the Securities and Exchange Commission (SEC) announced that the smallest publicly reporting companies will be required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 requirements related to audits of their assessments of internal control over financial reporting (ICFR). On October 13, 2009, the SEC issued a final rule, Internal Control over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers. This final rule is consistent with the SEC’s earlier announcement, but clarifies which smaller public companies are covered.
The final rule requires all non-accelerated filers to provide their auditor’s attestation on management’s assessment of ICFR in their annual reports filed for fiscal years ending on or after June 15, 2010. Prior to that time, a non-accelerated filer continues to be required to state in its management report on ICFR that the company’s annual report does not include an auditor attestation report. The scope of the final rule includes all “non-accelerated filers,” which is a term used to refer to a Securities Exchange Act of 1934 reporting company that does not meet the definitions of either an “accelerated filer” or “large accelerated filer” provided in SEC Rule 12b-2.
The final rule requires all non-accelerated filers to provide their auditor’s attestation on management’s assessment of ICFR in their annual reports filed for fiscal years ending on or after June 15, 2010. Prior to that time, a non-accelerated filer continues to be required to state in its management report on ICFR that the company’s annual report does not include an auditor attestation report. The scope of the final rule includes all “non-accelerated filers,” which is a term used to refer to a Securities Exchange Act of 1934 reporting company that does not meet the definitions of either an “accelerated filer” or “large accelerated filer” provided in SEC Rule 12b-2.
Reminder about FASB Statement No. 165, Subsequent Events
In May 2009, the Financial Accounting Standards Board issued Statement No. 165, Subsequent Events. CPAs are reminded that Statement No. 165 is effective for interim or annual financial periods ending after June 15, 2009. In many respects, Statement No. 165 does not result in significant changes in subsequent events that an entity reports (either through recognition or disclosure). It does, however, require the entity to disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. See the Statement.
Reverse Mergers - Tax Free Exchanges?
IRS issues rare private letter ruling on "reverse acquisition" transaction
The IRS earlier this year issued a private letter ruling (PLR 200905001) concluding that a series of transactions including a so-called "reverse acquisition" qualified as a tax-free reorganization and did not terminate the existence of an affiliated group of corporations that may file consolidated returns.
Reverse acquisitions commonly occur in two situations: (1) when two groups are combined (that is, when the parent of one group acquires all the stock of the parent of another) and (2) when a single group undergoes an internal restructuring transaction in which the parent is replaced by another member. It can be very important in those situations to determine whether a group remains in existence, to determine whether there are stub years (making tax attributes one year older), and to compute the common parent's E&P. Through the years the IRS has issued public and private rulings that have created substantial uncertainty in applying the reverse acquisition regulations.
In part because of that checkered history, the IRS for the past 10 or 12 years has been reluctant to issue private rulings on reverse acquisitions. Because this is an area in which the form of a transaction is extremely important to its tax treatment, the issuance of this PLR is a positive development for taxpayers engaging in similar transactions that would welcome the certainty provided by a private letter ruling.
The IRS earlier this year issued a private letter ruling (PLR 200905001) concluding that a series of transactions including a so-called "reverse acquisition" qualified as a tax-free reorganization and did not terminate the existence of an affiliated group of corporations that may file consolidated returns.
Reverse acquisitions commonly occur in two situations: (1) when two groups are combined (that is, when the parent of one group acquires all the stock of the parent of another) and (2) when a single group undergoes an internal restructuring transaction in which the parent is replaced by another member. It can be very important in those situations to determine whether a group remains in existence, to determine whether there are stub years (making tax attributes one year older), and to compute the common parent's E&P. Through the years the IRS has issued public and private rulings that have created substantial uncertainty in applying the reverse acquisition regulations.
In part because of that checkered history, the IRS for the past 10 or 12 years has been reluctant to issue private rulings on reverse acquisitions. Because this is an area in which the form of a transaction is extremely important to its tax treatment, the issuance of this PLR is a positive development for taxpayers engaging in similar transactions that would welcome the certainty provided by a private letter ruling.
Broker Dealer - SIPC Fees
Attention Broker-Dealers and Their Auditors: SIPC Assessment Changes
Effective April 1, 2009, the Securities Investor Protection Corporation reinstituted an assessment rate of one-quarter of 1 percent of a member's SIPC net operating revenue, which is generally defined on SIPC assessment forms as "gross revenues from the securities business." Click here to access the SIPC's assessment forms. Securities and Exchange Commission Rule 17a-5(e)(4) requires a registered broker-dealer to file, along with its annual audited financials, a supplemental report, covered by an independent accountant's report, which includes procedures related to the broker-dealers' SIPC annual general assessment reconciliation or exclusion from membership forms. An example of an independent accountant's report on applying agreed-upon procedures related to the entity's SIPC assessment reconciliation will be included in the 2009 AICPA Audit and Accounting Guide Brokers and Dealers in Securities and posted on the AICPA Web site. The AICPA Stockbrokerage and Investment Banking Expert Panel is in the process of developing an independent accountant's illustrative report that covers a broker-dealers' exclusion from SIPC membership.
Effective April 1, 2009, the Securities Investor Protection Corporation reinstituted an assessment rate of one-quarter of 1 percent of a member's SIPC net operating revenue, which is generally defined on SIPC assessment forms as "gross revenues from the securities business." Click here to access the SIPC's assessment forms. Securities and Exchange Commission Rule 17a-5(e)(4) requires a registered broker-dealer to file, along with its annual audited financials, a supplemental report, covered by an independent accountant's report, which includes procedures related to the broker-dealers' SIPC annual general assessment reconciliation or exclusion from membership forms. An example of an independent accountant's report on applying agreed-upon procedures related to the entity's SIPC assessment reconciliation will be included in the 2009 AICPA Audit and Accounting Guide Brokers and Dealers in Securities and posted on the AICPA Web site. The AICPA Stockbrokerage and Investment Banking Expert Panel is in the process of developing an independent accountant's illustrative report that covers a broker-dealers' exclusion from SIPC membership.
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