May 2007 Audit and Enterprise Risk Services ^ÅÅçìåíáåÖ ...

Audit and Enterprise Risk Services

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Edited by Stuart Moss and David Elizandro, Deloitte & Touche LLP

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`çåíÉåíëRoundup Flash

Roundup Articles

FASB Developments

• FASB Clarifies Settlement of a Tax Position in an Interpretation 48 FSP

• Interpretation 46(R) FSP Issued for Investment Companies

• Hedge Accounting Project Added to Agenda

AICPA Developments

• Employee Benefit Plan Technical Practice Aids Issued

• Framework for AICPA Code of Professional Conduct Exposure Draft

• Proposed Revisions to Peer Review Standards

• Discussion Paper on Improving Clarity of ASB Standards

SEC Developments

• Management Guidance Provided on Sarbanes-Oxley Section 404

• Rule Changes Proposed on Capital Raising and Disclosure Requirements for Smaller Companies

• Extension of Comment Period for Proposed Broker-Dealer Rules

• SEC Provides Research Guides for Securities Laws and Public Companies

• Auditor Independence Brochure Made Available

• SEC Staff Warns Securities Industry Firms of Imposters

PCAOB Developments

• Auditing Standard Approved

• PCAOB Holds International Auditor Regulatory Institute

GASB Developments

• Statement on Pension Disclosures Issued

FASAB Developments

• Exposure Draft on Accounting for Federal Oil and Gas Resources

International Developments

• IASB Preliminary Views on Accounting for Insurance Contracts

• U.S. and European Union Agree to Work to Eliminate Financial Reporting Reconciliation

Other Developments

• OMB Issues 2007 A-133 Compliance Supplement

• Treasury Department Announces Initiatives to Improve Financial Reporting and Auditing Profession

Appendix A: Recent Meetings

Appendix B: Significant Adoption Dates andDeadlines

Appendix C: Abbreviations

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FASB Clarifies Settlement of a Tax Position in an Interpretation 48 FSP

AFFECTS: All entities.

SUMMARY: FSP FIN 48-11 clarifies when a tax position is considered settled under Interpretation 48.2According to the FSP, the tax position can be considered “effectively settled” uponcompletion of the examination by the taxing authority without being legally extinguished.For effectively settled tax positions, an entity can recognize the full amount of the taxbenefit.

NEXT STEPS: The guidance in FSP FIN 48-1 is effective on the initial adoption of Interpretation 48.

Interpretation 46(R) FSP Issued for Investment Companies

AFFECTS: All investment companies.

SUMMARY: The FASB has issued FSP FIN 46(R)-7,3 which addresses the applicability of Interpretation46(R)4 to entities accounting for investments in accordance with the guidance in AICPAAudit and Accounting Guide, Investment Companies (“the Guide”). The AICPA has releaseda Discussion Draft of SOP 07-15 (with final issuance planned for June 2007) to clarify thescope of the Guide. FSP FIN 46(R)-7 amends Interpretation 46(R) to provide an exception tothe Interpretation’s scope for companies within the Guide’s scope pursuant to the revisionsto the Guide expected from the issuance of SOP 07-1.

NEXT STEPS: The FSP was effective upon issuance.

Hedge Accounting Project Added to Agenda

AFFECTS: Entities with derivative instruments accounted for under Statement 133.6

SUMMARY: The FASB has added to its agenda a project that focuses on hedge accounting underStatement 133 and the development of a fair value approach.

NEXT STEPS: The Board will next seek input from the Investors Technical Advisors Committee.

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Employee Benefit Plan Technical Practice Aids Issued

AFFECTS: All employee benefit plans and their auditors.

SUMMARY: The AICPA has issued three new TPAs on employee benefit plans. Topics covered includetypes of investments subject to the financial statement presentation and disclosure

1 FASB Staff Position No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48.”2 FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes.3 FASB Staff Position No. FIN 46(R)-7, “Application of FASB Interpretation No. 46(R) to Investment Companies.”4 FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities.5 AICPA’s Statement of Position 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by

Parent Companies and Equity Method Investors for Investments in Investment Companies.6 FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.

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Roundup Flash briefly summarizes the decisions and news covered this month, highlighting the entities affected and nextsteps. To jump to the corresponding article in this issue, click a title below.

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requirements of SOP 94-47 and financial statement presentation and disclosure requirementsof a plan that invests in a common collective trust fund or a master trust that holds fullybenefit-responsive investment contracts.

NEXT STEPS: The TPAs were effective upon issuance.

Framework for AICPA Code of Professional Conduct Exposure Draft

AFFECTS: All AICPA members.

SUMMARY: The AICPA has issued an Exposure Draft8 on Rule 102, Integrity and Objectivity, of the AICPACode of Professional Conduct. The proposed Framework provides guidance to all AICPAmembers whenever they face difficulty making decisions on ethical matters not specificallyaddressed by the AICPA Code of Professional Conduct.

NEXT STEPS: Comments are due by August 15, 2007.

Proposed Revisions to Peer Review Standards

AFFECTS: All AICPA members.

SUMMARY: The AICPA’s Peer Review Board has issued an Exposure Draft9 proposing certain revisions tothe AICPA Professional Standards aimed at improving the effectiveness and efficiency of thecurrent peer review process. The Exposure Draft proposes to create a single set of principles-based standards, with detailed interpretive guidance, for all AICPA members subject to peerreview.

NEXT STEPS: Comments are due by June 30, 2007.

Discussion Paper on Improving Clarity of ASB Standards

AFFECTS: All auditors of nonpublic entities.

SUMMARY: The ASB has undertaken a project to aid in accomplishing its mission of providing auditingstandards that are understandable, clear, and consistently applied. As part of this project, theASB has issued a Discussion Paper10 seeking comments on various aspects of improving itsSASs.

NEXT STEPS: Comments are due by June 15, 2007.

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Management Guidance Provided on Sarbanes-Oxley Section 404

AFFECTS: All public entities.

SUMMARY: The SEC has approved interpretive guidance to assist public entities in strengthening theirinternal control over financial reporting while also reducing the unnecessary costs ofcompliance under Section 404 of the Sarbanes-Oxley Act of 2002. The interpretive guidancefocuses management on controls that would most effectively protect against the risk of amaterial misstatement in the financial statements.

NEXT STEPS: The SEC must still post the interpretive guidance to its Web site. The interpretive guidanceand adopted rules will become effective 30 days from the date they are published in theFederal Register.

7 AICPA Statement of Position 94-4, Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined-ContributionPension Plans.

8 AICPA Proposed Interpretation 102-7, Other Considerations: Meeting the Objectives of the Fundamental Principles, and Proposed Frameworkfor Meeting the Objectives of the Fundamental Principles.

9 AICPA Exposure Draft, Proposed Revisions to the AICPA Standards for Performing and Reporting on Peer Reviews.10 ASB Discussion Paper, Improving the Clarity of ASB Standards.

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Rule Changes Proposed on Capital Raising and Disclosure Requirements for Smaller Companies

AFFECTS: Smaller public entities.

SUMMARY: On the basis of recommendations from the SEC’s Advisory Committee on Smaller PublicCompanies, the SEC has proposed six rule changes related to capital raising and disclosurerequirements of smaller public entities.

NEXT STEPS: The SEC must still post the proposed rules to its Web site. Comments will then be due within60 days of their publication in the Federal Register.

Extension of Comment Period for Proposed Broker-Dealer Rules

AFFECTS: All broker-dealer entities.

SUMMARY: The SEC has extended the comment period for proposed rule amendments related to thebroker-dealer industry under the Securities Exchange Act of 1934 (“Exchange Act”).

NEXT STEPS: Comments are now due by June 18, 2007.

SEC Provides Research Guides for Securities Laws and Public Companies

AFFECTS: Investors and other users of financial information.

SUMMARY: The SEC has issued two research guides for use by investors and the public. The first guideprovides guidance on researching securities law and the recommended order in whichvarious guidance should be researched. The second guide provides tips for using the SEC’sElectronic Data Gathering, Analysis, and Retrieval (EDGAR) database to research publicentities.

Auditor Independence Brochure Made Available

AFFECTS: Auditors of public entities or their affiliates.

SUMMARY: The SEC has issued a brochure to highlight certain SEC rules and other authoritativepronouncements regarding auditor independence and the audit committee’s oversightresponsibilities. The brochure documents the SEC’s general standard of auditorindependence as well as specific prohibited nonaudit services, audit committee preapprovalof permitted services, prohibited relationships, communications with audit committees, anda change of independent auditors.

SEC Staff Warns Securities Industry Firms of Imposters

AFFECTS: All security industry entities.

SUMMARY: The SEC has issued an alert to entities in the securities industry to warn of attempts byindividuals impersonating SEC staff. The SEC has directed firms to take precautionary stepsto ensure that persons requesting access to information are authorized SEC staff beforesharing any confidential information.

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Auditing Standard Approved

AFFECTS: All public entities.

SUMMARY: The PCAOB has adopted Auditing Standard 511 (AS 5) to replace the existing auditingstandard on internal control, Auditing Standard 2.12 AS 5 is a principles-based auditingstandard designed to increase the likelihood of identifying material weaknesses in internal

11 PCAOB Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated With An Audit of FinancialStatements.

12 PCAOB Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction With An Audit of FinancialStatements.

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control before the weaknesses result in a material misstatement of the financial statements.The Board also adopted Rule 352513 relating to an auditor’s responsibilities when seekingaudit committee preapproval of permitted internal control related nonaudit services.Additionally, the PCAOB approved two staff recommendations on the Board’s inspectionrules.

NEXT STEPS: The final standard must now be approved by the SEC before becoming effective.

PCAOB Holds International Auditor Regulatory Institute

AFFECTS: All auditor regulators and government agencies.

SUMMARY: The PCAOB conducted its first International Auditor Regulatory Institute, with regulators andgovernmental agents from over 40 countries in attendance. Participants learned aboutPCAOB programs and operations, including inspection programs, standard-setting,enforcement process, and international cooperation.

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Statement on Pension Disclosures Issued

AFFECTS: All state and local governmental entities and their auditors.

SUMMARY: The GASB has issued Statement 5014 to align pension disclosure requirements with thedisclosure requirements for retiree health insurance and other postemployment benefits.

NEXT STEPS: The provisions of Statement 50 generally are effective for periods beginning after June 15,2007, with early adoption encouraged.

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Exposure Draft on Accounting for Federal Oil and Gas Resources

AFFECTS: Preparers and auditors of federal financial information.

SUMMARY: The FASAB has issued an Exposure Draft15 on accounting for federal oil and gas resources.The Exposure Draft provides guidance on recognition of the estimated value of royalties fromfederal oil and gas resources. The document also prescribes various disclosures for federalfinancial reports such as revenues and depletion, production expense, trend information,estimated quantities of oil and gas reserves, and estimated value of royalty relief onproduction.

NEXT STEPS: Comments are due by September 21, 2007.

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IASB Preliminary Views on Accounting for Insurance Contracts

AFFECTS: Insurers that issue insurance contracts and insurers that hold reinsurance contracts.

SUMMARY: The IASB has issued a Discussion Paper entitled Preliminary Views on Insurance Contracts.The document discusses several topics, including measurement, recognition, and reportingchanges in insurance liabilities. The paper also proposes a three-building-block method formeasuring its insurance liabilities.

NEXT STEPS: Comments are due by November 16, 2007.

13 PCAOB Final Rule 3525, Audit Committee Pre-Approval of Non-Audit Services Related to Internal Control Over Financial Reporting.14 GASB Statement No. 50, Pension Disclosures.15 FASAB Proposed Statement of Federal Financial Accounting Standards, Accounting for Federal Oil and Gas Resources.

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U.S. and European Union Agree to Work to Eliminate Financial Reporting Reconciliation

AFFECTS: All foreign private issuers.

SUMMARY: The U.S. president and two European leaders agreed to work to promote the transatlanticeconomic integration of U.S. GAAP and IFRS. Among the issues to be addressed is the needto eliminate the reconciliation requirement between U.S. GAAP and IFRSs by no later than2009.

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OMB Issues 2007 A-133 Compliance Supplement

AFFECTS: Auditors of state and local governments, and nonprofit organizations.

SUMMARY: The U.S. Government’s Office of Management and Budget has issued an updated Circular A-133 Compliance Supplement for 2007.

Treasury Department Announces Initiatives to Improve Financial Reporting and Auditing Profession

AFFECTS: All auditors.

SUMMARY: The Treasury Department of the United States has announced four initiatives to improvefinancial reporting and the auditing profession. Among these initiatives is the creation of anew federal advisory committee. The committee will help develop recommendations onways to strengthen the auditing profession, including the industry’s financial soundness, andattracting and retaining qualified personnel.

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FASB Clarifies Settlement of a Tax Position in an Interpretation 48 FSPThe FASB has issued FSP FIN 48-1,16 which clarifies when a tax position is considered settled under Interpretation 48.17

The FSP explains that a tax position can be effectively settled on the completion of an examination by a taxing authoritywithout being legally extinguished. For tax positions considered effectively settled, an enterprise would recognize the fullamount of tax benefit, even if (1) the tax position is not considered more likely than not to be sustained solely on the basisof its technical merits and (2) the statute of limitations remains open. Enterprises must document their analyses andconclusions in applying the provisions of the FSP.

The guidance in the FSP should be applied on the initial adoption of Interpretation 48. For calendar-year-end enterprises,the initial adoption date of Interpretation 48 is January 1, 2007. However, an enterprise that did not apply Interpretation 48in a manner consistent with the FSP is required to retrospectively apply the provisions in this FSP to the date of the initialadoption of Interpretation 48.

The full text of the FSP is available on the FASB's Web site. Also see Deloitte & Touche LLP's Heads Up on FSP FIN 48-1.

Interpretation 46(R) FSP Issued for Investment CompaniesThe FASB has issued an FSP18 related to Interpretation 46(R)19 to clarify its applicability to accounting for investments by

entities applying the accounting guidance in the AICPA Audit and Accounting Guide, Investment Companies (“the Guide”).

Interpretation 46(R) provides an indefinite deferral for investment companies not subject to SEC Regulation S-X, Rule6-03(c)(1), but that account for investments under the Guide. Interpretation 46(R) also states that the FASB would considermodifying the Interpretation to continue providing the exception following the AICPA’s issuance of an SOP to clarify thescope of the Guide. The AICPA has issued a Discussion Draft of SOP 07-1,20 with a final issuance expected in June 2007.The SOP provides guidance for determining whether an entity is within the scope of the Guide. In response, the FASB hasissued this FSP to amend Interpretation 46(R) to continue to provide for the exception from the scope of Interpretation 46(R)for entities meeting the definition of an investment company after the adoption of SOP 07-1. Entities no longer eligible forthe specialized accounting in the Guide as a result of the adoption of SOP 07-1 immediately become subject to theprovisions of Interpretation 46(R).

The full text of the FSP is available on the FASB’s Web site.

Hedge Accounting Project Added to AgendaThe FASB has added to its agenda a project that aims at simplifying hedge accounting under Statement 133.21 After

discussing several alternatives, the Board has asked the FASB staff to work on a “fair value” approach. While this approachwould eliminate the shortcut and critical-terms-match methods, it would also eliminate a requirement for hedgers tocontinuously assess effectiveness to qualify for hedge accounting.

For fair value hedges, the derivative and the hedged item (including all risk components) would be measured at fair value,with changes in fair value recognized in earnings. For cash flow hedges, the derivative would be measured at fair value, withthe effective portion of the gain or loss reported in other comprehensive income, and the ineffective portion reported inearnings. The FASB will seek additional input from its Investors Technical Advisors Committee regarding the fair value andother approaches proposed by the staff.

16 FASB Staff Position No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48.”17 FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes.18 FASB Staff Position No. FIN 46(R)-7, “Application of FASB Interpretation No. 46(R) to Investment Companies.”19 FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities.20 AICPA Statement of Position 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by

Parent Companies and Equity Method Investors for Investments in Investment Companies.21 FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.

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Employee Benefit Plan Technical Practice Aids IssuedThe AICPA has issued three new TPAs on employee benefit plans.

TPA 6931.0822 clarifies the types of investments to which the financial statement presentation and disclosurerequirements of SOP 94-4,23 as amended by FSP AAG INV-1 and SOP 94-4-1,24 apply. The TPA details the four definitions ofinvestment contracts under FSP AAG INV-1 and SOP 94-4-1, which are:

TPA 6931.0925 clarifies that the financial statement presentation requirements of paragraph 15 of SOP 94-4, as amendedby FSP AAG INV-1 and SOP 94-4-1, are applicable to investments in a common collective trust (CCT) fund or a master trustthat holds fully benefit-responsive investment contracts. The financial statement presentation requirements include reportingboth the fair value of these investments, as well as the difference between fair value and the contract value, on the face ofthe statement of net assets available for benefits.

TPA 6931.1026 discusses the disclosure requirements of plans that directly invest in CCT funds or in master trusts that holdfully benefit-responsive investment contracts. The disclosures of paragraph 15 of the SOP are not required to be included inthe financial statements of plans that invest in CCTs because those disclosures would be included in the financial statementsof the CCT. However, for plans that invest in a master trust holding fully benefit-responsive investment contracts, thedisclosures required would be included in the notes to the financial statements.

The text of the TPAs is available on the AICPA’s Web site.

Framework for AICPA Code of Professional Conduct Exposure DraftThe Professional Ethics Executive Committee (PEEC) of the AICPA has issued an Exposure Draft27 on Rule 102, Integrity

and Objectivity, of the AICPA Code of Professional Conduct.

In early 2006, the PEEC commenced a project to develop a framework to assist members in meeting the fundamentalprinciples of the AICPA Code of Professional Conduct, including (1) responsibilities, (2) the public interest, (3) integrity, (4)objectivity and independence, (5) due care, and (6) scope and nature of services.

The proposed Framework provides guidance to all members, not just those performing attest services, whenever they facedifficulty making decisions on ethical matters not specifically addressed by the AICPA Code of Professional Conduct. Underthe Framework, members are required to apply adequate safeguards to minimize or eliminate any threat that is consideredto be significant. If the threat can not be mitigated, services provided by the member should be declined or discontinued.

To allow members time to develop and implement appropriate policies and procedures under the Framework, theExposure Draft’s proposed effective date is one year from the last day of the month in which the Framework is published inthe Journal of Accountancy.

Comments on the Exposure Draft are due by August 15, 2007. The full text of the Exposure Draft is available on theAICPA’s Web site.

22 AICPA Technical Practice Aid 6931.08, Types of Investments Subject to SOP 94-4, as Amended by FSP AAG INV-1 and SOP 94-4-1.23 AICPA Statement of Position 94-4, Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined-Contribution

Pension Plans.24 FASB FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies

Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans.25 AICPA Technical Practice Aid 6931.09, Financial Statement Presentation When a Plan Invests in a Common Collective Trust Fund or in a Master

Trust That Holds Fully Benefit-Responsive Investment Contracts.26 AICPA Technical Practice Aid 6931.10, Financial Statement Disclosure Requirements When a Plan Invests in a Common Collective Trust Fund or

in a Master Trust That Holds Fully Benefit-Responsive Investment Contracts.27 AICPA Proposed Interpretation 102-7, Other Considerations: Meeting the Objectives of the Fundamental Principles, and Proposed Framework

for Meeting the Objectives of the Fundamental Principles.

• A traditional or separate account guaranteed investment contract (GIC).

• A bank investment contract.

• A synthetic GIC composed of a wrapper contract and the underlying wrapped portfolio of individual investments.

• A contract with similar characteristics.

Proposed Revisions to Peer Review StandardsIn 2004, a Joint Peer Review Task Force was established between the Center for Public Company Audit Firm’s (CPCAF’s)

Peer Review Committee and its Peer Review Board. The purpose of the task force was to evaluate how the AICPA’s PeerReview Program and the CPCAF’s Peer Review Program could better cooperate or even integrate. The important decisionsreached by the task force included two recommendations:

As a result of these recommendations, the Peer Review Board of the AICPA has issued an Exposure Draft28 proposingcertain revisions to the AICPA Professional Standards aimed at improving the effectiveness and efficiency of the current peerreview process.

The Exposure Draft proposes to create a single set of principles-based standards, which would include detailed interpretiveguidance for all AICPA members subject to peer review. The proposal also creates a new peer review reporting model,expands the use of existing peer review practice aids, and clarifies that the AICPA Professional Standards can be used byapproved entities to administer peer reviews of non-AICPA firms.

Comments on the Exposure Draft are due by June 30, 2007. The full text of the Exposure Draft and the press releaseannouncing it are available on the AICPA’s Web site.

Discussion Paper on Improving Clarity of ASB StandardsAs a result of the recent focus on globalization of accounting and auditing standards, the ASB has undertaken a project

that would more closely align international and U.S. generally accepted auditing standards, while not creating unnecessarydifferences with PCAOB auditing standards.

To achieve harmony with international auditing standards, the ASB began to align its agenda with the InternationalAuditing and Assurance Standards Board (IAASB), with new standards developed concurrently with the IAASB’s InternationalStandards on Auditing (ISAs). The ASB then uses ISAs as the basis for developing its SASs, with modifications made to betterserve U.S. users of audited financial statements, or when U.S. legal or regulatory requirements require modification.

The IAASB has undertaken a project to address the clarity, usage terms, length, and complexity of its ISAs. The ASBbelieves that undertaking a similar project would help to accomplish its mission of providing auditing standards that areunderstandable, clear, and consistently applied.

The ASB has issued a Discussion Paper29 seeking comments on various aspects of improving its SASs. The issues raisedand considered by the ASB in the Discussion Paper include:

Comments on the Discussion Paper are due by June 15, 2007. The full text of the Discussion Paper is available on theAICPA’s Web site.

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Management Guidance Provided on Sarbanes-Oxley Section 404The SEC has approved interpretive guidance to assist public companies in strengthening their internal control over

financial reporting while also reducing unnecessary costs of compliance under Section 404 of the Sarbanes-Oxley Act of

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28 AICPA Exposure Draft, Proposed Revisions to the AICPA Standards for Performing and Reporting on Peer Reviews.29 ASB Discussion Paper, Improving the Clarity of ASB Standards.

• Merge the two peer review programs.

• Reengineer the peer review program reporting process to be more understandable and usable.

• Establishing objectives for standards that provide a conceptual framework for the application of professionaljudgment.

• Making improvements to the standards so they are more readable and understandable.

• Including special considerations for public sector and small entity audits.

• Establishing a glossary of terms to be included in the Codification of Statements on Auditing Standards.

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2002. The interpretive guidance focuses management on controls that would most effectively protect against the risk of amaterial misstatement in the financial statements.

The SEC also approved rule amendments to Securities Exchange Act of 1934 (“Exchange Act”) Rules 13a-15 and 15d-15so that a company performing an evaluation of internal control under the interpretive guidance issued by the SEC satisfiesthe annual evaluation requirements of the aforementioned rules.

The rule amendments also defined the term material weakness as "a deficiency, or combination of deficiencies, ininternal control over financial reporting, such that there is a reasonable possibility that a material misstatement of thecompany's annual or interim financial statements will not be prevented or detected on a timely basis."

The requirements on an auditor’s attestation report have also been revised to clarify that the auditor is not evaluating theprocess management has undertaken in evaluating its internal controls, but that rather the auditor is only providing anopinion on internal control over financial reporting.

The effective date of the interpretive guidance and adopted rules by the SEC will be 30 days from the date they arepublished in the Federal Register. The full text of the interpretive guidance and rules are not yet posted to the SEC Web site.A press release announcing the adoption of new guidance is available on the SEC’s Web site.

Rule Changes Proposed on Capital Raising and Disclosure Requirements for SmallerCompanies

On the basis of recommendations from the SEC’s Advisory Committee on Smaller Public Companies, the SEC hasproposed six rule changes related to capital raising and disclosure requirements of smaller public companies.

The proposed rule amendments include the following:

1. Regulatory Relief and Simplification for Smaller Reporting Companies — This proposal would (1) expand theSEC’s smaller company scaled disclosure and reporting requirements to all companies with $75 million or less of publicfloat, (2) combine small business issuers and nonaccelerated filers into a single category entitled “smaller reportingcompanies,” (3) integrate smaller company disclosure requirements in Regulation S-B into the disclosure requirementsof Regulation S-K, and (4) rescind the “SB” forms used for smaller companies.

2. Revisions to the Eligibility Requirements for Primary Securities Offerings on Forms S-3 and F-3 — Thisproposal would allow companies that meet certain requirements and have less than $75 million of public float toregister primary offerings of their securities under Forms S-3 and F-3.

3. Exemption of Compensatory Employee Stock Options From Registration Under Section 12(g) of theExchange Act — This proposal provides exemptions to Exchange Act Section 12(g) registration for compensatoryemployee stock options that are issued by (1) a private nonreporting issuer under an employee stock option plan or (2)an entity whose securities are registered under Section 12 of the Exchange Act.

4. New Regulation D Limited Offering Exemption — This proposal (1) establishes an exemption for a newly definedcategory of qualified purchasers that could engage in limited advertising, (2) includes an investments-owned standardunder which investors can qualify as accredited, (3) provides inflation adjustments to the “accredited investor”definition, (4) reduces the Regulation D integration safe harbor to 90 days, and (5) applies uniform disqualificationprovisions for Regulation D offerings.

5. Electronic Filing of Form D — This proposal would simplify Form D by revising and updating the informationrequirements and would require electronic filing using a new online system.

6. Revisions to Securities Act Rules 144 and 145 — This proposal includes amending Rule 144 to (1) reduce theholding period for restricted securities to six months, (2) allow for resale of restricted securities of nonaffiliates ofreporting companies after a six month period, (3) increase the threshold requiring Form 144 filing, and (4) simplifycertain portions of Rule 144 and codify Rule 144 interpretations. The proposal also amends Rule 145 to (1) eliminatethe presumptive underwriter provision in certain situations and (2) revise the Rule’s resale provisions.

Comments on these proposals should be received by the SEC within 60 days of the proposals’ publication in the FederalRegister. The full text of the detailed releases on these items is not yet posted to the SEC’s Web site; however, a pressrelease announcing the proposals is currently available.

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Extension of Comment Period for Proposed Broker-Dealer RulesThe SEC has extended the comment period for proposed rule amendments related to the broker-dealer industry under the

Exchange Act. As originally discussed in Accounting Roundup: First Quarter in Review — 2007, the proposed amendmentsaddress the broker-dealer net capital rule, customer protection rule, books and records rule, and notification rule. Theoriginal comment deadline ended May 18, 2007, but has been extended to June 18, 2007.

A press release announcing the comment period extension and the full text of the proposed rule are available on the SEC’sWeb site.

SEC Provides Research Guides for Securities Laws and Public CompaniesThe SEC has issued two research guides for use by investors and the public.

The guide on securities law provides information on researching securities law. Because federal statutes and SEC rules andregulations have the force of law, while other SEC-issued documents vary according to the degree to which they can beenforced under the law, the guide suggests researching securities laws in the following order: (1) Statutes, (2) SEC Rules andRegulations, (3) SEC Concept Releases, (4) SEC Interpretive Releases, and (5) SEC Staff Interpretations. The guide alsoprovides information on legislative history, effective and compliance dates, release number prefixes, and SR and S7 files.

The second guide provides tips and frequently asked questions for using the SEC's Electronic Data Gathering, Analysis,and Retrieval (EDGAR) database to research public companies. The EDGAR database allows public access to corporateinformation such as registration statements, prospectuses, periodic financial statements (Forms 10-K and 10-Q), recentevents (Form 8-K), as well as comment and response letters related to disclosure filings reviewed by the SEC's Division ofCorporation Finance or its Division of Investment Management. The guide includes (1) an overview of the EDGAR databaseand search capabilities, (2) tips for improving research results, and (3) FAQs on using the EDGAR database related to thefollowing: (a) understanding search results, (b) limitations on searches, (c) information about publicly-traded companies, (d)executive compensation, (e) insider transactions, (f) business combinations, (g) initial public offerings, (h) bankruptcy, (i)information about a company's auditors, and (j) researching mutual funds and variable insurance products.

The securities law and the EDGAR database research guides are available on the SEC's Web site.

Auditor Independence Brochure Made AvailableThe SEC has issued a brochure to highlight certain SEC rules and other authoritative pronouncements regarding auditor

independence and the audit committee’s oversight responsibilities.

The brochure states the SEC’s general standard of auditor independence, noting that “an auditor’s independence isimpaired if the auditor is not, or a reasonable investor with knowledge of all the facts and circumstances would concludethat the auditor is not, capable of exercising objective and impartial judgment on all issues encompassed within the auditengagement.” An audit committee should consider the following matters when determining whether a relationship orprofessional services provided by an auditor would impair independence:

The brochure states that the SEC’s independence rules prohibit an auditor from performing the following nonauditservices to an audit client or affiliates: (1) bookkeeping; (2) financial information systems design and implementation; (3)appraisal or valuation services, fairness opinions, or contribution-in kind reports; (4) actuarial services; (5) internal auditoutsourcing services; (6) management functions or human resources; (7) broker-dealer, investment adviser, or investmentbanking services; and (8) legal services and expert services unrelated to the audit. In addition, the audit committee shouldconsider whether other nonattest services provided by the audit firm could impair independence, in fact or appearance.

• Creating mutual or conflicting interests.

• Auditing one’s own work.

• Serving as management or an employee.

• Advocating client positions.

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The brochure also discusses the requirement of audit committee preapproval for all permitted services, including taxservices, comfort letters, and statutory audits. Prohibited relationships between a public entity and its audit firm are alsodiscussed in the brochure. Relationships not permitted under SEC independence rules include employment relationships,contingent fee arrangements, direct or material indirect business relationships, and certain other financial relationships.

Communications between an audit committee and the independent auditor are also covered within the brochure.Independence Standard Board Statement 130 requires that the auditor disclose in writing to the audit committee, no lessoften than annually, all relationships that may bear on the audit firm’s independence. The brochure also discusses theindependence implications of a change of independent auditors and subsequent reissuances or restatements of auditreports.

The independence brochure is available on the SEC’s Web site.

SEC Staff Warns Securities Industry Firms of Imposters The SEC has issued an alert to all securities industry entities regarding individuals impersonating SEC staff. The alert was

issued after multiple occasions on which securities industry entities were telephoned by individuals claiming to be SEC staffmembers and demanded access to confidential information. Known attempts have taken the form of “emergencyexaminations” that involved the gathering of information on behalf of well known SEC officials.

The SEC alert advises entities to take precautionary steps before sharing any information with individuals identifyingthemselves as SEC staff, including (1) asking for the caller’s name, office, and telephone number; (2) telling the caller thatyou will return the call; and (3) calling the SEC’s main telephone number and requesting to speak to the individual.

If it is suspected that the caller is not an SEC staff member, security industry entities are urged not to share anyinformation with the caller until the caller’s identity is verified. If the caller declines to provide proof of identity or ifverification of the caller’s identity is unsuccessful, firms should report the incident to the Examination Hotline at (202) 551-EXAM or to the SEC’s Inspector General.

The alert is available on the SEC’s Web site.

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Auditing Standard ApprovedThe PCAOB has adopted Auditing Standard 531 (AS 5) to replace its previous internal control auditing standard, Auditing

Standard 232 (AS 2). AS 5 is a principles-based auditing standard designed to increase the likelihood of identifying materialweaknesses in internal control before the weaknesses result in a material misstatement of the financial statements. Thestandard also focuses auditors on necessary internal control audit procedures based on a company’s facts and circumstances.The PCAOB and the SEC worked together in coordinating the new auditing standard with the guidance issued by the SECfor public company management (see article in SEC Developments section).

AS 5 was designed to achieve the following four basic objectives:

1. Focus the internal control audit on the most important matters — AS 5 assists auditors by clarifying the riskassessment auditors should perform on areas in which the risk of failure of a company’s internal control to prevent ordetect a material misstatement is highest. The standard provides best practices for focusing the scope of the audit onidentifying material weaknesses, such as planning the internal control audit using a top-down approach andidentifying and auditing higher risk areas. The standard also provides alternatives on how best to address lower riskareas by determining the amount of testing necessary, using knowledge accumulated through previous years’ audits,and using the work of the company’s personnel.

2. Eliminate procedures that are unnecessary to achieve an effective audit — The PCAOB examined therequirements under AS 2 to determine if auditors were encouraged to perform unnecessary procedures to achieve theintended benefits of an internal control audit. As a result of this process, the new standard has eliminated the

30 Independence Standard Board Statement No. 1, Independence Discussions With Audit Committees.31 PCAOB Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated With An Audit of Financial

Statements.32 PCAOB Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction With An Audit of Financial

Statements.

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requirement for the auditor to evaluate management’s evaluation process and clarified that no corresponding auditopinion is necessary. Other revisions to AS 5 include focusing multi-location audit procedures on risk rather thancoverage, assessing risk at the assertion level rather than at a control level, and removing previous barriers to using thework of the company’s personnel.

3. Make the audit scalable to fit the size and the complexity of any company — As part of the PCAOB’s ongoingproject to provide guidance to auditors of smaller entities, AS 5 was written to provide auditors information on howbest to tailor audit requirements for internal controls according to the size and complexity of the entity.

4. Simplify the text of the standard — AS 5 was written for ease of reading, using simpler terms, moving definitionsand other information to appendices, and removing duplicative information and replacing it with cross-references toother PCAOB standards, SEC rules, or laws. The standard also conforms certain terms with the SEC’s new guidance formanagement.

The Board has also adopted Rule 3525,33 which relates to an auditor’s responsibilities when seeking audit committeepreapproval of permitted internal control related nonaudit services. The Rule requires the auditor to provide the auditcommittee with a written proposal of the scope of service and the effect on an auditor’s independence, and to documentthe discussions with the audit committee. These requirements are similar to the auditor's responsibility under PCAOB Rule352434 to seek audit committee preapproval to perform tax services for an audit client.

The PCAOB also approved two recommendations of the staff regarding inspection rules. The Board has voted to eliminatethe tentative sunset date of June 30, 2007, for paragraph (d) of Rule 4003,35 which will allow the rule to remain in placeand provide flexibility regarding the timing of inspections for firms that registered with the PCAOB during 2003 and 2004.This allows the PCAOB to make necessary scheduling adjustments to provide a mix of inspections, based on the size andnature of the firm, that is consistent from year to year. The PCAOB also decided to propose for public comment anamendment to Rule 4003 to remove the requirement of regular inspections by the PCAOB for firms that do not issue auditreports regularly, including firms that participate in significant portions of internal controls audits but do not issue auditreports. The proposal would still allow the PCAOB the right to inspect any registered firm at its discretion. Comments on theproposed rule are due July 23, 2007.

AS 5 must be approved by the SEC. If it is, the standard and Rule 3525 would be applicable for audits of internal controlfor fiscal years ending on or after November 15, 2007. The full text of AS 5 and the press release announcing it are availableon the PCAOB’s Web site.

PCAOB Holds International Auditor Regulatory InstituteDuring May 2007, the PCAOB conducted its first International Auditor Regulatory Institute with regulators and

governmental agents from over 40 countries in attendance. Participants learned about PCAOB programs and how thePCAOB carries out its mandate under the Sarbanes-Oxley Act of 2002. Topics included inspection programs, standard-setting, enforcement process, and international cooperation.

The PCAOB established the International Auditor Regulatory Institute as a discussion forum for international auditregulators to better protect investors of their financial markets and to improve the efficiency, reliability, and transparency infinancial reporting.

The press release on the Institute is available on the PCAOB’s Web site.

33 PCAOB Final Rule 3525, Audit Committee Pre-Approval of Non-Audit Services Related to Internal Control Over Financial Reporting.34 PCAOB Final Rule 3524, Audit Committee Pre-Approval of Certain Tax Services.35 PCAOB Final Rule 4003, Frequency of Inspections.

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Statement on Pension Disclosures IssuedThe GASB has issued Statement 5036 to align pension disclosure requirements with the disclosure requirements for retiree

health insurance and other postemployment benefits by amending Statements 2537 and 27.38 Statement 50 requires stateand local governmental entities to do the following:

The provisions of Statement 50 are generally effective for periods beginning after June 15, 2007, with early adoptionencouraged. For governments using the aggregate actuarial cost method, the provisions of Statement 50 related to themethod are effective for financial statements and for required supplementary information that contains information fromactuarial valuations as of June 15, 2007, or later. A press release announcing the issuance of Statement 50 is available onthe GASB’s Web site. A copy of the Statement can be ordered through the GASB’s order department at 800-748-0659 oronline at the GASB’s Web site.

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Exposure Draft on Accounting for Federal Oil and Gas ResourcesThe FASAB has issued an Exposure Draft39 on accounting for federal oil and gas resources. The Exposure Draft prescribes

recognition of a royalty asset and its related liability for federal oil and gas resources.

The proposed standard also prescribes several disclosures to be made for federal oil and gas resources, such as trendinformation, estimated federal oil and gas resource quantities, estimated value of royalty relief, and federal oil and gasresources not classified as proved reserves.

The proposed standard would be effective for fiscal years beginning after September 30, 2009. Comments on theExposure Draft are due by September 21, 2007. The full text of the Exposure Draft and the press release announcing it areavailable on the FASAB’s Web site.

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IASB Preliminary Views on Accounting for Insurance ContractsSeeking public comment regarding the accounting for insurance contracts, the IASB has issued its preliminary views in a

Discussion Paper.40 This represents another step in developing a new standard for accounting for insurance contracts byinsurers after the formation of the Insurance Working Group in 2004.

36 GASB Statement No. 50, Pension Disclosures.37 GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans.38 GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers.39 FASAB Proposed Statement of Federal Financial Accounting Standards, Accounting for Federal Oil and Gas Resources.40 IASB Discussion Paper, Preliminary Views on Insurance Contracts.

• “Disclose the funded status of a pension plan as of the most recent actuarial valuation date in the notes to financialstatements.”

• Disclose a schedule of funding progress within required supplementary information using the entry age actuarial costmethod “if the aggregate actuarial cost method is used to determine the annual required contribution.”

• Link “the funded status disclosure in the notes to financial statements to the required schedule of funding progress” inthe required supplementary information.

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According to the Discussion Paper, an insurer should measure its insurance liabilities using the following three buildingblocks:

These three building blocks are collectively named by the discussion paper as “current exit value” and defined as “theamount the insurer would expect to pay at the reporting date to transfer its remaining contractual rights and obligationsimmediately to another entity.”

The paper discusses several other topics, such as recognition and derecognition, measurement issues, policyholderbehavior, customer relationships, acquisition costs, policyholder participation, and reporting of changes in insuranceliabilities. The paper also raises questions to be considered by constituents as they draft their comments to the preliminaryviews Discussion Paper.

The comments on the Discussion Paper are due by November 16, 2007. The IASB expects to issue an Exposure Draft bythe end of 2008 after reviewing the comments received and confirming or amending its preliminary views. The IASB expectsa final standard to be issued in 2010.

The press release announcing the Discussion Paper and the full text of Part 1 and Part 2 are available on the IASB’s Website.

U.S. and European Union Agree to Work to Eliminate Financial Reporting ReconciliationThe U.S. president and two European leaders met and resolved to work on promoting transatlantic integration and signed

a framework that outlines the steps to be taken to achieve such integration. The general sections of the framework include“Purposes”; “Fostering Cooperation and Reducing Regulatory Burdens”; “Lighthouse Priority Projects”; “TransatlanticEconomic Council”; and “Work Program of Cooperation.” Included in the Lighthouse Priority Projects section is the FinancialMarkets subsection, which addresses the need for U.S. GAAP and IFRS to be recognized equally in both the jurisdictionswithout need for reconciliation. More specifically, the Financial Markets section of the framework commits to focusing onthe following areas:

The press release announcing the framework is available on the IASB’s Web site. The full text of the framework is availableon the White House’s Web site.

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OMB Issues 2007 A-133 Compliance SupplementThe U.S. Government’s Office of Management and Budget (OMB) has issued an updated Circular A-133 Compliance

Supplement for 2007. The Compliance Supplement assists auditors in performing the required audits under Circular A-133,

(a) explicit, unbiased, market-consistent, probability-weighted, and current estimates of the contractual cash flows.

(b) current market discount rates that adjust the estimated future cash flows for the time value of money.

(c) an explicit and unbiased estimate of the margin that market participants require for bearing risk (a risk margin) and for providing other services, if any (a service margin).

• “Smooth [and consistent] implementation of the Basel II framework for banks” in both the EU and the U.S.

• Promotion of conditions for U.S. GAAP and IFRSs to be recognized in both the EU and the U.S. without a reconciliationby no later than 2009.

• As it relates to auditor oversight, support of roadmap discussions among the PCAOB and the European Commission.

• Reinsurance regulation convergence.

• “Greater regulatory convergence towards highest quality and most effective regulation.”

• Cooperation of EU and U.S. financial regulators.

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including audits of state and local governments, and nonprofit organizations. Annually, the OMB works with federalagencies to update the program objectives, procedures, and key compliance requirements that the federal governmentexpects to be considered in single audits of federal programs.

Treasury Department Announces Initiatives to Improve Financial Reporting andAuditing Profession

As part of his plan to strengthen the competitiveness of the U.S. capital markets, U.S. Treasury Secretary Henry Paulsonannounced several initiatives focused on improving financial reporting and providing a more transparent auditing profession.The following summarizes each of the four initiatives announced:

A press release announcing these initiatives is available on the U.S. Treasury Department’s Web site.

• Provide Investors With a Transparent and Sustainable Auditing System —As part of this initiative, the Treasuryhas asked former SEC Chairman Arthur Levitt and former SEC Chief Accountant Donald Nicolaisen to co-chair anonpartisan federal advisory committee. The committee will focus on developing recommendations on ways tostrengthen the auditing profession’s financial soundness and attracting and retaining qualified personnel.

• Gain Better Understanding of Reasons for Increasing Financial Restatements — The Treasury announced theneed to analyze the reasons for the dramatic increase in financial restatements over the last decade.

• Enhance Financial Reporting — The Treasury supports the FASB’s and SEC’s efforts to improve transparency anduser-friendliness of financial reporting for investors.

• Streamline Accounting Requirements to Encourage International Companies to List on U.S. Exchanges andIncrease Investor Opportunities — The Treasury supports the SEC’s elimination of the requirement of a U.S. GAAPreconciliation in IFRS reporting companies.

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To jump to the minutes of a FASB meeting, click a date or link below.

May 2, 2007The Board discussed the following topics:

• Conceptual Framework: Objectives and Qualitative Characteristics.

• Derivative Disclosures.

May 8, 2007The Board discussed the following topics:

• Financial Instruments: Liabilities and Equity.

• Transfers of Financial Assets.

• Conceptual Framework: Reporting Entity.

May 16, 2007The Board discussed the following topics:

• Financial Statement Presentation.

• Statement 133 Implementation Issue — Clarification of the Application of the Shortcut Method.

May 23, 2007The Board discussed the following topics:

• Agenda Decision: Hybrid Financial Instruments.

• Agenda Decision: Statement 133 Hedging Implementation.

May 30, 2007The Board discussed the following topics:

• Statement 140 Implementation: Transfers of Financial Assets and Repurchase Financing Agreements.

• Agenda Decision: Going Concern and Liquidation Basis of Accounting.

• Subsequent Events.

FASB Project Summaries and Meeting Minutes Project summaries, handouts distributed at each meeting, FASB meeting minutes, and summaries of FASB meetings and

recent actions are available on the FASB’s Web site.

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oÉÅÉåí=^Åpb`=jÉÉíáåÖëAt its May 15–16, 2007, meeting, the AcSEC discussed the following topics:

• Airline Audit and Accounting Guide.

• Casino Audit and Accounting Guide.

• Not-for-Profit Audit and Accounting Guide.

The AcSEC meeting highlights and agenda and materials are available on the AICPA’s Web site.

oÉÅÉåí=^p_==jÉÉíáåÖëAt its May 15–17, 2007, meeting, the ASB discussed the following topics:

• Audit Research.

• Revision of SAS 107, Audit Risk and Materiality in Conducting an Audit.

• Management Representations.

• Combining Estimates and Fair Value.

• Quality Control Standard.

• Project Proposal on ISA 200, Objective and Principles Governing an Audit of Financial Statements.

The agenda of the meeting and related agenda materials are available on the AICPA’s Web site.

oÉÅÉåí=c p^_=jÉÉíáåÖëAt its May 23–24, 2007, meeting, the FASAB discussed the following topics:

• Status Report on Fiscal Sustainability.

• Revised Exposure Draft on Reporting Changes in Assumptions and Selecting Discount Rates and Valuation Dates.

• Discussion of Staff Research Report on Appropriate Source of GAAP.

• Revised Statement and Issue Discussion on Elements of Financial Reporting.

The agenda and agenda materials are available on the FASAB’s Web site.

oÉÅÉåí=f^p_=jÉÉíáåÖëAt its May 15–18, 2007, meeting in London, the IASB discussed the following topics:

• Annual Improvement Process.

• Conceptual Framework.

• Financial Instruments Puttable at Fair Value.

• Financial Statements Presentation.

• IFRIC Update.

• IFRS 2, Share-based Payment — Vesting Conditions and Cancellations.

• Leases.

• Liabilities — Amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets.

• Post-employment Benefits.

The full agenda of the meeting and the agenda papers for various topics discussed at the meeting are available on theIASB’s Web site.

Summaries of IASB meeting decisions and discussions are also available on Deloitte’s IAS Plus Web site.

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oÉÅÉåí=fcof`=jÉÉíáåÖëAt its May 3–4, 2007, meeting in London, the IFRIC discussed the following topics:

• Revised Draft Interpretation on Customer Loyalty Programmes.

• IAS 1, Presentation of Financial Statements and IAS 39, Financial Instruments: Recognition and Measurement —Current or Non-current Presentation of Derivatives Classified as Held for Trading Under IAS 39.

• IAS 12, Income Taxes — Deferred Tax Arising from Un-remitted Overseas Earnings.

• IAS 16, Property, Plant and Equipment and IAS 18, Revenue — Sale of Assets Held for Rental.

• IAS 18, Revenue.

o Sales of Real Estate.

o Guidance on Identifying Agency Arrangements.

o Customer Contributions to Property, Plant and Equipment of a Supplier.

• IAS 19, Employee Benefits.

o Timetable for Outstanding Items.

o Revised Draft Interpretation on the Asset Ceiling and Minimum Funding Requirements.

o Curtailments and Negative Past Service Costs.

• IAS 21, The Effects of Changes in Foreign Exchange Rates — Hedging a Net Investment in a Foreign Operation.

• IAS 27, Consolidated and Separate Financial Statements — Demergers and Other In-specie Distributions.

• IAS 39, Financial Instruments: Recognition and Measurement.

o Gaming Transactions.

o Hedging Future Cash Flows with Purchased Options.

o Hedging Multiple Risks with a Single Derivative Hedging Instrument.

o Scope of IAS 39 Paragraph 11A.

o The Meaning of “Commonly Used Currencies” in AG 33(d).

• IFRS 3, Business Combinations — Reassessments on a Business Combination.

• IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

o Plan to Sell the Controlling Interest in a Subsidiary.

o Disclosures.

The full agenda of the meeting and the agenda papers for various topics discussed at the meeting are available on theIASB’s Web site.

Summaries of IFRIC meeting decisions and discussions are also available on Deloitte’s IAS Plus Web site.

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The chart below illustrates significant adoption dates and deadline dates for the FASB, EITF, AICPA/AcSEC, SEC, PCAOB, GASB/GAO, FASAB, and IASB/IFRIC.

FASB Status

Significant Adoption Dates

Statement 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115

Effective as of the beginning of the entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided that the entity (1) also adopts the requirements of Statement 157 concurrently with or prior to the adoption of this Statement, (2) makes that choice within 120 days of the beginning of the fiscal year of adoption, and (3) at the time the entity chooses to early adopt, the entity has not yet issued financial statements, including required notes to those financial statements, for any interim period of the fiscal year that included the early adoption date.

Statement 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R)

Recognition of asset and liability related to funded status of a plan and disclosures:

• For entities with publicly traded equity securities, effective for fiscal years ending after December 15, 2006.

• For all other entities, effective for fiscal years ending after June 15, 2007.

For all entities, change in measurement date is effective for fiscal years ending after December 15, 2008.

Statement 157, Fair Value Measurements Effective for fiscal years beginning after November 15, 2007, and interim periods within those years. Earlier adoption is permitted, provided that no financial statements have yet been issued within that fiscal year.

Statement 156, Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140

Effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006.

Statement 155, Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140

Effective for all financial instruments acquired, issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity’s first fiscal year that begins after September 15, 2006.

Interpretation 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109

Effective for fiscal years beginning after December 15, 2006.

FSP FAS 158-1, “Conforming Amendments to the Illustrations in FASB Statements No. 87, No. 88, and No. 106 and to the Related Staff Implementation Guides”

Effective concurrently with the requirements of Statement 158.

FSP FAS 126-1, “Applicability of Certain Disclosure and Interim Reporting Requirements for Obligors for Conduit Debt Securities”

Effective for fiscal periods beginning after December 15, 2006. If an entity issues interim financial statements, the FSP shall be applied to the first interim period after the date of adoption.

FSP FAS 123(R)-6, “Technical Corrections of FASB Statement No. 123(R)”

Effective for the first reporting period beginning after October 20, 2006, or an earlier period for which financial statements have not yet been issued.

FSP FAS 123(R)-5, “Amendment of FASB Staff Position FAS 123(R)-1”

Effective for the first reporting period beginning after October 10, 2006, or an earlier period for which financial statements have not yet been issued.

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FSP FAS 13-2, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction”

Effective for fiscal years beginning after December 15, 2006.

FSP FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48”

Effective upon the initial adoption of Interpretation 48.

FSP FIN 46(R)-7, “Application of FASB Interpretation No. 46(R) to Investment Companies”

The effective date for applying the provisions of Interpretation 46 or Interpretation 46(R) is deferred for investment companies that are not subject to SEC Regulation S-X, Rule 6-03(c)(1), but are currently accounting for their investments in accordance with the specialized accounting guidance in the AICPA Audit and Accounting Guide, Investment Companies, until the date that the investment company initially adopts AICPA Statement of Position 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies. An entity that is required to discontinue application of the specialized accounting in the Guide as a result of adoption of SOP 07-1 is subject to the provisions of Interpretation 46(R) at that time. Paragraph 4(e) of FASB Interpretation 46(R), Consolidation of Variable Interest Entities, states that “investments accounted for at fair value in accordance with the specialized accounting guidance in the AICPA Audit and Accounting Guide, Investment Companies, are not subject to consolidation according to the requirements of this Interpretation” (footnote reference omitted). Accordingly, an entity that meets the definition of an investment company after adoption of SOP 07-1 shall continue to apply the specialized accounting in the Guide to its investments..

FSP FIN 46(R)-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R)”

Effective the first day of the first reporting period beginning after June 15, 2006.

FSP FIN 39-1, “Amendment of FASB Interpretation No. 39” Effective for fiscal years beginning after November 15, 2007.

FSP AAG INV-1 and SOP 94-4-1, “Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans”

The financial statement presentation and disclosure guidance is effective for annual periods ending after December 15, 2006. The revised definition of “fully benefit-responsive” is effective for all investment contracts as of the last day of the annual period ending after December 15, 2006.

FSP EITF 00-19-2, “Accounting for Registration Payment Arrangements”

Effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified after December 21, 2006. Otherwise, effective for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years.

FSP AUG AIR-1, “Accounting for Planned Major Maintenance Activities”

Effective for first fiscal year beginning after December 15, 2006.

FSP FTB 85-4-1, “Accounting for Life Settlement Contracts by Third-Party Investors”

Effective for fiscal years beginning after June 15, 2006.

Projects in Request-for-Comment Stage

Proposed Statement, Accounting for Financial Guarantee Insurance Contracts — an interpretation of FASB Statement No. 60

Comments due June 18, 2007.

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EITF Status

Significant Adoption Dates Issue 06-10, “Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements”

Effective for fiscal years beginning after December 15, 2007, including interim periods within those fiscal years. Earlier application is permitted.

Issue 06-9, “Reporting a Change in (or the Elimination of) a Previously Existing Difference Between the Fiscal Year-End of a Parent Company and That of a Consolidated Entity or Between the Reporting Period of an Investor and That of an Equity Method Investee”

Effective for changes occurring in interim or annual reporting periods beginning after November 29, 2006.

Issue 06-8, “Applicability of the Assessment of a Buyer’s Continuing Investment Under FASB Statement No. 66, Sales of Real Estate, for Sales of Condominiums”

Effective for first annual reporting period beginning after March 15, 2007.

Issue 06-7, “Issuer’s Accounting for a Previously Bifurcated Conversion Option in a Convertible Debt Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities”

Effective for interim and annual periods beginning after December 15, 2006.

Issue 06-6, “Debtor’s Accounting for a Modification (or Exchange) of Convertible Debt Instruments”

Applies to modifications (or exchanges) occurring in interim or annual reporting periods beginning after November 29, 2006.

Issue 06-5, “Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance With FASB Technical Bulletin No. 85-4”

Effective for fiscal years beginning after December 15, 2006.

Issue 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”

Effective for fiscal years beginning after December 15, 2007.

Issue 06-3, “How Taxes Collected From Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation)”

Effective for financial statements for interim and annual periods beginning after December 15, 2006.

Issue 06-2, “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43”

Effective for fiscal years beginning after December 15, 2006.

Issue 06-1, “Accounting for Consideration Given by a Service Provider to a Manufacturer or Reseller of Equipment Necessary for an End-Customer to Receive Service From the Service Provider”

Effective for fiscal years beginning after June 15, 2007.

Issue 05-1, “Accounting for the Conversion of an Instrument That Became Convertible Upon the Issuer’s Exercise of a Call Option”

Effective for all conversions within the scope of the Issue that result from the exercise of call options in interim or annual reporting periods beginning after June 28, 2006.

AICPA/AcSEC Status

Significant Adoption Dates

SOP 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts

Effective for internal replacements occurring in fiscal years beginning after December 15, 2006. Initial application of this SOP should be as of the beginning of an entity’s fiscal year.

SAS 114, The Auditor’s Communication With Those Charged With Governance

Effective for audits of financial statements for periods beginning on or after December 15, 2006.

SAS 113, Omnibus — 2006 The amendments in paragraphs 1–5 of this SAS are effective for audits of financial statements for periods beginning on or after December 15, 2006.

The amendments in paragraphs 7–14 of this SAS are effective for audits of financial statements for periods ending on or after December 15, 2006.

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SAS 112, Communicating Internal Control Matters Identified in an Audit

Effective for audits of financial statements for periods ending on or after December 15, 2006.

SAS 111, Amendment to Statement on Auditing Standards No. 39, Audit Sampling

Effective for audits of financial statements for periods beginning on or after December 15, 2006.

SAS 110, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained

Effective for audits of financial statements for periods beginning on or after December 15, 2006.

SAS 109, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement

Effective for audits of financial statements for periods beginning on or after December 15, 2006.

SAS 108, Planning and Supervision Effective for audits of financial statements for periods beginning on or after December 15, 2006.

SAS 107, Audit Risk and Materiality in Conducting an Audit Effective for audits of financial statements for periods beginning on or after December 15, 2006.

SAS 106, Audit Evidence Effective for audits of financial statements for periods beginning on or after December 15, 2006.

SAS 105, Amendment to Statement on Auditing Standards No. 95, Generally Accepted Auditing Standards

Effective for audits of financial statements for periods beginning on or after December 15, 2006.

SAS 104, Amendment to Statement on Auditing Standards No. 1, Codification of Auditing Standards and Procedures (“Due Professional Care in the Performance of Work”)

Effective for audits of financial statements for periods beginning on or after December 15, 2006.

SAS 103, Audit Documentation Effective for audits of financial statements for periods ending on or after December 15, 2006.

SSAE 14, SSAE Hierarchy Effective when the subject matter or assertion is as of or for a period ending on or after December 15, 2006.

Conforming changes to AICPA Professional Standards, AT Section 501, “Reporting on an Entity’s Internal Control Over Financial Reporting,” resulting from SAS 112

Effective when the subject matter or the assertion is as of or for the period ending on or after December 15, 2006.

AICPA Professional Standards, ET Section 100.01, ”Conceptual Framework for AICPA Independence Standards”

Effective April 30, 2007.

Projects in Request-for-Comment Stage

AICPA Discussion Paper, Improving the Clarity of ASB Standards Comments due June 15, 2007.

AICPA Exposure Draft, Proposed Revisions to the AICPA Standards for Performing and Reporting on Peer Reviews.

Comments due June 30, 2007.

AICPA Proposed Interpretation 102-7, Other Considerations: Meeting the Objectives of the Fundamental Principles, and Proposed Framework for Meeting the Objectives of the Fundamental Principles

Comments due August 15, 2007.

SEC Status

Significant Adoption Dates Final Rule, Covered Securities Pursuant to Section 18 of the Securities Exchange Act of 1933

Effective May 24, 2007.

Final Rule, Termination of a Foreign Private Issuer’s Registration of a Class of Securities Under Section 12(g) and Duty to File Reports Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934

Effective June 4, 2007.

24

Final Rule, Internal Control Over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers and Newly Public Companies

For nonaccelerated filers, auditor’s attestation report on internal control over financial reporting must be included with annual reports for fiscal years ending on or after December 15, 2008. Management’s report is required for fiscal years ending on or after December 15, 2007. For a newly public company, the requirement to provide either a management assessment of internal control over financial reporting or an auditor attestation report will be effective when it files its second annual report with the SEC.

Final Rule, Internal Control Over Financial Reporting in Exchange Act Periodic Reports of Foreign Private Issuers That Are Accelerated Filers

For foreign private issuers that are accelerated filers (but not large accelerated filers), auditor’s attestation report on internal control over financial reporting must be included with annual reports for fiscal years ending on or after July 15, 2007. Management’s report is required for fiscal years ending on or after July 15, 2006.

Interim Final Rule, Executive Compensation Disclosure Effective December 29, 2006.

Final Rule, Executive Compensation and Related Person Disclosure

In Form 8-K, effective for triggering events that occur on or after November 7, 2006; in Forms 10-K and 10KSB, for fiscal years ending on or after December 15, 2006; and in registration and proxy/information statements filed after December 15, 2006.

Final Rule, Fund of Funds Investments Effective July 31, 2006.

Amendments to Forms N-1A, N-2, N-3, N-4, and N-6 All new registration statements filed on the investment company forms and all post-effective amendments that are annual updates to effective registration statements on the investment company forms filed on or after January 2, 2007, must include the disclosure required by the form amendments.

Final Rule, First-Time Application of International Financial Reporting Standards (amendments to Form 20-F)

Rule will apply to foreign private issuers that adopt IFRS prior to or for the first financial year starting on or after January 1, 2007.

Final Rule, Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports (an extension of compliance date)

Effective for fiscal years ending on or after November 15, 2004, for certain “accelerated filers.” Effective for fiscal years ending on or after July 15, 2007, for “nonaccelerated filers,” including foreign private issuers that are not accelerated filers. Effective for fiscal years ending on or after July 15, 2006, for foreign private issuers that are accelerated filers and file annual reports on Form 20-F or Form 40-F.

SAB 108 (on the process of quantifying financial statement misstatements)

Effective for annual financial statements covering the first fiscal year ending after November 15, 2006.

Request for Additional Comments on Interpretive Release, Commission Guidance Regarding Client Commission Practices Under Section 28(e) of the Securities Exchange Act of 1934

Interpretive Release is effective July 24, 2006; market participants, however, will be able to rely on prior SEC guidance for six months after publication.

Final Rule, Internet Availability of Proxy Materials Effective March 30, 2007. Issuers may not send a notice of availability of proxy materials over the Internet until July 30, 2007.

Projects in Request-for-Comment Stage Proposed Rule, Amendments to Financial Responsibility Rules for Broker-Dealers

Comments due on or before June 18, 2007.

Proposed rule amendments on capital raising and disclosure requirements of smaller public companies

Comments on proposals should be received by the SEC within 60 days of the proposals’ publication in the Federal Register.

25

PCAOB Status

Significant Adoption Dates Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated With an Audit of Financial Statements

Effective, subject to approval by the SEC, for audits of fiscal years ending on or after November 15, 2007. Earlier adoption is permitted, however, at any point after SEC approval. Auditors who elect to comply with Auditing Standard No. 5 after SEC approval but before its effective date must also comply, at the same time, with PCAOB Rule 3525 and other PCAOB standards as amended by this release.

Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements

Effective for fiscal years ending on or after November 15, 2004, for certain “accelerated filers.” Effective for fiscal years ending on or after July 15, 2006, for foreign private issuers that are accelerated filers and file annual reports on Form 20-F or Form 40-F. Effective for fiscal years ending on or after December 15, 2007, “nonaccelerated filers,” including foreign private issuers that are not accelerated filers, are required to provide management’s report on internal control over financial reporting. A nonaccelerated filer is required to file the auditor’s attestation report on internal control over financial reporting when it files an annual report for its first fiscal year ending on or after December 15, 2008.

Rule 3525, Audit Committee Pre-Approval of Non-Audit Services Related to Internal Control Over Financial Reporting

Effective for audits of internal control for periods ending on or after November 15, 2007.

Rule 3524, Audit Committee Pre-Approval of Certain Tax Services

Rule will not apply to any tax service preapproved on an engagement-by-engagement basis before June 18, 2006. With respect to tax services provided to audit clients whose audit committees preapprove tax services pursuant to policies and procedures, the rule will not apply to any such tax service that is begun by April 20, 2007.

Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles

Rule will not apply to tax services being provided during the professional engagement period pursuant to an engagement in process at April 19, 2006, provided that such services are completed on or before October 31, 2006. Rule will not apply to tax services being provided on or before July 31, 2007, provided that those services were performed during the audit period and completed prior to the beginning of the professional engagement period.

Rule 3522, Tax Transactions Rule will not apply to tax services that are completed by a registered public accounting firm prior to June 18, 2006.

Rule 3521, Contingent Fees Rule will not apply to contingent fee arrangements that prior to June 18, 2006, were (1) paid in their entirety, (2) converted to fixed fee arrangements, or (3) otherwise unwound.

Release No. 2006-008, Amendments to Board Rules Relating to Inspections

Effective December 8, 2006.

26

GASB/GAO Status

Significant Adoption Dates Statement No. 50, Pension Disclosures Generally effective for periods beginning after June 15, 2007,

with early adoption encouraged. For governments using the aggregate actuarial cost method, related provisions are effective for financial statements and required supplementary information that contains information from actuarial valuations as of June 15, 2007, or later.

Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations

Effective for financial statements for periods beginning after December 15, 2007.

Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues

Effective for financial statements for periods beginning after December 15, 2006.

Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions

Effective for:

• Phase I governments in periods beginning after December 15, 2006.

• Phase 2 governments in periods beginning after December 15, 2007.

• Phase 3 governments in periods beginning after December 15, 2008.

Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans

Effective one year prior to the effective date of GASB Statement 45 for the employer in a single-employer plan or the largest participating employer in a multiple-employer plan.

Technical Bulletin No. 2006-1, Accounting and Financial Reporting by Employers and OPEB Plans for Payments From the Federal Government Pursuant to the Retiree Drug Subsidy Provisions of Medicare Part D

Effective for financial statements issued after June 30, 2006, except for portions of answers pertaining specifically to measurement, recognition, or required supplementary information requirements of Statements 43 and 45. Those provisions would be applied upon the adoption of Statements 43 and 45.

Technical Bulletin No. 2004-2, Recognition of Pension and Other Postemployment Benefit Expenditures/Expense and Liabilities by Cost-Sharing Employers

For pension transactions, effective for financial statements for periods ending after December 15, 2004, with earlier application encouraged. For other postemployment benefit transactions, the provisions should be applied simultaneously with the requirements of GASB Statement 45.

Projects in Request-for-Comment Stage

Exposure Draft, Land and Other Real Estate Held as Investments by Endowments

Comments due by June 29, 2007.

FASAB Status

Significant Adoption Dates

Technical Bulletin 2006-1, Recognition and Measurement of Asbestos-Related Cleanup Costs

Effective for periods beginning after September 30, 2009.

Statement 31, Accounting for Fiduciary Activities Effective for periods beginning after September 30, 2008.

Statement 30, Entity Cost Implementation: Amending SFFAS 4, Managerial Cost Accounting Standards and Concepts

Effective for periods beginning after September 30, 2006.

Statement 29, Heritage Assets and Stewardship Land Effective for periods beginning after September 30, 2006.

Statement 26, Presentation of Significant Assumptions for the Statement of Social Insurance: Amending SFFAS 25

Effective for periods beginning after September 30, 2006.

Interpretation 7, Items Held for Remanufacture Effective March 16, 2007.

27

Projects in Request-for-Comment Stage

Proposed Statement, Accounting for Federal Oil and Gas Resources

Comments due by September 21, 2007.

IASB/IFRIC Status

Significant Adoption Dates IFRS 8, Operating Segments Effective for annual periods beginning on or after

January 1, 2009.

IFRS 7, Financial Instruments: Disclosures Effective for annual periods beginning on or after January 1, 2007.

Amendment to IAS 23, Borrowing Costs Effective for annual periods beginning on or after January 1, 2009.

Amendment to IAS 1, Presentation of Financial Statements — Capital Disclosures

Effective for annual periods beginning on or after January 1, 2007.

IFRIC Interpretation 12, Service Concession Arrangements Effective for annual periods beginning on or after January 1, 2008.

IFRIC Interpretation 11, Group and Treasury Share Transactions Effective for annual periods beginning on or after March 1, 2007.

IFRIC Interpretation 10, Interim Financial Reporting and Impairment

Effective for annual periods beginning on or after November 1, 2006.

IFRIC Interpretation 9, Reassessment of Embedded Derivatives Effective for annual periods beginning on or after June 1, 2006.

Projects in Request-for-Comment Stage IASB Exposure Draft, Proposed IFRS for Small and Medium-sized Entities

Comments due October 1, 2007.

IASB Discussion Paper, Preliminary Views on Insurance Contracts Comments due November 16, 2007.

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AcSEC Accounting Standards ExecutiveCommittee

AICPA American Institute of Certified PublicAccountants

APB Accounting Principles Board

ARB Accounting Research Bulletin

ASB Auditing Standards Board

COSO Committee of Sponsoring Organizationsof the Treadway Commission

DIG Derivatives Implementation Group

DTC Draft Technical Correction

EITF Emerging Issues Task Force

FAS Financial Accounting Standard

FASAB Federal Accounting Standards AdvisoryBoard

FASB Financial Accounting Standards Board

FIN FASB Interpretation

FSP FASB Staff Position

GAAP Generally Accepted AccountingPrinciples

GASB Governmental Accounting StandardsBoard

IAS International Accounting Standard

IASB International Accounting StandardsBoard

IFAC International Federation of Accountants

IFRIC International Financial Reporting Interpretations Committee

IFRS International Financial ReportingStandard

ITAC Investors Technical Advisory Committee

ITC Invitation to Comment

MD&A Management’s Discussion & Analysis

NAIC National Association of InsuranceCommissioners

NCGA National Council on GovernmentalAccounting

PCAOB Public Company Accounting OversightBoard

SAB Staff Accounting Bulletin

SAS Statement on Auditing Standards

SEC Securities and Exchange Commission

SFFAC Statement of Federal FinancialAccounting Concepts

SFFAS Statement of Federal FinancialAccounting Standards

SOP Statement of Position

SSAE Statement on Standards for AttestationEngagements

SSARS Statement on Standards for Accountingand Review Services

TPA Technical Practice Aid

28

Conclusions of the FASB, GASB, IASB, and IFRIC are subject to change at future meetings and generally do not affect current accounting requirements until an official position (e.g.,

Statement, Interpretation, Staff Position, or IFRS) is issued. Official positions are determined only after extensive deliberation and due process, including a formal vote.

Further information about the standard setters can be found on their respective Web sites as follows: www.fasb.org (FASB); www.fasb.org/eitf/agenda.shtml (EITF); www.aicpa.org

(AICPA); www.sec.gov (SEC); www.fasab.gov (FASAB); www.gasb.org (GASB); and www.iasb.org or www.iasplus.com/index.htm (IASB and IFRIC).

Accounting Roundup is prepared by the National Office Accounting Standards and Communications Group of Deloitte & Touche LLP (“Deloitte & Touche”). The purpose of this

publication is to briefly describe key regulatory and professional developments that have recently occurred in the field of accounting and to provide links to locations where additional

information can be found on each topic. Readers seeking additional information about a topic should review the information referred to in the hyperlinks and not rely solely on the

descriptions included in this communication.

This publication contains general information only and Deloitte & Touche is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or

other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may

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and related entities shall not be responsible for any loss sustained by any person who relies on this publication.

SubscriptionsIf you wish to receive Accounting Roundup and other accounting publications issued by the Accounting Standards andCommunications Group of Deloitte & Touche, please register at www.deloitte.com/us/subscriptions.

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