Private companies must disclose uncertain tax positions
Questions have been raised about the appropriate way for private companies to implement the full provisions of the Financial Accounting Standards Board's Accounting Standards Codification (FASB ASC) 740, Income Taxes, in their financial statements. Of particular concern is the "overall" section (ASC 740-10) within that guidance, which includes the legacy document FASB Interpretation (FIN) 48, Accounting for Uncertainty in Income Taxes.

Include auditor insights in your post-recession recovery
While auditors need to ensure that they comply with independence requirements and regulations when offering additional services to their clients, post-recession environments present unique opportunities. Audit clients should prepare to take the bull by the horns.

Milestone event method: Recognizing R&D revenue
The Financial Accounting Standards Board released new revenue recognition guidance for research and development arrangements in April 2010. Research or development arrangements often include payment provisions so that a portion of the consideration to be received is contingent upon "milestone events." Examples of these types of events include successful completion of phases in certain studies within the medical profession or achievement of specified results from other research or development work.

Independence and Internal Control Issues: Do third parties get a clear picture of impairments?

In the world of smaller private company financial reporting, it is not uncommon for management, or owner-managers of businesses, to engage practitioners to perform attest engagements and certain nonattest engagements as well.

Attest engagements span a spectrum – from a high assurance engagement, an audit, to a limited assurance engagement, a review, and all the way to a nonassurance engagement, a compilation.

Expect helpful communication from your auditor

Clear communication is always helpful – in life and in business – to avoid unpleasant surprises or to confirm that you’re on the right track.

The Statement of Auditing Standards (SAS) 115, Communicating Internal Control Related Matters Identified in an Audit, reiterates the standards found in SAS 60 and SAS 112 for auditors to communicate information regarding internal control matters to managers and those in charge of corporate governance.

New rules codified for reporting subsequent events
In preparing financial statements, it’s important to implement the new guidance in FASB Accounting Standards Codification (ASC) Topic 855, Subsequent Events. The new guidance establishes general standards to account for, and disclose, events that occur after the financial statement date but before the financial statements are issued or available to be issued.

Time out for review of significant audit judgments
The Public Company Accounting Oversight Board (PCAOB) released its Auditing Standard No. 7 on July 28, 2009. The standard requires a review of “significant judgments made by the engagement team and the related conclusions reached in forming the overall conclusions on the engagement and subsequent engagement report.”

Forming an audit committee? Know what’s involved
Five simple words have created not just ripples – but waves – of audit committee activity. Embedded within Section 301 of H.R. 3763, our nation’s 107th Congress set forth language amending the Securities and Exchange Act of 1934 by adding “Standards Relating to Audit Committees.”

FIN 46R: Changes are much more than skin deep
Amendment, of course, means change. But, at some point, the extent of the changes can mean a complete replacement. When the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standard No. 167, Amendments to FASB Interpretation No. 46R, in June 2009, the amendments actually replaced the guidance in FIN 46R, Consolidation of Variable Interest Entities.

Private companies now have ‘the Standard’ to follow
Financial reporting standards for private companies have finally arrived, thanks to the International Accounting Standards Board (IASB).

Out with the old, in with new codified standards
Have you ever felt as if you’re on the outside looking in? That’s the situation for all the formerly authoritative guidance that was superseded when the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 168 at the end of June 2009.

New guidance provided for fair value accounting
Fair value accounting and reporting gained attention in April 2009 when the Financial Accounting Standards Board addressed guidance issues in three newly released FASB Staff Positions (FSPs). The FASB had been under intense pressure, from a variety of different sources, to provide additional application guidance, along with enhancing disclosures, related to fair value measurements and impairments of securities. The proposed documents had an inordinately short exposure period so that the guidance could be finalized on a timely basis.

Preparing for risk assessment puts your audit on the road to success
Knowing what is expected when the auditors enter your business to assess the risks of material misstatements in your financial statements creates a good opportunity for advance preparation. Your awareness of what the auditors are looking and testing for should help your business obtain an unqualified opinion.

Changes ahead: Accounting for leases under scrutiny
End users of financial statements have expressed concerns about the way reporting entities account for lease arrangements. As a result, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are working together to change the authoritative technical literature. With these changes, financial statements will more accurately reflect the substance of lease accounting transactions.

Companies should prepare for a tale of two audits
“It was the best of times; it was the worst of times. …” Exactly 150 years after Charles Dickens penned A Tale of Two Cities, he is still half right – we may indeed be in the worst of times economically. Conducting an audit engagement in the current business climate is about as risky as being an aristocrat in Paris during the French Revolution.

Let’s get down to basics: Do you know how to read financial statements?
Most people have little experience or know-how when it comes to reading a financial statement. For some, it seems a foreign language; for others, a task best left to someone else. At some point, almost everyone in the business world will need to read and understand a financial statement or, more accurately, a set of financial statements.

New fair value guidance impacts not-for-profit
The challenge of implementing SFAS No. 157, Fair Value Measurements, is significant for any entity, but not-for-profit organizations might face unique issues in applying the guidance.

Defining ‘reporting entity’ is simple, or is it?
Those involved in management of reporting entities have been in the recent past – and will be in the foreseeable future – tackling some relatively difficult implementation issues associated with the accounting authoritative literature. Now, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are looking at changing the landscape as to what constitutes the reporting entity itself. Essentially, while in the preliminary stages of work, they are considering changes to the conceptual underpinnings related to what a reporting entity is.

Role of board member: Do it the right way – or not at all
Frank Sinatra was called the Chairman of the Board when he sang his hit song “My Way.” But since the post Enron-WorldCom debacle and the more recent Bear Stearns and Lehman Brothers subprime meltdown, the philosophy of “Old Blue Eyes” may no longer be the way to conduct corporate board business, especially during an audit. Avoiding “the final curtain” should be the ultimate goal of any corporate board member.

International standards may be around the corner
Over the past several months, many have gone from asking if International Financial Reporting Standards (IFRS) will be permitted or required in the United States to when IFRS will be required to be used as the primary U.S. financial reporting framework. The answer to the “when” question became clearer on Aug. 27, 2008, when the Securities and Exchange Commission announced a possible roadmap to transition U.S. issuers to IFRS as issued by the International Accounting Standards Board (IASB).

Will convergence simplify your world – eventually?
As the ripple effect associated with converging U.S. generally accepted accounting principles with international accounting guidance becomes more of a tidal wave for reporting entities, now is the time to heighten awareness of the international guidance.

Reporting standards still differ, but international and U.S. boards are closing the GAAP
Little did anyone – issuers, financial statement preparers, users, educators, regulators – know the significant impact the 2002 commitment to converge U.S. generally accepted accounting principles and International Financial Reporting Standards would have on financial reporting in the United States and around the globe.

Internal auditors fight to prevent and detect fraud
Thirty years later, fear of a job headed toward obsolescence doesn’t apply to the new roaming internal auditor. In fact, the working environment for internal auditors is headed toward expansion. Since the passage of the Sarbanes-Oxley Act, the Institute of Internal Auditors has climbed from more than 80,000 members in 2002 to approximately 160,000 in June 2008.

Reporting how’s and why’s of derivatives a must
Issues associated with reporting entities that are involved in derivative arrangements have recently generated a heightened degree of awareness across the United States and internationally. In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities. The enhanced disclosure requirements in Statement No. 161 were developed in response to concerns about existing disclosure requirements in Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (as amended).

It’s good to know when control deficiencies exist
Control deficiencies can have a detrimental effect on your company and the accuracy of its financial statements. Statement on Auditing Standards No. 112, Communicating Internal Control Related Matters Identified in an Audit, establishes standards and provides guidance to auditors for communicating matters relating to internal control over financial reporting.

Financial statement consistency: Can we all agree?
The beginning of the year brought users of financial statements some potential help in understanding businesses’ financial statements, pending approval by the Securities and Exchange Commission. The Public Company Accounting Oversight Board (PCAOB) adopted Auditing Standard No. 6, Evaluating Consistency of Financial Statements, and amendments to its interim auditing standards. The ball is now in the SEC’s court. There are two reasons for implementing AS No. 6.

Why one auditing standard is in and one is out
Auditing Standard No. 5 has come to the rescue of company budgets by replacing Auditing Standard No. 2, and it is expected to save “a fistful of dollars.”

Do you report business combinations based on fair value?
The guidance within Statement of Financial Accounting Standards No. 141R changes the landscape related to accounting and reporting for business combinations.

Are you clearly stating ‘noncontrolling interests’?
Improving information reflected in the financial statements related to noncontrolling interests is the primary objective associated with the Statement of Financial or Accounting Standards No. 160.

Updates: Private company financial reporting
When compared to the accounting standards used by public companies, should certain elements of differentiation be incorporated into the standards for private companies? This is the question the Private Company Financial Reporting Committee, within the Financial Accounting Standards Board (FASB), began to wrestle with in 2007.

Why internal controls – and reviews – are needed
Every day, during the normal course of our lives, we encounter numerous controls or safeguards. Whether your place of work requires an identification badge or a key fob, a password to log onto your computer or an access code to use a copier, controls are a way of life.

Delay granted to private companies to implement rule
Has FIN 48 implementation been weighing heavily on your mind? You may have some relief. On Nov. 7, 2007, the Financial Accounting Standards Board (FASB) voted to delay for one year the implementation of Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, for private companies. FIN 48, which the FASB issued in June 2006, is an interpretation of FASB Standard No. 109, Accounting for Income Taxes.