gaap360

FASB Chairman: Accounting Rules and Bank Capital Regulations Are Different!

mgroup — Tue, 08 Dec 2009 04:12:29 +0000

Floyd Norris of the NY Times reports that FASB Chairman Robert H. Herz will announce at the AICPA’s SEC/PCAOB Developments Conference that the FASB will propose rules that provide for the “decoupling” of bank capital rules from normal accounting standards. According to Mr. Norris, the proposal would encourage bank regulators to make adjustments as they determine whether banks have adequate capital while still providing fair values of bank loans and other assets to investors.

Update

A copy Mr. Herz’s comments made at the conference are available, here.

Bush Budget: SEC Would Get Slim Increase

mgroup — Tue, 05 Feb 2008 15:59:15 +0000

President Bush released his budget for fiscal 2009. Funding for the SEC would rise less than 1% to $914 million. Rueters has this story.

Statement of Cash Flow Study Outline Published

mgroup — Wed, 30 Jan 2008 17:29:58 +0000

We have published the following accounting study outline on cash flows (also available in word, here):

Statement of Cash Flows Required
o As part of a full set of general-purpose financial statements
o For all business enterprises and not-for-profits
§ Some limited exclusions from requirement to provide
o Provide for each period results of operations (income statement) provided
§ SEC Rules differ in some respects
Cash & cash equivalents (C&C)
§ Cash
Cash on hand
Demand deposits
§ Cash equivalents
Short-term, highly liquid investments that are
o Readily convertible to amounts of cash, and
o So near maturity (THREE months or less) that the risk of changes in value because of changes in interest rates is not significant
Examples
o Treasury bills
o Commercial paper
o Money market funds
o Federal funds sold
Company can elect to treat a by definition “cash equivalent” as something else
o Accounting policy election (see disclosures below)
o Any change in policy is a change in accounting principle
§ Restate financial statements for earlier years presented
§ Gross vs. net reporting
Gross amounts of cash receipts and payments more relevant
Qualify for net reporting
o Turnover is quick
o Amounts are large
o Maturities are short
o Specific items that qualify
§ Investments
§ Loans receivable
§ Debt (3 months or less)
Purpose of Statement of Cash Flows
o Provide information on cash receipts (sources of cash) and cash disbursements (uses of cash) during a period
o Provide liquidity or cash information to interested parties, should help these parties assess:
§ Ability to generate positive future net cash flows
§ Ability to meet obligations, pay dividends
§ Need for external financing
§ Reasons for differences between net income and associated cash receipts and cash payments
§ Effects on financial position of both cash and noncash investing and financing transactions
o Reconciles C&C of:
§ Balance of C&C presented on balance sheet at BEGINNING of period, with
§ Balance of C&C presented on balance sheet at END of period
§ Statement of Cash Flows shows the change between these two amounts
Classification of cash flows (three, based on nature of activity):
o Operating
§ Items that get to net income (activities involved in producing goods and delivering services to customers)
§ Transactions involving trading securities under 115
§ Residual category – item not classified as investing or financing, goes here
§ Differences how shown based on two methods (see below)
o Investing
§ Noncurrent asset transactions
Fixed assets
Investments
Lending to others
§ Uses
Making loans to other entities
Purchasing available for sale and held to maturity investment securities of other entities (remember trading securities are operating)
Acquiring PPE
§ Sources
Collecting on previous loans you made
Disposing of available for sale and held to maturity investments (not trading)
Disposing of PPE
o Financing
§ Sources
Obtaining resources from owners
Borrowing debt
§ Uses
Repurchasing stock
Repayment of debt (principal, not interest)
Paying dividends
Non-cash investing and financing activities
o Material, must be supplemental disclosure
o Portion is cash, include that in cash flow statement
§ Fixed asset for stock
§ Convert bonds to equity
§ Acquire assets through capital lease obligation
§ Exchange of non-cash assets
Two methods of presenting statement of cash flows(only operating different)
o Direct method
§ Recommended
§ Shows major classes of operating cash receipts and cash disbursements
Sources
o Cash received from customers
o Interest received
o Dividends received
o Other operating cash receipts (insurance proceeds, lawsuit settlements)
o Cash from sale of securities classified as trading securities under 115
Uses
o Cash paid to suppliers or employees
o Interest paid
o Income taxes paid
o Cash paid to acquire securities classified as trading securities under 115
o Other operating cash payments
§ If use, also required to provide (in separate schedule) indirect – net income to net cash flows from operating activities
§ Cash collections
Sales to customers -
increase in receivables+
decrease in receivables+
increase in unearned revenue-
decrease in unearned revenue
§ Cash paid to suppliers/employees
COGS+
Increase in inventory-
Decrease in inventory+
Expenses+
Increase in prepaid-
Decrease in prepaid
-increase in AP/other liab+
Decrease in AP/other liab
o Indirect method
§ Reconciles net income to net cash flows from operating activities
§ Supplemental disclosure of cash paid for interest and income taxes is required
§ Adjustments to NI (remove the effects on NI for these items which don’t impact cash)
Non-cash items, such as amortization, depreciation, gains/losses on sales
Rules
o Increase in asset or debit balance
§ decrease or use of cash
o decrease in asset or debit balance
§ increase or source of cash
o increase in liability, equity or credit balance
§ increase or source of cash
o Decrease in liability, equity or credit balance
§ Decrease in source of cash
o Gains
§ adjust out of operating – negative to net income – other side investing
o losses
§ adjust out of operating – positive in net income – other side investing
o CLAD
§ Current assets and liabilities
§ Losses and gains
§ Amortization and depreciation
§ Deferred items
Disclosures
o Accounting policy on classification of items as C&C
§ Which items are treated as C&C
§ Change to policy would be disclosed and is a change in accounting principle (restate prior periods)
o Investing and financing noncash transactions
o If direct method used, a reconciliation of net income to net cash flow from operating activities in separate schedule (indirect method)
o Cash flow per share (similar to EPS)
§ Is not permitted
§ May fall into the SEC’s rules on “Non-GAAP” financial measures if presented

Statement of Cash Flows Study Outline Added

mgroup — Tue, 22 Jan 2008 21:50:36 +0000

We have added our first accounting study outline, Statement of Cash Flows. We will be adding additional outlines soon! Let us know what you think.

FASB Publishes Codification for Public Verification

mgroup — Tue, 22 Jan 2008 14:50:43 +0000

Over the past several years, the FASB has been working to codify, by topic, existing U.S. GAAP into a single, online source. Last week, the FASB issued its long-awaited Codification for public comment. The Codification does is not intended to change existing GAAP, just make it easier to access and navigate. The FASB is seeking user feedback during a one-year free trial, on whether the codification represents U.S. GAAP. Users can sign-up here: http://asc.fasb.org/

SEC xBRL Webcast

mgroup — Tue, 25 Sep 2007 13:52:07 +0000

The SEC is expected to make a major announcement this morning regarding its xBRL, interactive data initiatives. You can access the webcast, here.

Call to Revise FASB Statement No. 123R

mgroup — Fri, 10 Aug 2007 14:59:24 +0000

Graef Crystal of Bloomberg News argues: FASB Should Revise Stock Options’ Earnings Rule

Securities and Exchange Commissioner to Leave

mgroup — Thu, 09 Aug 2007 20:11:53 +0000

The SEC announced today that Commissioner Roel C. Campos will leave the Commission to return to the private sector. Mr. Campos is one of two Democratic commissioners on the SEC.

SEC Charges Former Nicor Gas Executives

mgroup — Thu, 09 Aug 2007 20:08:53 +0000

The SEC announced civil charges against three former senior executives of Nicor Gas, Chicago-based distributor of natural gas. The SEC alleges that the three executives:

participated in devising a method by which Nicor could profit by accessing its low-cost last-in, first-out (“LIFO”) layers of gas inventory. As a result, from 1999 through 2002, the former officer defendants engaged in or approved improper transactions, and made material misrepresentations in financial statements and documents filed with the Commission.

The SEC’s complaint in this matter is available, here.

SEC Issues IFRS Concept Release

mgroup — Wed, 08 Aug 2007 16:16:43 +0000

As expected, the SEC issued a Concept Release that seeks input on the concept of allowing US issuers chose between US GAAP and International Financial Reporting Standards. The SEC is providing a 90 day comment period.