HIGHLIGHTS

FASB issued a standard that gives companies the option to report selected financial assets and liabilities at fair value. Statement of Financial Accounting Standards no. 159, The Fair Value Option for Financial Assets and Financial Liabilities, is designed to reduce complexity in accounting for financial instruments and volatility in earnings caused by measuring related assets and liabilities differently, according to FASB. The standard also creates presentation and disclosure requirements designed to aid comparisons between companies that use different measurement attributes for similar types of assets and liabilities. Statement no. 159 does not eliminate disclosures required by FASB statements no. 157, Fair Value Measurements, and no. 107, Disclosures About Fair Value of Financial Instruments. Statement no. 159 is effective for fiscal years beginning after Nov. 15, 2007. Companies may adopt the standard at the beginning of the previous fiscal year provided they choose to do so in the first 120 days of that fiscal year and also apply the provisions of Statement no. 157. To view the standard, visit www.fasb.org/pdf/fas159.pdf.

The AICPA provided comments on a Department of Labor (DOL) request for information concerning a provision of the Pension Protection Act of 2006 (PPA) that allows 401(k) plan sponsors and administrators to provide investment advice using objective computer models that meet certain requirements. AICPA comments focused on requirements in the PPA for the computer models to be certified by an eligible investment expert and for annual compliance audits. Among other recommendations, the AICPA:

Said CPAs are qualified to perform the compliance audits of these computer models.

Recommended that the DOL develop or reference suitable performance and reporting standards.

Encouraged the DOL to recognize AICPA professional attestation standards as being suitable for performing the compliance audits.

The AICPA comment letter is available on the Employee Benefit Plan Audit Quality Center Web site at www.aicpa.org/EBPAQC.

Rank-and-file employees who unknowingly exercised backdated stock options in 2006 can obtain relief from a 20% tax obligation if their employers elected to participate in an IRS program and pay the tax instead.

The service established the Compliance Resolution Program in February. Companies that elected to participate were required to notify affected employees by March 15.

The program allows companies to pay the additional 20% tax and any interest tax employees owe, which will be treated as income to the affected employees. Under a 2004 law, employees who were issued stock options at below-market price were required to pay the additional tax and interest on options exercised in 2006. Options earned and vested before 2005 were not affected.

The program acknowledges that some employees unwittingly benefited from backdating or other option underpricing schemes, the IRS said in a release. The same break doesn’t extend to corporate executives or other insiders.

The AICPA and Canadian Institute of Chartered Accountants expanded their jointly published framework of Generally Accepted Privacy Principles to address international privacy concerns. Generally Accepted Privacy Principles—A Global Privacy Framework amplifies the organizations’ 2003 GAPP framework to address privacy implications of globalization in such areas as international outsourcing of services. It references privacy laws and regulations, both domestic and international, incorporating them into a single privacy objective supported by 10 privacy principles as an aid to businesses with international transactions and CPAs in private practice providing them with consulting and attestation services. The framework is available at www.aicpa.org/privacy in versions for businesses and CPA practitioners.

The IASB released an exposure draft of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). The proposal would simplify accounting principles that are appropriate for smaller, non-listed companies. The draft is based on full International Financial Reporting Standards (IFRS), which were developed primarily for listed companies.

Sir David Tweedie, the IASB chairman, said the proposal’s goal is to “produce a standard for use by smaller and unlisted companies that offers the comparability of full IFRS while reducing the burden on the preparing company.”
The EU requires listed companies to comply with IFRS, but it is not requiring the adoption of IFRS for SMEs, leaving the decision to each member state.

The English text of the ED is available at www.iasb.org. Spanish, French and German translations are expected this month. Comments are due by Oct. 1.