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CORPORATE GOVERNANCE
Company shareholders will be looking to the Internet rather than their mailboxes to receive proxy materials, after the SEC approved final rules for online posting in lieu of individual delivery of the documents. Shareholders will receive a notice by mail or e-mail that proxy documents are available on a Web site. Shareholders who still want to receive a copy of the materials by e-mail or postal mail may do so upon request.

The SEC acknowledged it received comments raising concerns about shareholders being unable to access online materials, security worries and possible effects on proxy voting. But the agency said it relied upon research indicating about 80% of investors have a home Internet connection—more than it initially estimated—and deemed security safeguards adequate. Proxy solicitations for mergers and acquisitions must still be sent individually.

FINANCIAL REPORTING
The SEC approved a market-based valuation model for stock options presented by Zions Bancorporation. The Zions model uses the auctioning of instruments called Employee Stock Option Appreciation Rights Securities to determine the fair value of underlying employee stock options. Some reports have suggested that valuations using this new model may be lower than those produced by models such as Black-Scholes-Merton, thus reducing employers’ share-based compensation expense. To view the SEC letter, visit www.sec.gov/info/accountants/staffletters/zions012507.pdf.

FASB is seeking comment on whether additional and more specific valuation guidance is needed in financial reporting as well as the appropriate processes and organizations for developing guidance if such is found desirable. The invitation to comment is available at www.fasb.org/draft/ITC_Val_Guide_for_Financial_Reporting.pdf. Comments may be e-mailed to director@fasb.org until April 15.

In response to numerous requests, the SEC Division of Corporation Finance developed filing guidance in the form of an illustrative letter for companies preparing to restate previously issued financial statements for errors in accounting for stock option grants.

The sample letter, issued by Carol Stacey, the division’s chief accountant, contains several caveats, including that following the guidance does not mean filings will not be reviewed and does not foreclose any action recommended by the division with respect to the disclosure.

In amending form 10-K, the sample letter recommends, among other things:

A note explaining the reasons for the amendment.

Selected financial data for the most recent five years as required by Item 301 of Regulation S-K, restated as necessary and with columns labeled “restated.”

Audited annual financial statements for the most recent three years, restated as necessary and with columns labeled “restated.”

The sample letter, which was issued Jan. 18, is available at www.sec.gov/divisions/corpfin/guidance/oilgasltr012007.htm.

FASB will propose a change to the current definition of discontinued operations in Statement no. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The planned proposal was among several actions the board took at its Jan. 24 meeting. If adopted, the change would require that a discontinued component of an entity be reported in the discontinued operation section of the basic financial statements only if that component is an operating segment as defined in Statement no. 131, Disclosures About Segments of an Enterprise and Related Information. Additional disclosures would be required in the notes to financial statements.

FRAUD
The PCAOB reminded auditors to be diligent about fraud in a report that draws on important or recurring observations made during the board’s inspection of audit work performed by registered public accounting firms.

The report addresses several topics, including:

Auditors’ overall approach to the detection of financial fraud.

Required brainstorming sessions and fraud-related inquiries.

Auditors’ response to fraud risk factors.

Financial statement misstatements.

Fraud associated with management override of controls.

The report does not change, propose to change or provide new interpretations of any existing standards. The report’s purpose is to generally focus auditors on being diligent about their fraud-related responsibilities and to provide information that audit committees may find useful in working with auditors.

The report is available at www.pcaobus.org/Inspections/Other/2007/01-22_Release_2007-001.pdf.

INTERNATIONAL
The International Auditing and Assurance Standards Board (IAASB) released as final its first four International Standards on Auditing (ISAs), which were redrafted as part of a comprehensive program to enhance the clarity of its standards.

The IAASB, an independent board of the International Federation of Accountants, also approved amendments to the Preface to International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services, which sets conventions for the IAASB to use in drafting ISAs and obligations for auditors who follow those standards. The revisions are intended to clarify standards with a goal of promoting consistent application by auditors worldwide.

The four redrafted standards include:

ISA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements.

ISA 300, Planning an Audit of Financial Statements.

ISA 315, Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and Its Environment.

ISA 330, The Auditor’s Responses to Assessed Risk.

The redrafted standards have a provisional effective date for audits of financial statements for periods beginning on or after Dec. 15, 2008. The ISAs are available for free at the IFAC online bookstore at www.ifac.org/store.

An IASB proposal would relieve parent companies of some of the difficulties in measuring the cost of an investment in a subsidiary upon adoption of International Financial Reporting Standards (IFRS).

IASB Chairman Sir David Tweedie said the proposals address “preparers’ concern about a requirement that they regard as an obstacle to adopting IFRS.” Tweedie said the changes would reduce burdens on preparers while still providing useful information to users of financial statements.

The amendments to IFRS 1, First-Time Adoption of International Financial Reporting Standards, would provide some relief from the requirements of IAS 27, Consolidated and Separate Financial Statements, by allowing a parent company to use a deemed cost to measure its investment in subsidiaries when it first adopts IFRS. This deemed cost can be determined by referring to the parent’s investment in the net assets of the subsidiary or the fair value of the parent’s investment. The proposals also alleviate the need to restate the pre-acquisition accumulated profits of a subsidiary for the purposes of classifying dividends.

The ED is available at www.iasb.org. Comments are due by April 27.

The IASB extended until May 4 the comment deadline on its discussion paper Fair Value Measurements that was published in November. Constituents had asked for more time, given the significance of issues raised in the paper, said an IASB statement. The discussion paper is part of the IASB’s fair value measurement project, which is included in the IASB’s memorandum of understanding with FASB on the convergence of U.S. GAAP and IFRS. The objective of the project is to develop a single set of guidance that will apply to all fair value measurements required by IFRS.

MONEY LAUNDERING
Requiring financial institutions to report cross-border wire transfer data is technically feasible for the U.S. government and may be valuable to its efforts to combat money laundering and terrorist financing, the Financial Crimes Enforcement Network (FinCEN) told Congress.

The FinCEN report, Feasibility of a Cross-Border Electronic Funds Transfer Reporting System Under the Bank Secrecy Act, outlines an incremental approach to resolving outstanding technical and policy issues relating to whether and how to implement a regulatory requirement for the reporting of cross-border wire transfers. The report was required under the Intelligence Reform and Terrorism Prevention Act of 2004.

FinCEN, a division of the Treasury Department, will conduct an analysis in conjunction with the financial services industry and law enforcement to weigh the benefit to the public against the costs to all parties affected by new regulatory requirements. The analysis will address technical capacity and privacy concerns.

The report, which was issued on Jan. 17, is available at www.fincen.gov/cross_border/index.html.

PERSONAL FINANCIAL PLANNING
The Bush administration’s FY2008 budget proposal includes several measures intended to simplify and encourage retirement savings. A Retirement Savings Account would consolidate the current three types of individual retirement accounts (IRAs) and eliminate qualified purposes for early withdrawals. It would restrict annual contributions, which must be made in cash, to the lesser of $5,000 or earnings included in income; there would be no income limits. Contributions would be nondeductible, but distributions made after age 58 or in the event of death or disability would be tax-free, as with current-law Roth IRAs. Also, there would be no minimum-distribution requirement. Existing Roth IRAs would automatically convert to RSAs, whereas traditional IRAs could be converted by taking the conversion amount into gross income, as is currently done for Roth conversions (but no income limit would apply to RSA conversions).

A separate Lifetime Savings Account could be used for any purpose, including health care, emergencies and education, as well as for retirement, consolidating several types of tax-favored “special-purpose savings vehicles”: Health Savings Accounts, Archer Medical Savings Accounts, Coverdale Education Savings Accounts and section 529 Qualified Tuition Programs. An LSA would have a $2,000-a-year contribution limit regardless of earned income level; contributions must be in cash. LSA distributions also would be tax-free, regardless of the account-holder’s age or use of the distribution, although contributions would be nondeductible.

Likewise, the administration would consolidate the panoply of employer-sponsored retirement plans into an Employer Retirement Savings Account for all employers.

PRACTICE MANAGEMENT
Contrary to what most CPA firm partners believe, advancement, not compensation, is the top priority among most young CPAs in deciding whether to join and stay with a firm, according to an AICPA survey.

The Top Talent Study by the AICPA’s Private Companies Practice Section (PCPS) asked 646 young CPAs in spring 2006 what was most important to them in choosing an employer. It also asked 645 partners what they thought recruits most prized. The respondents were drawn from 600 firms.

Ninety-three percent of partners said they thought salary was the new recruits’ chief concern; but the recruits ranked it third, below growth opportunities and paid personal/vacation time. In fact, 80% of young professionals placed a chance to move up in the firm as their most important consideration. Partners said they thought advancement opportunities would rank fourth, behind medical benefits and paid time off.

The AICPA incorporated the findings with recommendations for firms in a guide, Gaining a Strategic Advantage in Recruiting and Retention. PCPS members can obtain a free copy by going to www.aicpa.org/pcps. It is also available for $30 to other AICPA members and $37.50 for nonmembers at www.cpa2biz.com.

TECHNOLOGY
Information security management was the most important technology initiative for 2007, according to the AICPA’s 18th Annual Top Technology Initiatives survey, as voted upon by members of the AICPA Information Technology Section, CITP credential holders, members of the Information Systems Audit and Control Association and the Information Technology Alliance. For the fifth consecutive year, the survey identified information security as the initiative expected to have the greatest effect on business in the coming year.

“This top technology survey provides the CPA’s unique perspective regarding the impact of technology on financial management and the fulfillment of other fiduciary responsibilities, such as the safeguarding of business assets, oversight of business performance and compliance with regulatory requirements,” said Barry Melancon, CPA, president and CEO of the AICPA.

Four new initiatives made their debut in this year’s top 10: Securing and Controlling Information Distribution; Mobile and Remote Computing; Electronic Archiving and Data Retention; and Document, Content and Knowledge Management.

For more on the survey, visit www.aicpa.org/toptech.

XBRL
The SEC proposed rule amendments to expand the agency’s interactive data voluntary filing program to enable mutual funds to submit XBRL-tagged risk and return summary information. The risk and return summary at the front of every mutual fund prospectus includes information about a fund’s investment objectives and strategies, risks, costs and historical performance.

The submission of tagged risk and return summary information would be supplemental and would not replace required official versions of information. Any mutual fund submitting tagged risk and return summary information would be required to include this information as an amendment to a filing on form N-1A, the registration form for mutual funds. The proposal would permit mutual funds to use a taxonomy (a set of standard tags and definitions) being developed by the Investment Company Institute. The taxonomy is available at http://members.ici.org/xbrl. For more information on the SEC voluntary filing program, visit www.sec.gov/spotlight/xbrl.htm.

FYI
The SEC appointed James L. Kroeker, CPA, as deputy chief accountant for accounting in the Office of the Chief Accountant. He will be responsible for resolution of accounting issues, rulemaking projects, and oversight of private sector accounting standard-setting efforts. Previously, Kroeker was a partner of Deloitte & Touche LLP.

CORRECTION
The February article “What’s Hot, Cool and Very Useful” misstated the amount of free storage space available to users of Google’s Gmail service. The correct number is approximately 2.8 gigabytes. The Journal of Accountancy regrets the error.

CLARIFICATION
A February “Tax Matters” case study of Gee v. Commissioner should have specified that only surviving spouses who inherit an individual retirement account (IRA) may roll it over directly into an IRA in their own name.