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BANKING
Well-managed and well-capitalized banks and savings associations with up to $500 million in total assets and CAMELS ratings of 1 or 2 may qualify for the extended 18-month on-site examination cycle (instead of the 12-month cycle) under final regulations issued by the major federal bank and thrift regulators. The rules also clarify when an institution is considered “well-managed.”

“CAMELS” stands for the six factors the system uses to rate financial institutions: capital adequacy, asset quality, management quality, earnings, liquidity and sensitivity to market risk.

The rules, issued by the Federal Reserve, FDIC, Office of the Comptroller of the Currency, and Office of Thrift Supervision, went into effect Sept. 25.

The full text of the rules is available at http://edocket.access.gpo.gov/2007/pdf/07-4716.pdf.

Federal bank and thrift regulators reported that Shared National Credits (SNC) grew by 21% from 2006, the fastest pace since 1998. The 2007 SNC portfolio included 7,686 credits totaling $2.3 trillion, a $401 billion increase over 2006.

The large increase was attributed, in part, to brisk merger and acquisition lending.

The SNC Program, which was established in 1977, seeks to provide an efficient and consistent review and classification of large syndicated loans. It generally covers loans or loan commitments of at least $20 million that are shared by three or more regulated financial institutions.

Total criticized credits—which include credits classified as substandard, doubtful and loss—increased as well, but the rate of criticized credits fell to 5% from 5.1% the previous year.

The report was issued by the Federal Reserve, FDIC, Office of the Comptroller of the Currency, and Office of Thrift Supervision. The full report is available at www.fdic.gov/
news/news/press/2007/pr07080.html.

FINANCIAL REPORTING
The Private Company Financial Reporting Committee recommended that FASB delay the effective date of FIN 48, Accounting for Uncertainty in Income Taxes, for private companies. The PCFRC voted unanimously at its September meeting to recommend postponing the effective date until guidance is issued on FIN 48’s implications for pass-through entities and until more consideration is given to the usefulness of FIN 48’s disclosure requirements for private companies.

The recommendation was based on preliminary research conducted by the PCFRC on the issues that private company financial statement users, preparers and CPA practitioners are facing with the requirements of FIN 48. That research “raises legitimate questions about the usefulness and relevance of the disclosure requirements of FIN 48 to users,” Judith O’Dell, the committee’s chairwoman, wrote in a letter to FASB Chairman Bob Herz detailing the PCFRC’s recommendations.

FIN 48 took effect for fiscal years beginning after Dec. 15, 2006. Private companies generally were given until the end of the first year of adoption to comply, unless they had an earlier contractual reporting requirement, such as debt covenant calculations or interim financial statements.

The PCFRC also voted to begin identifying issues private company financial reporting constituents are facing with FASB Statement no. 123(R), Share-Based Payment. The committee wants to better understand the costs involved with those accounting issues and whether the associated benefits outweigh the costs.

FASB’s Emerging Issues Task Force issued draft abstracts of the following issues:

EITF Issue no. 07-1, Accounting for Collaborative Arrangements, which focuses on, among other issues, how to define a collaborative relationship and how costs incurred and revenue generated on sales to third parties should be reported by the partners to joint development agreements in each of their respective income statements.

EITF Issue no. 07-4, Application of the Two-Class Method Under FASB Statement no. 128, Earnings per Share, to Master Limited Partnerships, which focuses on how master limited partnerships with incentive distribution rights calculate earnings per unit, in accordance with FASB Statement no. 128, Earnings per Share.

EITF Issue no. 07-6, Accounting for the Sale of Real Estate Subject to the Requirements of FASB Statement no. 66, Accounting for Sales of Real Estate, When the Agreement Includes a Buy-Sell Clause, which focuses on determining whether a buy-sell clause is a prohibited form of continuing involvement that would preclude partial sales treatment.

For more information, visit www.fasb.org/eitf/eitfissu.shtml.

GOVERNMENT ACCOUNTING
The FASAB extended the comment deadline for the exposure draft, Accounting for Federal Oil and Gas Resources, until Jan. 11. The ED, published in May, proposes a new framework of standards to recognize the estimated value of royalties from federal oil and gas leases, changes in those values over time, and the amount of royalties designated for distribution to other entities such as state governments. The proposed framework, if adopted, is expected to be applied to other natural resources.

Currently, no specific accounting standards for federal oil and gas resources exist. There is also no federal financial reporting about the quantity or value of these assets.

The ED and the specific questions raised are available at www.fasab.gov/exposure.html.

INTERNATIONAL
The International Auditing and Assurance Standards Board issued a consultation paper outlining its proposed strategy for 2009–2011. The document includes a list of possible actions the IAASB may take to implement its proposed strategy. The list includes developing assurance standards relevant to raising international capital and contributing to development in sustainability reporting.

The paper is available at www.ifac.org/Guidance/EXD-Details.php?EDID =0096.

The International Accounting Standards Board (IASB) published a proposal to improve the accounting for joint ventures. ED 9, Joint Arrangements, proposes to replace International Accounting Standard (IAS) no. 31, Interests in Joint Ventures, and represents the first major revision to the standard since it was issued in 1990. The review also forms part of the IASB’s short-term project with FASB to reduce differences between International Financial Reporting Standards (IFRS) and U.S. GAAP. The IASB designed the proposal to provide users with more information about the operations an entity conducts through joint arrangements. The ED is available at www.iasb.org. Comments are due by Jan. 11.

The IASB also published proposed amendments to IAS 39, Financial Instruments: Recognition and Measurement. The amendments are intended to clarify what can be designated as a hedged item in a hedge accounting relationship. The exposure draft specifies the risks that qualify for designation as hedged risks when an entity hedges its exposure to a financial instrument. It also clarifies when an entity may designate a portion of the cash flows of a financial instrument as a hedged item. The IASB prepared the proposed changes in response to requests for additional guidance on what IAS 39 permits to be designated as a hedged item. The ED is available at www.iasb.org. Comments are due by Jan. 11.

The International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board within the International Federation of Accountants (IFAC), published an exposure draft as part of its project to enhance the clarity and usability of its International Public Sector Accounting Standard (IPSAS) that addresses accounting for fluctuations in exchange rates. ED 33, Amendments to IPSAS 4, The Effects of Changes in Foreign Exchange Rates, proposes updates to IPSAS 4 to reflect, as appropriate for the public sector, amendments made by the IASB to IAS 21, The Effects of Changes in Foreign Exchange Rates. The ED is available at www.ifac.org/Eds. Comments are due by Dec 31.

MONEY LAUNDERING
U.S. Treasurer Anna Escobedo Cabral announced new outreach materials for money services businesses (MSBs) in seven foreign languages. In addition to English, the materials are now available in Spanish, Chinese, Vietnamese, Korean, Arabic, Farsi and Russian.

The materials were produced in these languages to enhance MSB outreach efforts to ethnic communities affected by Bank Secrecy Act (BSA) requirements. The Financial Crimes Enforcement Network administers the BSA.

MSBs generally provide non-traditional financial services, including check cashing, money orders, fund transfers and utility bill payment services. MSBs are considered to be a high-risk category for money laundering and other financial crimes. About 40 million Americans who do not maintain bank accounts regularly rely on MSBs for financial transactions.

NONPROFITS
FASB issued proposed staff position 94-3-a and AAG HCO-a, Omnibus Changes to Consolidation and Equity Method Guidance for Not-for-Profit Organizations. The proposed staff position makes several changes to the guidance on consolidation and the equity method of accounting in the AICPA Statement of Position 94-3, Reporting of Related Entities by Not-for-Profit Organizations, and the AICPA Audit and Accounting Guide, Health Care Organizations. The proposed changes are designed to simplify and improve the existing guidance by making it more consistent between the two standards.

If approved, the guidance would be effective for fiscal years beginning after June 15, 2008. The staff position is available at www.fasb.org/fasb_staff_positions/prop_fsp_sop94-3-a&aag_hco-a.pdf.

PROFESSIONAL ISSUES
The International Accounting Education Standards Board (IAESB), an independent standard-setting board within IFAC, released two new International Education Practice Statements (IEPS). The statements are designed to assist IFAC member bodies such as the AICPA in developing ethics education programs and in implementing the information technology (IT) knowledge component of a professional accounting education program. The first practice statement, IEPS 1, Approaches to Developing and Maintaining Professional Values, Ethics, and Attitudes, provides guidance on how to achieve good practice in developing and maintaining professional values, ethics and attitudes in accordance with the requirements in International Education Standard no. 4, Professional Values, Ethics and Attitudes.

IEPS 2, Information Technology for Professional Accountants, outlines the knowledge and skills necessary to prepare professional accountants to perform competently in the IT environment. All professional accounting candidates are expected to have knowledge and understanding of at least one of three roles—manager, evaluator or designer of information systems—or a combination of these roles. The practice statement identifies the competency elements that IFAC member bodies can include in the IT knowledge component of prequalification professional accounting education programs. It also provides guidance on teaching and assessing IT at the prequalification stage, as well as implementing post-qualification development of IT knowledge and competencies.

The statements can be downloaded for free at www.ifac.org/store. For more information on the IAESB, visit www.ifac.org/education.

The Center for Audit Quality conducted a seven-week pilot program in Seattle and Dallas to test advertising designed to raise visibility among the investing public of the roles of public company auditors.

The pilot’s run—Sept. 19 to Nov. 2—included television and print advertising designed to reach a target audience of politically engaged people who invest in the public markets, says Cindy Fornelli, the center’s executive director. The campaign included ads in regional editions of The Wall Street Journal, Seattle Post-Intelligencer and The Dallas Morning News. The CAQ will evaluate responses to the pilot before deciding on the next step for the ads, Fornelli said.

The ads feature Beth Ann Reese, a public company auditor and partner with Deloitte & Touche whose clients include General Motors, Coty and Nortel Networks.

The ads directed visitors to www.thecaq.org/whoami, which includes background on the center and its mission as well as links for job seekers interested in public company auditing work or other careers in the accounting profession.

Online advertising is a widely misunderstood tool, especially in the areas of accounting and finance, according to a study conducted by the electronic media group of the AICPA and Bay Street Group LLC, “Beyond the Click, Maximizing Advertising ROI in B2B E-Newsletters.” The report states that marketers need to get their messages to (and through) CPAs more effectively and must do a better job of understanding the unique characteristics of sponsored electronic newsletters, particularly those reaching influential, time-pressed professionals. The executive summary, which includes additional notes on the research and a list of “Top 10 Recommendations to Marketers,” is available at www.aicpalearning.org/
profdev_news.asp?id=10360.

The AICPA launched Small Firm Solutions, a quarterly e-newsletter designed to help members in the smallest firms make the most of their practice opportunities and keep track of important developments in the profession. This resource will fill a need by offering news updates as well as articles with practical solutions to common challenges facing sole practitioners and practitioners in the smallest firms. The e-newsletter “is just one example of the AICPA’s commitment to providing resources for small practitioners,” said James C. Metzler, AICPA vice president–Small Firm Interests. “They are a dynamic group facing challenges that set them apart from other CPAs. At the AICPA, we understand their specialized needs and we are dedicated to creating tools to help them enhance their profitability and professionalism.”

The newsletter is available at http://pcps.aicpa.org/NR/rdonlyres/5957E80C-3D1B-41D3-9EDC-726A1136FF1A/0/1024830_sfs_Final_wlinks.pdf.

FYI
The SEC’s Office of the Chief Accountant is seeking up to five professional accounting fellows to help develop proposed securities rules, work with standard setters in accounting and auditing, and consult with filers on reporting matters. The fellowships are for two years beginning in summer or fall of 2008.

Three positions are in the Accounting Group; desired experience includes applying U.S. GAAP or International Financial Reporting Standards. A fourth position is in the International Group; desired experience includes IFRS or International Standards on Auditing. The fifth position is in the Professional Practice Group; desired experience includes internal control over financial reporting under section 404 of the Sarbanes-Oxley Act.

Applications are due by Jan. 18. For information, call Bob Malhotra at 202-551-5305 or Jeff Ellis at 202-551-5329.