FASB issued Statement no. 151 , Inventory Costs ( www.fasb.org/st/index.shtml ), an amendment of Accounting Research Bulletin (ARB) no. 43, chapter 4. The statement clarifies that abnormal amounts of idle facility expense, freight and/or handling costs and wasted materials (that is, spoilage) should be recognized as current-period charges, and it requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005, but earlier application is permitted for costs incurred during fiscal years beginning after November 23, 2004. The statement’s provisions should be applied prospectively.

The Public Company Accounting Oversight Board (PCAOB) issued a third set of questions and answers on Auditing Standard no. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements ( www.pcaobus.org/standards/staff_questions_and_answers/index.asp ). The board published the first two in June and December 2004.

The PCAOB proposed rules that identify specific circumstances in which providing tax services impairs auditors’ independence; increase auditors’ responsibility for obtaining audit committee preapproval of tax services rendered to audit clients; prohibit persons associated with an audit firm from causing it to violate relevant laws, rules and regulations; and include certain definitions integral to observing the rules ( www.pcaobus.org/rules_of_the_board/documents/docket_017/release2004-015.pdf ). The board will consider comments, which are due February 14, 2005, before adopting the rules, which it will submit to the SEC for approval as required by section 107 of the Sarbanes-Oxley Act.

The Securities and Exchange Commission amended its rules to allow certain larger companies an additional year to comply with internal control requirements mandated by section 404 of the Sarbanes-Oxley Act of 2002 (www.sec.gov/rules/final/33-8507.htm). Such entities, known as “accelerated filers,” must begin to include in the annual report for their first fiscal year ending on or after November 15, 2004, both a management report and an auditor report on the effectiveness of their internal control over financial reporting.

Under the amended rules, for an additional year the deadline for accelerated filers will remain at 75 days after yearend for annual reports and 40 days after the quarter ends for quarterly reports. But, beginning with reports filed for fiscal years ending on or after December 15, 2005, accelerated filers will have to file their annual reports within 60 days after yearend and their quarterly reports within 35 days after the quarter ends. These deadlines will remain in place for all subsequent periods.

SEC rules define an “accelerated filer” as a company that has at least $75 million of its stock owned by retail investors, has been subject to the SEC’s periodic reporting requirements for at least 12 months, has filed one annual report and is not eligible to use the SEC’s small business reporting forms.

The Governmental Accounting Standards Board (GASB) issued an exposure draft, Accounting for Termination Benefits, that would require employers to recognize—in financial statements they prepare on the accrual basis of accounting—the cost of voluntary termination benefits when employees accept a termination offer, and the cost of involuntary termination benefits when an employer approves a plan of termination and communicates it to its employees. In addition the proposal would establish measurement and disclosure requirements for such benefits. Comments are due March 11, 2005.

The International Accounting Standards Board (IASB) issued International Financial Reporting Standard (IFRS) 6, Exploration for and Evaluation of Mineral Resources, which provides the first guidance on accounting for expenditures in this area. The standard is effective for annual periods beginning on or after January 1, 2006. Meanwhile the board’s International Financial Reporting Interpretations Committee (IFRIC) released three interpretations of international accounting standards (IAS). IFRIC 2, Members’ Shares in Co-operative Entities and Similar Instruments, provides guidance on classifying such shares as either financial liabilities or equity. IFRIC 3, Emission Rights, specifies how companies should account for their participation in government programs to reduce greenhouse gas emissions. IFRIC 4, Determining whether an Arrangement contains a Lease, provides guidance on ascertaining whether arrangements not in the legal form of a lease, such as “take-or-pay” contracts, nevertheless should be accounted for according to IAS 17, Leases . The IFRIC also issued draft interpretation D10, Liabilities arising from Participating in a Specific Market—Waste Electrical and Electronic Equipment, which provides guidance on accounting for liabilities for waste management costs. Comments are due February 11, 2005.

The International Federation of Accountants (IFAC) released an exposure draft (ED) and a collection of interviews with practitioners in industry. The ED, International Guidelines on Environmental Management Accounting ( www.ifac.org/guidance/exd-outstanding.php ), provides a framework and set of definitions for environmental management accounting (EMA) from a variety of authoritative bodies, as well as practical examples of EMA applications and other resources. Comments on it are due February 28, 2005. The compendium, The Diverse Roles of Professional Accountants in Business ( www.ifac.org/mediacenter ), features discussions in which senior accountants from organizations in 11 countries describe how they balance their support of corporate objectives and shareholder needs.

In response to a Treasury Department request for comments, the AICPA National CPA Financial Literacy Commission encouraged the development of an education strategy for promoting universal financial literacy in the United States ( www.aicpa.org/financialliteracy/download/aicpa_comment_letter_11_04.pdf ) and emphasized the skills CPAs can contribute to such an effort. The Institute established the commission to lead the profession in improving Americans’ ability to understand and manage their finances.

The Institute published a series of Statements on Responsibilities (SORs) applicable to any member providing personal financial planning (PFP) services on a full-time, part-time or occasional basis. To help members understand this guidance, the AICPA is publishing a series of explanatory articles. One such article ( www.aicpa.org/download/pfp/work_with_adv.pdf ) focuses on SOR no. 2, Working with Other Advisors in a PFP Engagement, explaining its provisions and addressing compliance issues and practice opportunities for CPAs.

XBRL International launched a public, Web-based repository ( www.xbrl.org/showcase ) of feasibility studies and XBRL implementation reports, a resource center containing white papers and other reference materials, and a guide to XBRL products and services. Founding sponsors included Ernst & Young LLP, software developer Universal Business Matrix LLC and XBRL Japan.

Through May 1, 2005, the Institute is accepting applications for committee service from October 2005 through October 2006. Members interested in contributing to the profession and networking with their peers can apply online at http://volunteers.aicpa.org. Volunteers are particularly needed for several new committees and panels. Additional information is available from David Ray at 212-596-6030 or dray@aicpa.org.

AICPA President and CEO Barry C. Melancon presented the Journal of Accountancy’s 2003 Lawler Award for best article of the year to Stephen A. Scarpati, CPA for “CPAs as Audit Committee Members” (Sep.03, page 32; www.aicpa.org/pubs/jofa/sep2003/scarpati.htm ). In his article Scarpati, president of 180 Management LLC in New York, explained how CPAs can prepare themselves for audit committee service. Each year, the JofA’s editorial advisers choose a winning article, which earns its author $500 and a commemorative plaque. The award is named after John L. Lawler, a former JofA editor and AICPA senior vice-president.

The AICPA Academic and Career Development team created a new reference brochure, Directory of Education and Recruitment Programs, that describes the Institute’s programs and services for students and educators. Free copies are available from Jodi Ryan at jryan@aicpa.org .