Editorial Staff

Publisher/Editor-in-Chief
Colleen Katz

Managing Editor
Cheryl Rosen

Senior Editors
Laura Baron
Katharine W. Coveleski
Peter D. Fleming
Michael Hayes
James Quaglietta
Robert Tie

Senior Assistant Editor
Sarah Cobb

Assistant Editor
Vince Nolan

Contributing Editors
Anita Dennis
Lesli S. Laffie
Joan Mancuso
Barbara J. Shildneck
Stanley Zarowin

Production Director
Peter M. Tuohy 

Art Director
Jeryl A. Costello

Production Manager
Gene Cioffi

Senior Manager—
Production Services—
Publishing Technology
Robert DiCorcia

Production Editor
D. Hillel Lofaso

Senior Production Associates
Valrie Mason
Ingrid Medina

Associate Publisher
Thomas R. Greve

Advertising Team Manager
Karin DeMarco

Advertising Representatives
Joseph Torres
Kurt Weber

Advertising Coordinator
John Weinberg

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201-938-3292
e-mail: joaed@aicpa.org

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201-938-3767

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Highlights

SECOND PCAOB STANDARD NOW IN EFFECT
The SEC on June 17, 2004, approved PCAOB Auditing Standard no. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements (www.sec.gov/rules/pcaob/34-49884.htm; www.pcaobus.org/rules/release-20040308-1.pdf). Although the standard was adopted by the board in March, it could not take effect without the commission’s approval, as required under section 107 of the Sarbanes-Oxley Act.

The new rule requires that independent auditors test and evaluate the design and operating effectiveness of an entity’s internal controls over financial reporting and evaluate management’s process for assessing those controls. The standard also requires the auditor’s report to state whether the company’s internal control over its financial reporting was effective as of the end of the most recent fiscal year and whether management’s assessment was fairly presented as of that date.

For accelerated filers, the standard takes effect for audits of fiscal years ending on or after November 15, 2004. For other companies, the rule takes effect for audits of periods ending on or after July 15, 2005.

The PCAOB also issued a series of questions and answers related to implementing the standard (www.pcaobus.org/qa_staff_internal_control.pdf).

IRS CHANGES PENSION AND ANNUITY RULES
In Internal Revenue Bulletin 2004-26 the IRS issued final regulations (Treasury decision 9130, Required Distributions From Retirement Plans) concerning required minimum distributions under IRC section 410(a)(9) for defined benefit plans and annuity contracts providing benefits under qualified plans, individual retirement plans and section 403(b) contracts (www.irs.gov/irb/2004-26_IRB/ar07.html#d0e188). The new provisions also revise the separate account rules concerning required minimum distributions for defined contribution plans. The regulations, which took effect June 15, 2004, apply for purposes of determining required minimum distributions for calendar years beginning on or after January 1, 2003.

FASB ISSUES EDs ON ASSET RETIREMENT, FAIR VALUE
In June 2004 FASB published an exposure draft (ED), Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143 (www.fasb.org/draft/ed_prop_interp_aro.pdf), to clarify that a legal obligation to perform an asset retirement activity conditional on a future event is within the scope of Statement no. 143, Accounting for Asset Retirement Obligations. Therefore, the proposal would require that entities recognize a liability for the fair value of an asset retirement obligation conditional on a future event if the liability’s fair value can be reasonably estimated.

The ED proposes factoring uncertainty surrounding the timing and method of settlement potentially conditional on future events into the measurement of the liability rather than its recognition. Comments are due August 1, 2004.

Also in June, FASB issued an exposure draft, Fair Value Measurements (www.fasb.org/draft/ed_fair_value_measurements.pdf), in response to companies’ requests for improved guidance on this topic. The ED seeks to establish a framework for measuring fair value that would apply broadly to financial and nonfinancial assets and liabilities, improving the consistency, comparability and reliability of the measurements. The proposed framework would clarify the fair value measurement objective and its application under other authoritative pronouncements (such as FASB Statement no. 107, Disclosures about Fair Value of Financial Instruments, and APB Opinion no. 21, Interest on Receivables and Payables). Thus, the ED would replace any current guidance for measuring fair value in those pronouncements and expand current disclosures about the use of fair value to measure assets and liabilities. Comments are due September 7, 2004.

Editorial Advisers

Catherine R. Allen, Kenneth D. Askelson, James Bean, John C. Boma, Jacob R. Brandzel, Steven J. Brown, Jolene C. Brucks, Thomas F. Burrage, Linda Burt, J. Gregory Bushong, R. Patrick Cargill, Benson J. Chapman, Rosemarie T. Dunn, Thomas Emmerling, Elizabeth Fender, Robert J. Freeman, Kim Gibson, Alan Glazer, Randi K. Grant, Patrick T. Hanratty, DeAnn Hill, James E. Hunton, Frank J. Kopczynski, Jeffrey B. Kraut, Dennis B. Kremer, William F. Laurie, Alan Levin, John Lewison, Joseph P. Liotta, Mano Mahadeva, Benjamin F. Mathews, David McIntee, Anita Meola, Debra Mitchell, Roger H. Molvar, Brenda Morris, Craig Murray, Lyne P. Noella, Edward T. Odmark, Mary P. Ricciardello, Mark L. Richardson, Marshall B. Romney, Peggy Scott, Carolyn Sechler, Gary Shamis, Ivan J. Sotomayor, Alan Steiger, Paul C. Sullivan, Gary R. Trugman, Robert Willens, Mark A. Yahoudy