For news from the AICPA and state societies, visit www.cpa2biz.com, which also offers online CPE, AICPA professional literature, practice management aids and links to state society Web sites.

FASB issued Staff Position (FSP) FAS 123(R)-1, Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R) (www.fasb.org/fasb_staff_positions/fsp_fas123r-1.pdf). The board, which continues to believe freestanding financial instruments should be accounted for consistently, plans to consider broadly the distinction between liabilities and equity—a project that could significantly change other applicable GAAP. The FSP therefore defers the requirement in the statement, Share-Based Payment, that a freestanding financial instrument originally subject to the statement becomes subject to the recognition and measurement requirements of other applicable GAAP when the rights conveyed by the instrument to the holder no longer depend on his or her being an employee of the entity. The guidance is effective upon the entity’s initial adoption of the statement.

The AICPA issued three accounting technical practice aids. TPAs 6930.09 and 6930.10 pertain, respectively, to single-employer and multiemployer benefit plans. Each TPA contains a question and answer on accounting and disclosure requirements related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. TPA 5400.05 identifies issues and relevant literature nongovernment entities should consider in their accounting and disclosures related to losses from natural disasters. All three TPAs are available at www.aicpa.org/members/div/acctstd/general/recent_tpas.asp.

The Institute’s Accounting and Review Services Committee (ARSC) released three statements on standards for accounting and review services (SSARSs) and an interpretation (see Official Releases, page 109). SSARS no. 12, Omnibus Statement on Standards for Accounting and Review Services—2005 (# 060650JA); SSARS no. 13, Compilation of Specified Elements, Accounts, or Items of a Financial Statement (# 060651JA); and SSARS no. 14, Compilation of Pro Forma Financial Information (# 060652JA), can be ordered from www.cpa2biz.com or from the AICPA at 888-777-7077. The interpretation, “Applicability of SSARSs to Reviews of Nonissuers Who Are Owned by or Controlled by an Issuer,” which relates to SSARS no. 1, Compilation and Review of Financial Statements, is available at www.aicpa.org/download/members/div/auditstd/SSARS_. The ARSC also issued new and revised illustrative representation letters for engagements performed under the SSARSs, revised illustrative inquiries for review engagements and a revised illustrative successor accountant acknowledgement letter. These documents are available at www.aicpa.org/members/div/auditstd/technic_arsc.asp.

The AICPA’s Auditing Standards Board issued two interpretations of statements on auditing standards: “Auditing Derivative Instruments, Hedging Activities, and Investments in Securities” and “Auditing Interests in Trusts Held by a Third-Party Trustee and Reported at Fair Value” (www.aicpa.org/download/auditstd/announce/; see Official Releases, page 121). The interpretations clarify that when an auditor determines that the nature and extent of auditing procedures should include testing the measurement of investments in securities, simply receiving a confirmation from a third party does not constitute adequate audit evidence with respect to the valuation assertion. The interpretations also reiterate management’s responsibility for establishing an accounting and financial reporting process for determining fair value measurements.

The AICPA issued three auditing technical practice aids (TPAs): Consideration of Impact of Losses From Natural Disasters Occurring After Completion of Audit Field Work and Signing of the Auditor’s Report But Before Issuance of the Auditor’s Report and Related Financial Statements; Audit Considerations When Client Evidence and Corroborating Evidence in Support of the Financial Statements Has Been Destroyed by Fire, Flood, or Natural Disaster and Considerations When Audit Documentation Has Been Destroyed by Fire, Flood, or Natural Disaster. The TPAs are available at www.aicpa.org/members/div/auditstd/.

The Public Company Accounting Oversight Board (PCAOB) adopted an auditing standard and issued ethics and independence rules addressing tax services, contingent fees and certain related general ethics and independence standards. PCAOB Auditing Standard no. 4, Reporting on Whether a Previously Reported Material Weakness Continues to Exist, establishes requirements and provides direction for auditors reporting on unresolved material weaknesses. The rules identify circumstances in which providing tax services impairs auditor independence, strengthen the auditor’s responsibilities in connection with seeking audit committee preapproval of tax services and lay a foundation for the PCAOB’s independence rules. The standard and rules will not take effect unless the SEC approves them (www.pcaobus.org/rules/rulemaking_docket.aspx).

The AICPA issued Practice Alert 2005-1, Auditing Procedures With Respect to Variable Interest Entities, which provides guidance to auditors of nonissuers and their firms on planning and performing auditing procedures with respect to variable interest entities. The alert is available at www.aicpa.org/download/auditstd/.

The Office of Management and Budget (OMB) issued the Circular A-133 2005 Compliance Supplement (www.whitehouse.gov/omb/financial/2005_compliance_supp.html), which is not a complete reissuance of the 2004 edition. The circular governs audits of entities that receive federal funds. The 2005 supplement addresses only new or significantly changed information on agency program requirements and clusters of programs. For 2005 planning and review purposes, therefore, auditors should use both the 2004 and 2005 supplements. The AICPA audit and accounting guide, Government Auditing Standards and Circular A-133 Audits (# 012745JA), is available at www.cpa2biz.com.

The Institute and the Department of Labor’s Employee Benefit Security Administration (EBSA) are conducting seminars with state CPA societies for small business clients on how to establish and administer pension, health and other employee benefit plans. Ian MacKay, director of the AICPA Employee Benefit Plan Audit Quality Center (http://ebpaqc.aicpa.org), said, “Since most companies don’t offer pensions, it’s essential to educate them on how to set up benefit plans and help their employees participate in them. As trusted business advisers, CPAs are ideally qualified to guide businesses in such efforts.” For information, e-mail educationcampaignseminars@dol.gov.

The SEC invited mutual funds to join other registrants already voluntarily submitting their filings electronically in extensible business reporting language (XBRL) format (www.sec.gov/spotlight/xbrl.htm). The commission will assess registrants’ ability to properly tag their data in XBRL and will weigh the benefits of tagged data. Information on XBRL is available at www.xbrl.org.

The Governmental Accounting Standards Board’s (GASB) new Guide to Implementation of GASB Statements 43 and 45 on Other Postemployment Benefits can help preparers and auditors implement recent GASB standards on accounting and reporting for health care and other nonpension benefits provided to retirees. To order the guide (# GQA43/45), go to http://store.yahoo.com/gasbpubs/gqa43-45.html or call 800-748-0659.

The Federal Accounting Standards Advisory Board issued Statement of Federal Financial Accounting Standards (SFFAS) 30, Inter-Entity Cost Implementation: Amending SFFAS 4, Managerial Cost Accounting Standards and Concepts (www.fasab.gov/pdffiles/sffas30aug2005.pdf; see Official Releases, page 108). SFFAS 30 requires full implementation of the interentity cost provision in SFFAS 4 for reporting periods beginning after September 30, 2008.

A revised audit program the Department of Agriculture’s Office of Inspector General (OIG) issued in September 2004 is effective for periods ending on or after December 31, 2005 (www.usda.gov/oig/webdocs/). In response to OIG concerns about potential fraud, the guidance introduces audit procedures designed to detect any diversion of project funds in the department’s Rural Rental Housing program.

The AICPA Audit Committee Effectiveness Center issued “SOX Section 404: Responding to an Adverse Report—A Checklist for the Audit Committee,” which can be downloaded free at www.aicpa.org/audcommctr. The checklist provides an overview of the Sarbanes-Oxley Act’s internal control evaluation requirements and specifies actions audit committees should take in response to adverse reports.

The International Accounting Standards Board (IASB) issued one standard and amended three others (www.iasb.org). International Financial Reporting Standard (IFRS) 7, Financial Instruments: Disclosures, introduces requirements to improve information on financial instruments in entities’ financial statements, replacing International Accounting Standard (IAS) 30, Disclosures in the Financial Statements of Banks and Similar Institutions, and some of the requirements in IAS 32, Financial Instruments: Disclosure and Presentation. A complementary issuance, Amendment to IAS 1, Presentation of Financial Statements—Capital Disclosures, introduces requirements for disclosures about an entity’s capital. Limited amendments to IAS 39, Financial Instruments: Recognition and Measurement, and IFRS 4, Insurance Contracts, are intended to ensure issuers of financial guarantee contracts include related liabilities in their balance sheets.

The International Federation of Accountants’ (IFAC) new International Guidance Document on Environmental Management Accounting provides a framework and definitions for public accountants and auditors tracking or verifying environmental information in financial and other reports (www.ifac.org/store). IFAC also issued Request for Proposal: Development of a Guide to International Standards on Auditing for Use in Audits of Small- and Medium-sized Entities, which solicits assistance in developing implementation guidance (www.ifac.org). Comments are due November 18, 2005.

The Treasury Department’s Financial Crimes Enforcement Network released two sets of questions and answers on completing Form 104, Currency Transaction Report (www.fincen.gov/faq08122005.pdf), and on the applicability of Bank Secrecy Act requirements to new accounts opened by people displaced by Hurricane Katrina (www.fincen.gov/faqkatrinalead.pdf).

A white paper prepared by the AICPA’s Business and Industry Executive Committee reported that CPAs’ skills and values are well-suited to meet new demands facing chief financial officers. CPAs as CFOs: Why You Should Have a CPA in Your C-Suite says CPAs are particularly qualified to manage the unprecedented operational, financial and compliance risks of today’s global business environment. It’s available free at the AICPA’s newly launched Financial Management Center (http://fmcenter.aicpa.org).

Also available at the center are the results of the AICPA’s June 2005 Business and Industry Economic Outlook Survey, which found that fewer CPAs in senior finance positions were optimistic about the U.S. economy than six months earlier. Still, the great majority of respondents were hopeful about their own organizations’ prospects.

In response to its governing council’s authorizing an effort to educate members and elicit their comments on achieving greater transparency of peer review results, the Institute has gathered member feedback directly and through state societies, town hall meetings, a dedicated Web site (www.aicpa.org/transparency/index.htm) and an online poll. A status report on these activities is available at www.aicpa.org/transparency/pr_update_7_05.htm.

The AICPA reported that 54,000 accounting majors graduated in 2004, up 19% from 2000. Enrollments in accounting programs also are up 19% for the four-year period. According to the 2005 edition of the Institute’s annual study, The Supply of Accounting Graduates and the Demand for Public Accounting Recruits, firms of all sizes are projecting double-digit percentage increases in their hiring of new accounting graduates through 2009. The report is available free at http://ceae.aicpa.org.

A joint task force of the AICPA, the National Association of State Boards of Accountancy and Thomson Prometric Inc. reported the results of its research into why enrollment for the CPA exam declined to 52,000 in the first year of computerized testing from 82,000 the year before. According to the CBT Volume Task Force report, candidates, employees and employers continued to value the CPA credential highly; candidates and employers also said the conversion to a computerized test was an improvement and exam fees were not an obstacle. Candidates most frequently cited work and family commitments as reasons for not taking the exam; they also said they felt no pressure from employers to take it and, because the test is offered on demand, procrastinated in scheduling it. The report recommended ways employers, exam course providers and state societies can help induce more candidates to sit for the exam. It’s available at www.cpa-exam.org/download/volumetaskforcerept605.pdf.

The Institute launched the AICPA Tax Center (www.aicpa.org/tax), offering news related to taxation, information on tax professional standards and the Institute’s tax advocacy activities, and access to premium resources, including The Tax Adviser magazine, tax practice guides and checklists, and discussion forums focused on specific aspects of taxation.

Christopher Cox became chairman of the SEC in August, replacing William H. Donaldson. SEC Chief Accountant Donald T. Nicolaisen resigned in October to return to the private sector, and PCAOB Chairman William J. McDonough said he will step down by the end of November. Their successors had not yet been identified as the JofA went to press.

The SEC’s Division of Corporation Finance chose Andrew J. McLelland, CPA and assistant professor at Auburn University, for a one-year term as its academic accounting fellow. He will interpret research, assist in rule making and act as a liaison with professional standard-setting entities.

The AICPA added the brochures and speeches, “College Planning: Easing the Financial Burden” and “Securing Your Business Financing,” to its CPA Marketing Tool Kit (www.aicpa.org/cpamarketing). The tool kit is designed to help members better market their services through presentations and printed materials for local business and community groups.

The IRS and the Department of the Treasury released their 2005–2006 Priority Guidance Plan, which lists the tax issues on which they will issue formal legal guidance next year (www.irs.gov/pub/irs-utl/2005-2006). It reflects suggestions from taxpayers, tax practitioners and industry groups and contains 254 projects dealing with tax topics that affect individuals, corporations, charities, international transactions and employee benefit plans. For copies, call the Treasury’s Office of Public Affairs at 202-622-2960.

The Treasury Department’s Office of Technical Assistance is seeking used journals, magazines and books on public finance, budgeting and financial analysis for its training activities in developing nations. For more information or to make a donation, contact Thomas Glen at tglen@ota.treas.gov or 202-622-5817.

Ernst & Young released IFRS/U.S. GAAP Comparison, an analysis of the two canons’ provisions. The volume, published by the International Accounting Standards Committee Foundation—parent of the International Accounting Standards Board—and LexisNexis Butterworths, can be ordered at www.ey.com/global/content.nsf/uk/fr_-_gaap_comparisons.

The JofA earned honors in the 2005 International Federation of Accountants’ Articles of Merit competition. “Enterprising Views of Risk Management” by Russ Banham (JofA, Jun.04, page 65) was cited for its distinguished contribution to management accounting. The winning entries can be downloaded free at www.ifac.org/store.