Exposure Drafts, Comment Letters, and Statements of Position

Follow

• 

  Proposed statement of position : accounting for costs of materials and activities of not-for-profit organizations and state and local governmental entities that include a fund-raising appeal :(a revision of SOP 87-2, Accounting for joint costs of informational materials and activities of not-for-profit organizations that include a fund-raising appeal);Accounting for costs of materials and activities of not-for-profit organizations and state and local governmental entities that include a fund-raising appeal :(a revision of SOP 87-2, Accounting for joint costs of informational materials and activities of not-for-profit organizations that include a fund-raising appeal); Exposure draft (American Institute of Certified Public Accountants), 1993, Sept. 10

  American Institute of Certified Public Accountants. Not-for-Profit Organizations Committee

  This proposed statement of position (SOP) would supersede SOP 87-2, Accounting for Joint Costs of Informational Materials and Activities of Not-for-Profit Organizations That Include a Fund-Raising Appeal. The scope of this proposed SOP would be broader than the scope of SOP 87-2, because this proposed SOP would apply to all not-for-profit organizations (NPOs) and state and local governmental entities that report expenses or expenditures by function. It would amend the following, which include guidance for accounting for the costs of informational materials and activities that include a fund-raising appeal: 1. AICPA Industry Audit Guide Audits of Voluntary Health and Welfare Organizations; 2. SOP 78-10, Accounting Principles and Reporting Practices for Certain Nonprofit Organizations; 3. AICPA Audit and Accounting Guide Audits of Certain Nonprofit Organizations. Also, it would be applied by all not-for-profit organizations and state and local governmental entities in determining fund-raising costs. This proposed SOP sets forth the following: 1. The costs of all materials and activities that include a fund-raising appeal should be reported as fund-raising costs, including costs that are otherwise clearly identifiable with program or management and general functions, unless a bona fide program or management and general function has been conducted in conjunction with the appeal for funds. 2. If a bona fide program or management and general function has been conducted in conjunction with an appeal for funds, the joint costs of those activities should be allocated. Costs that are clearly identifiable with fund-raising, program, or management and general functions should be charged to that cost objective. 3. Criteria of purpose, audience, and content must be met in order to conclude that a bona fide program or management and general function has been conducted in conjunction with the appeal for funds. (The flowchart in Appendix B on page 29 illustrates the decision-making process for applying the conclusions in the SOP.) 4. Some commonly used and acceptable allocation methods are described and illustrated though no methods are prescribed or prohibited. 5. Certain information must be disclosed if joint costs are allocated. The proposed SOP would be effective for financial statements for years beginning on or after its issuance date. Earlier application would be encouraged in fiscal years for which financial statements have not been issued.

• 

  Proposed statement of position : Reporting of related entities by not-for-profit organizations;Reporting of related entities by not-for-profit organizations; Exposure draft (American Institute of Certified Public Accountants), 1993, May 19

  American Institute of Certified Public Accountants. Not-for-Profit Organizations Committee

  This proposed statement of position (SOP) amends and makes uniform the guidance concerning reporting related entities in the following AICPA publications: 1. Industry Audit Guide Audits of Voluntary Health and Welfare Organizations; 2. Industry Audit Guide Audits of Colleges and Universities; 3. SOP 78-10, Accounting Principles and Reporting Practices for Certain Nonprofit Organizations; 4. Audit and Accounting Guide Audits of Certain Nonprofit Organizations. The conclusions in this proposed SOP are based on the premise that (1) whether the financial statements of a reporting not-for-profit organization and those of one or more other not-for-profit or for-profit entities should be consolidated and (2) the extent of disclosure that should be required, if any, if consolidated financial statements are not presented should be based on the nature of the relationship between the entities. The guidance in this proposed SOP focuses on (1) investments in for-profit entities and (2) financially interrelated not-for-profit organizations. That guidance includes the following: A. Investments in For-Profit Entities: 1. A reporting not-for-profit organization should include in its consolidated financial statements the financial position and results of operations of a for-profit entity in which it has a majority ownership interest if the guidance in Accounting Research Bulletin (ARB) No. 51, as amended by Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 94, requires consolidation. The manner in which the for-profit entity's financial position and results of operations are presented in the reporting organization's financial statements depends on the nature of the activities of the for-profit entity. 2. Except as specified below, a reporting not-for-profit organization should use the equity method in conformity with Accounting Principles Board (APB) Opinion No. 18 to report an investment in a for-profit entity in whose voting common stock it has a 50 percent or less voting interest, if the guidance in that Opinion would require the use of the equity method. 3. Some AICPA audit guides applicable to some not-for-profit organizations permit investment portfolios to be reported at market value. Not-for-profit organizations that choose to report investment portfolios at market value in conformity with AICPA audit guides may continue to do so instead of reporting those investments by the equity method, which would otherwise be required by this proposed SOP. B. Financially Interrelated Not-for-Profit Organizations: 1. A not-for-profit organization that owns more than 50 percent of the outstanding voting shares of another not-for-profit organization should consolidate that other organization unless control is likely to be temporary or does not rest with the majority owner, as discussed in paragraph 13 of FASB Statement No. 94. 2. A not-for-profit organization should consolidate the financial statements of another not-for-profit organization if the reporting not-for-profit organization has both control of the other not-for-profit organization, as evidenced by either majority ownership or a majority voting interest in the board of the other not-for-profit organization, and an economic beneficial interest in the other not-for-profit organization, unless control is likely to be temporary or does not rest with the majority owner, as discussed in paragraph 13 of FASB Statement No. 94. 3. A not-for-profit organization may exercise control of a separate not-for-profit organization in which it has an economic beneficial interest by means other than majority ownership or a majority voting interest in the board of the other not-for-profit organization. In such circumstances, the not-for-profit organization is permitted, but not required, to consolidate the financial statements of the other not-for-profit organization, subject to the exception in the previous bullet. If consolidated financial statements are not presented, the not-for-profit organization should make the financial statement disclosures specified in paragraph 33. 4. If either (but not both) control or an economic beneficial interest exists, the financial statement disclosures required by FASB Statement No. 57, Related Party Disclosures, should be made. The conclusions in this proposed SOP will be reconsidered when the FASB completes its project on consolidations and related matters, which may affect the definition of control and other related matters. This proposed SOP is effective for fiscal years beginning on or after its date of issuance, with earlier application encouraged. Comparative financial statements for earlier periods included with those for the period in which this proposed SOP is adopted should be restated.

• 

  Proposed statement of position : the application of the requirements of accounting research bulletins, opinions of the Accounting Principles Board, and statements and interpretations of the Financial Accounting Standards Board to not-for-profit organizations;Application of the requirements of accounting research bulletins, opinions of the Accounting Principles Board, and statements and interpretations of the Financial Accounting Standards Board to not-for-profit organizations; Exposure draft (American Institute of Certified Public Accountants), 1993, May 19

  American Institute of Certified Public Accountants. Not-for-Profit Organizations Committee

  This proposed statement of position (SOP) would provide guidance on the application of Accounting Research Bulletins (ARBs), Opinions of the Accounting Principles Board (APB) of the American Institute of Certified Public Accountants (AICPA), and Statements and Interpretations of the Financial Accounting Standards Board (FASB) to not-for-profit organizations. This proposed SOP provides that not-for-profit organizations should follow the guidance in effective provisions of ARBs, APB Opinions, and FASB Statements and Interpretations except for specific pronouncements that explicitly exempt not-for-profit organizations. Also, it includes interpretive comments concerning the application of certain pronouncements.

• 

  Comment letters on exposure draft Omnibus Proposal of Professional Ethics Division Interpretations and Rulings

  American Institute of Certified Public Accountants. Professional Ethics Executive Committee

• 

  Omnibus proposal of Professional Ethics Division interpretations and rulings; Exposure draft (American Institute of Certified Public Accountants), 1993, May 19

  American Institute of Certified Public Accountants. Professional Ethics Executive Committee

  1. PROPOSED INTERPRETATION UNDER RULE 101: Independence and Cooperative Arrangements With Clients; 2. PROPOSED ETHICS RULING UNDER RULE 101: Indemnification Clause in Engagement Letters; 3. PROPOSED ETHICS RULING UNDER RULE 101: Agreement With Attest Client to Use ADR Techniques; 4. PROPOSED ETHICS RULING UNDER RULE 101: Commencement of ADR Proceeding; 5. PROPOSED ETHICS RULING UNDER RULE 101: Auditors Performance of Certain Internal Audit Services; 6. PROPOSED ETHICS RULING UNDER RULE 101: Members Loan From a Nonclient Subsidiary of an Attest Client Parent Company; 7. PROPOSED REVISION OF INTERPRETATION 101-9 UNDER RULE 101: The Meaning of Certain Independence Terminology and the Effect of Family Relationships on Independence; 8. PROPOSED REVISION OF ETHICS RULING NO. 60 UNDER RULE 101: Employee Benefit Plans—Members Relationships With Participating Employer(s); 9. PROPOSED REVISION OF ETHICS RULING NO. 67 UNDER RULE 101: Servicing of Loan; 10. PROPOSED DELETION OF RULING NO. 13 UNDER RULE 101: Member as Bank Stockholder; 11. PROPOSED INTERPRETATION UNDER RULE 102: Obligations of a Member to His or Her Employers External Accountant; 12. PROPOSED INTERPRETATION UNDER RULE 102: Subordination of Judgment by a Member; 13. PROPOSED INTERPRETATION UNDER RULE 203: Responsibility of Employees for the Preparation of Financial Statements in Conformity With GAAP; 14. PROPOSED ETHICS RULING UNDER RULE 301: Disclosure of Confidential Client Information to Professional Liability Insurance Carrier; 15. PROPOSED REVISION OF ETHICS RULING NO. 158 UNDER RULE 505: Operation of Separate Data Processing Business by a Public Practitioner; 16. PROPOSED DELETION OF ETHICS RULING NO. 180 UNDER RULE 505: Side Businesses Which Offer Services of a Type Performed by CPAs

• 

  Comment letters on Performing and Reporting on Off-Site Quality Reviews

  American Institute of Certified Public Accountants. Quality Review Executive Committee

• 

  Proposed amendments to standards for performing and reporting on quality reviews : performing and reporting on off-site quality reviews;Performing and reporting on off-site quality reviews; Exposure draft (American Institute of Certified Public Accountants), 1993, Jun. 15

  American Institute of Certified Public Accountants. Quality Review Executive Committee

  The Quality Review Executive Committee (QREC) is considering the issuance of these proposed amendments to the Standards for Performing and Reporting on Quality Reviews to enhance on-site and off-site quality reviews and eliminate some of the differences between the two types of reviews. The proposed amendments would bring about significant changes in the performance and reporting on quality reviews. The proposed amendments: 1. Allow associations of CPA firms to arrange and carry out off-site quality reviews in the same manner as they arrange and carry out on-site quality reviews. 2. Require all individuals performing on-site and off-site quality reviews (a) to be currently active in the practice of public accounting (b) to have five years of recent experience in the accounting and/or auditing function of a firm enrolled in one of the AICPA practice-monitoring programs, and (c) to have attended an applicable reviewer's training course. 3. Require letters of comments to be issued in conjunction with off-site quality review reports so reviewers can more easily report on deficiencies detected during the review. These letters of comments also provide reviewers the opportunity to make useful recommendations for correcting the deficiencies detected. 4. Allow the AICPA Quality Review Executive Committee to report certain matters to the AICPA Professional Ethics Division for investigation and disposition. 5. Define "substandard engagements" for purposes of the quality review program. These proposed amendments would revise and add to the existing Standards. For purposes of this exposure draft, the language to be revised is shown with a line drawn through it and the new language is presented in boldface italics. The proposed amendments are expected to become effective with quality reviews conducted on or after April 1, 1994.

• 

  Comment letters on Proposed Statements on Responsibilities in Personal Financial Planning Practice: Working With Other Advisers and Implementation Engagement Functions and Responsibilities

  American Institute of Certified Public Accountants. Statements on Responsibilities in PFP Practice Subcommittee

• 

  Proposed statements on responsibilities in personal financial planning practice : Working with other advisers : Implementation engagement functions and responsibilities;Working with other advisers;Implementation engagement functions and responsibilities; Exposure draft (American Institute of Certified Public Accountants), 1993, May 10

  American Institute of Certified Public Accountants. Statements on Responsibilities in PFP Practice Subcommittee and American Institute of Certified Public Accountants. Personal Financial Planning Executive Committee

  These proposed Statements on Responsibilities in Personal Financial Planning Practice (SRPFPs) are intended to provide guidance to members of the AICPA who perform personal financial planning services. The proposed SRPFPs are advisory and do not constitute enforceable technical standards under rule 202 of the AICPA Code of Professional Conduct. The proposed SRPFPs do not supersede Statements on Standards for Accounting and Review Services, Statements on Responsibilities in Tax Practice, the Personal Financial Statements Guide, or the Guide for Prospective Financial Statements. The issuance of these exposure drafts was approved by the PFP Executive Committee. Working With Other Advisers This proposed SRPFP provides guidance to CPAs who use the advice of other advisers or refer a client to other advisers in connection with personal financial planning engagements. It provides guidance on engagement scope limitations, selecting other advisers, using advice provided by other advisers, and recommending other advisers to clients. The proposed SRPFP recommends that CPAs disclose limitations that have been placed on the scope of engagements. Sample disclosures are contained in the proposed SRPFP. Implementation Engagement Functions and Responsibilities This proposed SRPFP defines implementation as taking action on personal financial planning decisions, explains how CPAs may assist in implementation, and indicates that implementation is typically completed when all recommended products are acquired or services rendered. The proposed SRPFP provides guidance on planning implementation engagements, communicating with clients, establishing selection criteria, participating in the selection process, and implementing planning decisions developed by others. The proposed SRPFP recommends that CPAs disclose the limitations that have been placed on the information used or the work performed in developing recommendations and contains a sample disclosure. The appendixes to the proposed SRPFP include a flowchart explaining how CPAs might assist in implementation and illustrations of situations in which a CPA has been engaged by a client to implement personal financial planning decisions to purchase disability insurance and to invest funds for postretirement needs.

• 

  Proposed statement of position : Identifying and accounting for real estate loans that qualify as real estate investments;Identifying and accounting for real estate loans that qualify as real estate investments; Exposure draft (American Institute of Certified Public Accountants), 1993, Oct. 27

  American Institute of Certified Public Accountants. Task Force on ADC Arrangements

  This proposed statement of position (SOP) applies to all entities that make or acquire real estate loans. It provides guidance on identifying and accounting for real estate loans that qualify as real estate investments for financial reporting purposes. Such loans may include real estate acquisition, development, and construction (ADC) loans, loans on operating real estate, convertible mortgages, and shared appreciation (participating) mortgages. It requires real estate loans that do not meet certain criteria to be classified and accounted for as real estate investments. For purposes of applying this proposed SOP, a loan classified and accounted for as a real estate investment is considered the equivalent of an investment by the lender in a hypothetical partnership, the assets of which include the subject real estate. This proposed SOP does not apply to (1) troubled debt restructurings, foreclosures, or in-substance foreclosures relating to real estate loans accounted for as loans using the criteria set forth in this proposed SOP, (2) debtors, (3) real estate loans resulting from the lender's sale of real estate, (4) permanent mortgage real estate loans on one-to four-family residential properties, or (5) small real estate loans evaluated for impairment by the lender in the aggregate. The proposed SOP supersedes the guidance in the February 10, 1986, AICPA Notice to Practitioners, ADC Arrangements (the third Notice), which was carried forward in the AICPA Accounting Standards Executive Committee (AcSEC) Practice Bulletin 1, Purpose and Scope of AcSEC Practice Bulletins and Procedures for Their Issuance. This proposed SOP should be applied to real estate loans entered into or purchased after December 31, 1994. Earlier application is encouraged. The following highlights significant differences between the provisions of the proposed SOP and the third Notice. The proposed SOP clarifies the scope by stating that it applies to all entities that make or acquire real estate loans. The proposed SOP incorporates the consensus reached in the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 86-21, Application of the AICPA Notice to Practitioners Regarding Acquisition, Development, and Construction Arrangements to Acquisition of an Operating Property, that extends the concepts of the third Notice to operating properties. The third Notice applies to ADC arrangements in which the lender participates in expected residual profits from the underlying real estate project. The proposed SOP's primary focus is on the assumption of risk. In this regard, while the presence of an expected residual sharing arrangement typically will coincide with classifying a loan as an investment in real estate, it is not a specific criterion for determining the classification. Both the third Notice and the proposed SOP refer to a borrower's equity investment that is "substantial" to the project. Among other revisions, the proposed SOP clarifies that substantial should be evaluated in terms of the minimum initial investment tests described in FASB Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate. The proposed SOP, similar to the third Notice, provides that a loan initially classified as an investment may be reclassified as a loan if one or more of the loan characteristics in paragraph 12 of the proposed SOP are met. However, unlike the third Notice, the proposed SOP does not permit or require reclassification from loans to investments unless the underlying loans are renegotiated in other than a troubled debt restructuring.

• 

  Comment letters on Proposed Statement of Position: Disclosure of certain Significant Risks and Uncertainities and Financial Flexibilityrt

  American Institute of Certified Public Accountants. Task Force on Risks and Uncertainties

• 

  Proposed statement of position : Disclosure of certain significant risks and uncertainties and financial flexibility;Disclosure of certain significant risks and uncertainties and financial flexibility; Exposure draft (American Institute of Certified Public Accountants), 1993, Mar. 31

  American Institute of Certified Public Accountants. Task Force on Risks and Uncertainties

  This proposed statement of position (SOP) would require all reporting entities (including business enterprises, not-for-profit organizations, and state and local governments) that prepare financial statements in conformity with generally accepted accounting principles to include in their financial statements disclosures about: 1. The nature of their operations. 2. Use of estimates in the preparation of financial statements. In addition, if specified disclosure criteria are met, it would require such entities to include in their financial statements disclosures about: 1. Certain significant estimates. 2. Current vulnerability due to concentrations. 3. Financial flexibility. The provisions of this proposed SOP would be effective for financial statements issued for fiscal years ending after December 15,1994, and for financial statements for interim periods in fiscal years subsequent to the year for which the proposed SOP is first applied. Early application is encouraged but not required.

• 

  Comment letters on proposed SOP, Reporting on Required Supplementary Information Accompanying Compiled or Review Financial Statements of Common Interest Realty Associations

  American Institute of Certified Public Accountants. Accounting and Review Services Committee

• 

  Proposed statement of position : reporting on required supplementary information accompanying compiled or reviewed financial statements of common interest realty associations : proposed supplement to the AICPA audit and accounting guide, Common interest realty associations;Reporting on required supplementary information accompanying compiled or reviewed financial statements of common interest realty associations : proposed supplement to the AICPA audit and accounting guide, Common interest realty associations; Exposure draft (American Institute of Certified Public Accountants), 1992, Oct. 26

  American Institute of Certified Public Accountants. Accounting and Review Services Committee

  The AICPA Audit and Accounting Guide Common Interest Realty Associations (the CIRA guide) requires common interest realty associations (CIRAs) to disclose certain supplementary information outside of the basic financial statements. This requirement also applies to nonpublic CIRAs whose financial statements are compiled or reviewed in accordance with Statements on Standards for Accounting and Review Services (SSARSs). Paragraph 43 of SSARS No. 1, Compilation and Review of Financial Statements, describes the accountant's responsibility when the financial statements are accompanied by information voluntarily presented for supplementary analysis purposes; however, SSARSs do not address the accountant's responsibility when the financial statements are accompanied by required supplementary information. This proposed SOP augments chapter 8, "Review and Compilation Engagements," of the CIRA guide by providing accountants with performance and reporting guidance when required supplementary information accompanies the basic financial statements in compilation and review engagements. The proposed SOP: 1. Requires that the accountant, at a minimum, compile the required supplementary information accompanying compiled or reviewed financial statements. 2. Specifies the procedures that should be performed when compiling the required supplementary information. 3. Refers the accountant to the Statement on Standards for Attestation Engagements, Attestation Standards (AICPA, Professional Standards, vol. 1, AT sec. 100) for guidance on reviewing the required supplementary information.

• 

  Proposed statement on standards for accounting and review services : omnibus statement on standards for accounting and review services--1992;Omnibus statement on standards for accounting and review services--1992; Exposure draft (American Institute of Certified Public Accountants), 1992, March 18

  American Institute of Certified Public Accountants. Accounting and Review Services Committee

  The Accounting and Review Services Committee is issuing this proposed statement on standards for accounting and review services (SSARS) to provide practitioners with improved guidance on compiling or reviewing an entity's financial statements. This proposed Statement amends various sections of SSARSs. Among the more significant provisions of the proposed Statement are amendments that: 1. Revise the wording of the SSARS review and compilation reports to clarify that the standards referred to in these reports are Statements on Standards for Accounting and Review Services. The revised wording will help readers differentiate the SSARS review report from the review report presented in Statement on Auditing Standards (SAS) No. 36, Review of Interim Financial Information (AICPA, Professional Standards, vol. 1, AU section 722). 2. Make obtaining a client representation letter a required, rather than an optional, procedure when performing a review engagement. 3. Eliminate the prohibition against merely typing or reproducing financial statements as an accommodation to a client. Guidance on this subject is now subsumed by Interpretation No. 16 of SSARS No. 1, "Determining If the Accountant Has 'Submitted' Financial Statements Even When Not Engaged to Compile or Review Financial Statements." 4. Delete SSARS No. 5, Reporting on Compiled Financial Statements, because the provisions of that Statement have been incorporated into SSARS Nos. 1, 2, and 3. This proposed Statement supersedes SSARS No. 1, paragraphs 1, 4, 7, 8,14,17, 21, 31, 32, 35, 36, 40, 44, 45, 46, 47, 48, 49, and Appendixes B, C, and D; SSARS No. 2, paragraphs 9, 10, and 30; SSARS No. 3, paragraph 3; and SSARS No. 4, paragraphs 1 and 3. It deletes SSARS No. 5.

• 

  Accounting for foreclosed assets; Statement of position 92-3;

  American Institute of Certified Public Accountants. Accounting Standards Executive Committee

• 

  Comment letters on Proposed SOP on Accounting for ESOPs

  American Institute of Certified Public Accountants. Accounting Standards Executive Committee

• 

  Comment letters received on the June 22, 1992, exposure draft, Reporting on Advertising Costs

  American Institute of Certified Public Accountants. Accounting Standards Executive Committee

• 

  Proposed statement of position : accounting for the results of operations of foreclosed assets held for sale;Accounting for the results of operations of foreclosed assets held for sale; Exposure draft (American Institute of Certified Public Accountants), 1992, Nov. 10

  American Institute of Certified Public Accountants. Accounting Standards Executive Committee

  Statement of Position (SOP) 92-3, Accounting for Foreclosed Assets, deals with the measurement of foreclosed assets after foreclosure. This proposed SOP provides guidance on accounting for the results of operations of foreclosed assets held for sale. It applies to all reporting entities except those that account for assets at fair value. It applies to all assets obtained through foreclosure that are considered held for sale, except for inventories, marketable equity securities, and real estate previously owned by the lender and accounted for under FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects. It does not apply to in-substance-foreclosed assets. This proposed SOP recommends the following: 1. Depreciation expense should be recognized on depreciable foreclosed assets held for sale commencing no later than one year after foreclosure. 2. The net of revenues and expenses related to operating or holding foreclosed assets held for sale should be credited or charged to income as a gain or loss on holding the assets.

• 

  Proposed statement of position : employers' accounting for employee stock ownership plans ;Employers' accounting for employee stock ownership plans; Exposure draft (American Institute of Certified Public Accountants), 1992, Dec. 21

  American Institute of Certified Public Accountants. Accounting Standards Executive Committee

  This proposed statement of position (SOP) would supersede AICPA SOP 76-3, Accounting Practices for Certain Employee Stock Ownership Plans, which was issued in December 1976. Since SOP 76-3 was issued, the reporting of transactions between employers and employee stock ownership plans (ESOPs) has become a source of accounting controversy. The importance of employers' financial reporting for ESOPs grew with increases in the number of plans and the amounts of stock held by the plans over the past decade. Furthermore, there have been significant changes in the tax and regulatory environment surrounding ESOPs and the structure and purpose of ESOPs have become more complex and diverse. Those developments called attention to the limitations of SOP 76-3, and therefore, the Accounting Standards Executive Committee (AcSEC) initiated a project to reconsider SOP 76-3, to consider ESOP reporting issues that are not specifically addressed in the accounting literature, and to develop principles for employers' financial reporting of ESOP transactions that provide more relevant and useful information. This proposed SOP, which provides guidance on employers' accounting for ESOPs, is a result of that project. It would apply to all employers with ESOPs, both leveraged and nonleveraged. The proposed SOP would bring about significant changes in the way employers report transactions with leveraged ESOPs. It recommends the following: 1. Employers would report the issuance of new shares or the sale of treasury shares to the ESOP when the issuance or sale occurs and would report a corresponding charge to unearned compensation, a contra-equity account. 2. For ESOP shares committed to be released to compensate employees directly, employers would recognize compensation cost equal to the fair value of the shares committed to be released. 3. For ESOP shares committed to be released to settle or fund liabilities for other employee benefits, such as an employer's match of employees' 401 (k) contributions or an employer's obligation under a formula profit-sharing plan, employers would report satisfaction of the liabilities when the shares are committed to be released to settle the liabilities. Compensation cost and liabilities associated with providing such benefits to employees would be recognized the way they would be if an ESOP had not been used to fund the benefit. 4. For ESOP shares committed to be released to replace dividends on allocated shares used for debt service, employers would report satisfaction of the liability to pay dividends when the shares are committed to be released for that purpose. 5. Employers would credit unearned compensation as the shares are committed to be released based on the cost of the shares to the ESOP. The difference between the amount reported based on the fair value of the shares and the amount credited to unearned compensation would be charged or credited to additional paid-in capital. 6. Employers would charge dividends on allocated ESOP shares to retained earnings. Employers would report dividends on unallocated shares as a reduction of debt or accrued interest or as compensation cost, depending on whether the dividends are used for debt service or paid to participants. 7. Employers would report redemptions of ESOP shares as purchases of treasury stock. 8. Employers would report loans from outside lenders to ESOPs as liabilities on their balance sheets and would report interest cost on the debt. Employers with internally leveraged ESOPs would not report the loan receivable from the ESOP as an asset and would not report the ESOP's debt as a liability. 9. For earnings-per-share computations, ESOP shares that have been committed to be released would be considered outstanding. ESOP shares that have not been committed to be released would not be considered outstanding. The proposed SOP, although it would not change the existing accounting for nonleveraged ESOPs, contains guidance for nonleveraged ESOPs. The proposed SOP also addresses issues concerning pension reversion ESOPs, ESOPs that hold convertible preferred stock, and terminations, as well as issues related to accounting for income taxes. The proposed SOP would be effective for fiscal years ending after December 15,1993. Employers would be required to apply the provisions of the proposed SOP to shares purchased by ESOPs after September 23, 1992, that have not been committed to be released as of the beginning of the year of adoption. Employers would be permitted, but not required, to apply the provisions of the proposed SOP to shares purchased by ESOPs on or before September 23, 1992, that have not been committed to be released as of the beginning of the year of adoption. However, all employers with ESOPs would be required to make the applicable disclosures in paragraph 54 of the proposed SOP.

• 

  Proposed statement of position : Reporting on advertising costs;Reporting on advertising costs; Exposure draft (American Institute of Certified Public Accountants), 1992, Jun. 22

  American Institute of Certified Public Accountants. Accounting Standards Executive Committee

  This proposed statement of position (SOP) provides guidance on financial reporting on advertising costs. The proposed SOP requires the following: 1. Reporting the costs of all advertising as expenses in the periods in which those costs are incurred, or the first time the advertising takes place, unless the advertising is direct-response advertising that results in probable future economic benefits (future benefits); 2. Reporting the costs of the future benefits of direct-response advertising as assets; 3. Amortizing the amounts reported as assets over the estimated period of the benefits. Also, this proposed SOP requires disclosure of certain information if the future benefits of direct-response advertising are reported as assets. This proposed SOP would amend the following AICPA statements of position: 1. SOP 88-1, Accounting for Developmental and Preoperating Costs, Purchases and Exchanges of Take-off and Landing Slots, and Airframe Modifications, paragraph 22; 2. SOP 89-5, Financial Accounting and Reporting by Providers of Prepaid Health Care Services, paragraph 55; 3. SOP 90-8, Financial Accounting and Reporting by Continuing Care Retirement Communities This proposed SOP would be effective for financial statements for years beginning approximately one year after its issuance date. Earlier application would be encouraged in fiscal years for which financial statements have not previously been issued. Costs incurred before initial application of this SOP, regardless of whether or not they are reported as assets, should not be adjusted to the amounts that would have been reported as assets had this SOP been in effect when those costs were incurred. However, the concepts included in the provisions of paragraphs 40 and 41 (amortization), paragraph 42 (net-realizable-value test), and paragraphs 43 and 44 (disclosures) should be applied to any unamortized costs reported as assets before initial application of this proposed SOP that continue to be reported as assets after the effective date. In the year in which this proposed SOP is first applied, the financial statements should disclose the nature of the accounting changes adopted to conform to the provisions of this proposed SOP, and their effect on income before extraordinary items, net income, and related per share amounts.

• 

  Proposed statement of position : Rescission of Accounting Principles Board statements ;Rescission of Accounting Principles Board statements; Exposure draft (American Institute of Certified Public Accountants), 1992, Jul. 20

  American Institute of Certified Public Accountants. Accounting Standards Executive Committee

  This proposed statement of position (SOP) would formally rescind Accounting Principles Board (APB) Statements 1 through 4, which do not have standing as rules or standards required to be observed by members of the Institute by rule 203 of the Code of Professional Conduct and have been substantially superseded by subsequent pronouncements of the Financial Accounting Standards Board. THIS PROPOSED SOP WILL NOT AFFECT APB OPINIONS, WHICH ARE SEPARATE AND DISTINCT FROM APB STATEMENTS.

• 

  Comment letters on Proposed Statement on Standards for Attestation Engagements Reporting on an Entity’s Internal Control Structure Over Financial Reporting

  American Institute of Certified Public Accountants. Auditing Standards Board

• 

  Proposed statement on standards for attestation engagements : reporting on an entity's internal control structure over financial reporting : supersedes SAS No. 30, Reporting on internal accounting control;Reporting on an entity's internal control structure over financial reporting : supersedes SAS No. 30, Reporting on internal accounting control; Exposure draft (American Institute of Certified Public Accountants), 1992, Apr. 20

  American Institute of Certified Public Accountants. Auditing Standards Board

  The Auditing Standards Board is considering the issuance of this proposed statement on standards for attestation engagements to provide guidance to practitioners who are engaged to examine and report on management's written assertion about the effectiveness of an entity's internal control structure over financial reporting. This proposed Statement provides guidance to assist the practitioner in: 1. Accepting an engagement. 3. Obtaining an understanding of the internal control structure. 4. Testing and evaluating the design effectiveness and the operating effectiveness of internal control structure policies and procedures. 5. Forming an opinion on management's assertion, using material weakness as the basis for determining whether the 6. Communicating reportable conditions. This proposed guidance would apply to auditors of insured depository institutions who examine management's assertions about the effectiveness of the internal control structure over financial reporting, as required by the Federal Deposit Insurance Corporation Improvement Act of 1991. This proposed Statement would supersede Statement on Auditing Standards (SAS) No. 30, Reporting on Internal Accounting Control (AICPA, Professional Standards, vol. 1, AU sec. 642). It differs from SAS No. 30 in that the proposed Statement: 1. Requires practitioners to consider whether management's assertion is based on reasonable criteria against which it can be evaluated, and whether the assertion is capable of reasonably consistent estimates or measurement using those criteria. (Unlike SAS No. 30, this proposed Statement does not define the specific criteria.) 2. Precludes the practitioner from reporting directly on the company's internal control structure. (Unlike SAS No. 30, this proposed Statement does not allow the practitioner to report directly on the company's internal control structure. Instead, the practitioner reports on management's assertion only.) 3. Precludes the practitioner from issuing a public report unless management's assertion is included in a separate written report that accompanies the practitioner's report. 4. Requires the practitioner to limit his or her report on management's assertion about the company's internal control structure when management elects to present its assertion only in a representation letter and not in a separate written report. 5. Updates the definition of internal control, including terminology and concepts that are consistent with SAS No. 55, Consideration of the Internal Control Structure in a Financial Statement Audit.

• 

  Questions and answers on the term reasonably objective basis and other issues affecting prospective financial statements : February 10, 1992, amendment to AICPA Guide for prospective financial statements; Statement of position 92-2;

  American Institute of Certified Public Accountants. Auditing Standards Division

• 

  Information for CPA Candidates, Eleventh Edition, Effective May 1994; Exposure draft (American Institute of Certified Public Accountants), 1992, Dec. 21

  American Institute of Certified Public Accountants. Board of Examiners

• 

  Proposed audit and accounting guide : audits of credit unions ;Audits of credit unions; Exposure draft (American Institute of Certified Public Accountants), 1992, March 20

  American Institute of Certified Public Accountants. Credit Unions Committee

  This proposed audit and accounting guide has been prepared to assist the independent auditor in auditing and reporting on the financial statements of credit unions. It describes relevant matters or procedures unique to these entities and focuses on specific problems of accounting, auditing, and reporting on their financial statements. This proposed guide would supersede the AICPA Audit and Accounting Guide Audits of Credit Unions issued in 1986. One objective of this proposed guide is to heighten auditors' awareness of the complex issues encountered in audits of credit unions' financial statements. Interest-rate risk, liquidity, asset quality, and internal control structure are among the most important concerns in the credit union industry. These areas should also be essential considerations in the auditor's assessment of risk at the financial statement level. A credit union's management must exercise considerable skill and judgment to manage interest-rate risk and maintain liquidity, asset quality, and an effective internal control structure. Similarly, the auditor of a credit union's financial statements should exercise considerable skill and judgment when considering these matters in planning and performing an audit. Interest-rate risk, liquidity, asset quality, internal control structure, and their effect on the auditor's consideration of risk at the account-balance or class-of-transactions level are each discussed in this proposed guide. This proposed guide also describes relevant specific internal control structure policies and procedures and auditing procedures. Further, it stresses the need for industry knowledge and training in auditing certain areas, including the allowance for loan losses. Significant accounting matters addressed in this proposed guide include establishing an adequate allowance for loan losses, valuing real estate acquired, accounting for mortgage-banking activities, accounting for business combinations, and accounting for investment securities held by a credit union. This proposed guide includes illustrations of the form and content of financial statements for credit unions and the auditor's report thereon.

• 

  Accounting and reporting by health and welfare benefit plans, August 3, 1992 : amendment to AICPA audit and accounting guide, Audit of employee benefit plans; Statement of position 92-6;

  American Institute of Certified Public Accountants. Employee Benefit Plans Committee

• 

  Audits of state and local governmental entities receiving federal financial assistance : supplement to AICPA Audit and accounting guide, Audits of state and local governmental units; Statement of position 92-7;

  American Institute of Certified Public Accountants. Government Accounting and Auditing Committee

• 

  Auditing property/casualty insurance entities' statutory financial statements : applying certain requirements of the NAIC annual statement instructions; Statement of position 92-8;

  American Institute of Certified Public Accountants. Insurance Companies Committee

• 

  Auditing insurance entities' loss reserves : May 29, 1992 supplement to AICPA Audit and accounting guide, Audits of property and liability insurance companies; Statement of position 92-4;

  American Institute of Certified Public Accountants. Insurance Companies Committee. Auditing Insurance Entities' Loss Reserves Task Force

• 

  Accounting for foreign property and liability reinsurance : June 1, 1992 supplement to AICPA Audit and accounting guide : Audits of property and liability insurance companies; Statement of position 92-5;

  American Institute of Certified Public Accountants. Insurance Companies Committee. Reinsurance Auditing and Accounting Task Force

• 

  Proposed statement of position : financial accounting and reporting for high-yield debt securities by investment companies : proposed amendment to AICPA Audit and accounting guide, Audits of investment companies ;Financial accounting and reporting for high-yield debt securities by investment companies : proposed amendment to AICPA Audit and accounting guide, Audits of investment companies; Exposure draft (American Institute of Certified Public Accountants), 1992, March 4

  American Institute of Certified Public Accountants. Investment Companies Committee

  This proposed statement of position (SOP) provides guidance on financial reporting by investment companies for high-yield debt securities held as investments. Although the focus of this proposed SOP is on high-yield debt securities, certain guidance is also applicable to other debt securities held as investments by investment companies. It recommends the following: 1. Using the effective-interest method to report interest income on payment-in-kind (PIK) bonds and step bonds; 2. Writing off interest receivable on defaulted high-yield debt securities in accordance with Financial Accounting Standards Board Statement No. 5, Accounting for Contingencies, and allocating the write-off between income, for the portion that had been recognized as income, and the cost of the related investment for the portion purchased; 3. Reporting capital infusions in support of high-yield debt securities as additions to cost; reporting other expenditures, excluding workout expenditures, as additions to cost only to the extent that they increase legally enforceable claims against the issuer of the securities; and reporting workout expenditures as operating expenses; 4. Procedures to be considered by auditors for reviewing the valuations of high-yield debt securities to be reported in financial statements.

• 

  Proposed statement of position : foreign currency accounting and financial statement presentation for investment companies : proposed amendment to AICPA audit and accounting guide, Audits of investment companies ;Foreign currency accounting and financial statement presentation for investment companies : proposed amendment to AICPA audit and accounting guide, Audits of investment companies; Exposure draft (American Institute of Certified Public Accountants), 1992, Jun. 5

  American Institute of Certified Public Accountants. Investment Companies Committee

  This proposed statement of position (SOP) amends the third edition, revised, of the AICPA Audit and Accounting Guide Audits of Investment Companies (the guide) to require reporting of all foreign currency gains and losses.* This proposed SOP recommends that realized and unrealized foreign currency gains and losses be reported separately. However, the guide does not indicate a preference for reporting separately the portion of the change in market value stated in the reporting currency that results from changes in foreign currency rates (see paragraph 2.86). It also states that foreign currency transaction gains or losses may be either accounted for separately or combined for reporting purposes with the kind of transaction that results in the gain or the loss (see paragraph 2.89).

• 

  Audits of not-for-profit organizations receiving federal awards, with conforming changes as of December 18, 1995, resulting from the issuance of Government auditing standards: 1994 revision, and Statement on auditing standards no. 74, Compliance auditing considerations in audits of governmental entities and recipients of governmental financial assistance; Statement of position 92-9;

  American Institute of Certified Public Accountants. Not-for-Profit Organizations Committee

• 

  Omnibus proposal of Professional Ethics Division interpretations and rulings; Exposure draft (American Institute of Certified Public Accountants), 1992, Sept. 25

  American Institute of Certified Public Accountants. Professional Ethics Executive Committee

  1. PROPOSED ETHICS RULING UNDER RULE 101: Partially Secured Loans; 2. PROPOSED ETHICS RULING UNDER RULE 101: Loan Commitment or Line of Credit; 3. PROPOSED ETHICS RULING UNDER RULE 101: Loans to Partnership in Which Members Are Limited Partners; 4. PROPOSED ETHICS RULING UNDER RULE 101: Loans to Partnership in Which Members Are General Partners; 5. PROPOSED ETHICS RULING UNDER RULE 101: Credit Card Balances and Cash Advances; 6. PROPOSED ETHICS RULING UNDER RULE 101: Member Leasing Property From a Client; 7. PROPOSED ETHICS RULING UNDER RULE 101: Joint Interest in Vacation Home; 8. PROPOSED ETHICS RULING UNDER RULE 102: Service on Board of Directors of Federated Fund-raising Organization; 9. PROPOSED ETHICS RULING UNDER RULE 501: Requests for Client Records and Other Information; 10. PROPOSED ETHICS RULING UNDER RULE 503: Commission Payments for Services for an Officer, Director, or Principal Shareholder of a Client

• 

  Accounting for real estate syndication income; Statement of position 92-1;

  American Institute of Certified Public Accountants. Real Estate Committee

• 

  Proposed statement on responsibilities in personal financial planning practice : basic PFP engagement functions and responsibilities;Basic PFP engagement functions and responsibilities; Exposure draft (American Institute of Certified Public Accountants), 1992, March 31

  American Institute of Certified Public Accountants. Statements on Responsibilities in PFP Practice Subcommittee

  Although CPAs have provided personal financial planning services to clients for a long time, they now provide such services in a more structured way. Consequently, significant practice issues in personal financial planning are not covered by existing professional standards. In 1989, the Personal Financial Planning (PFP) Division undertook a project to provide guidance on the CPA's responsibilities in personal financial planning engagements. Its purpose was to promote consistency and quality in the performance of personal financial planning services. This proposed statement on responsibilities in personal financial planning practice (SRPFPP) is not intended to establish a separate code of conduct in personal financial planning practice, yet it provides useful guidance to CPAs performing such services. The proposed Statement is advisory, that is, it does not constitute an enforceable technical standard and is educational in nature. The proposed Statement also protects the public by ensuring the competency of personal financial planning services provided by CPAs. The AICPA's Personal Financial Planning Executive Committee is the senior technical committee of the AICPA designated to issue advisory statements on personal financial planning practice. However, the PFP Executive Committee, concerned about preventing standards overload, expects to limit SRPFPPs to substantive issues of general usefulness not covered by existing standards. This proposed Statement does not supersede the Statements on Standards for Accounting and Review Services, the Statements on Responsibilities in Tax Practice, the Personal Financial Statements Guide, the Guide for Prospective Financial Statements, and the Code of Professional Conduct. This proposed Statement defines and provides guidance for financial planning engagements. It defines a personal financial planning engagement as developing strategies and making recommendations that will assist clients in achieving their personal financial goals. The proposed SRPFPP provides guidance on defining engagement objectives, planning specific procedures appropriate for the engagement, developing a basis for recommendations, communicating those recommendations, assisting the client to act on planning decisions, monitoring the client's progress in achieving established goals, updating recommendations, and helping the client to revise planning decisions. Furthermore, the proposed SRPFPP recommends that the CPA disclose the fact that recommendations are based only on selected goals. A sample disclosure to be made when recommendations are made only on selected goals is contained in the proposed SRPFPP. This proposed SRPFPP was approved by the Statements on Responsibilities in PFP Practice Subcommittee and the PFP Executive Committee. In addition, the Tax Executive Committee has approved the issuance of this exposure draft. After the conclusion of the comment period, the Statements on Responsibilities in PFP Practice Subcommittee will consider all comments received and make any necessary changes to the proposed Statement. The revision will then be voted on by the Statements on Responsibilities in PFP Practice Subcommittee and the PFP Executive Committee. A two-thirds vote for approval by each committee is required for this proposed Statement to become effective.

• 

  Proposed statement of position : compliance and internal control auditing for student financial assistance programs using service organizations : proposed amendment to AICPA audit and accounting guide, Audits of colleges and universities;Compliance and internal control auditing for student financial assistance programs using service organizations : proposed amendment to AICPA audit and accounting guide, Audits of colleges and universities; Exposure draft (American Institute of Certified Public Accountants), 1992, Apr. 29

  American Institute of Certified Public Accountants. Student Financial Assistance Program Audit Task Force

  The U.S. Department of Education (ED) Audit Guide Audits of Student Financial Assistance Programs (ED Audit Guide) requires institutions that participate in its student financial assistance (SFA) programs to engage independent auditors to audit certain aspects of their participation in those programs. Among other reports, auditors who perform such audits are required to issue reports on (1) the participating institutions' compliance with laws and regulations specified in the ED Audit Guide, and (2) the internal control structure used by participating institutions in administering the student financial assistance programs. The ED Audit Guide requires an institution's auditor's reports on compliance and the internal control structure to encompass any functions performed by service organizations, as defined in this proposed statement of position. This proposed statement of position would amend the Audit and Accounting Guide Audits of Co/leges and Universities to: 1. Provide guidance on an institution's auditor's responsibilities when auditing compliance with the requirements applicable to SFA programs and the internal control structure over compliance at an institution that engages a service organization to perform certain functions related to the administration of its SFA program. 2. Provide guidance on a service organization's auditor's responsibilities when auditing compliance with the requirements applicable to SFA programs and the internal control structure over compliance at a service organization that performs certain functions related to the administration of an SFA program.

• 

  Proposed statement of tax policy 10 : integration of the corporate and shareholder tax systems ;Integration of the corporate and shareholder tax systems; Exposure draft (American Institute of Certified Public Accountants), 1992, Dec. 7

  American Institute of Certified Public Accountants. Tax Division

  This proposed statement of tax policy (STP) presents recommendations for improving the system of taxing corporate-source earnings. Statements of Tax Policy of the Tax Division are issued for the general information of those interested in the subject. They are intended to aid in the development of federal tax legislation in directions that the division believes are in the public interest.

• 

  Proposed statement of position : auditing insurance entities' loss reserves : proposed supplement to AICPA Audit and accounting guide, Audits of property and liability insurance companies;Auditing insurance entities' loss reserves : proposed supplement to AICPA Audit and accounting guide, Audits of property and liability insurance companies; Exposure draft (American Institute of Certified Public Accountants), 1991, Sept. 16

  American Institute of Certified Public Accountants. Auditing Insurance Entities' Loss Reserves Task Force

  This proposed statement of position (SOP) is designed to provide guidance to auditors when auditing management's estimate of the liability for loss reserves of property and liability insurance entities. Following is a summary of some of the more significant matters discussed in the proposed SOP: 1. Methods available for estimating the liability for loss reserves and the types of data that may be used in developing such estimates, including an example of the application of a commonly used estimating method illustrating how the method may be used with two different types of data and a discussion of the difference in the resulting projections; 2. Changes in the environment and other variables, both internal and external to the entity being audited, that the auditor should consider in evaluating the reasonableness of the loss reserve estimate; 3. The need for the use of a loss reserve specialist in management's determination of the loss reserve estimate and how the absence of a loss reserve specialist in this process may affect the auditor's consideration of an entity's internal control structure; 4. The qualifications of a loss reserve specialist; 5. The requirement that an outside loss reserve specialist, that is, a specialist who is not an employee or officer of the entity, be used by the auditor in the evaluation of the reasonableness of management's loss reserve estimate (SAS No. 11, Using the Work of a Specialist, does not preclude the auditor from using the work of a specialist who is related to the client. However, because of the significance of loss reserves to the financial statements of insurance companies and the complexity and subjectivity involved in making loss reserve estimates, the proposed SOP requires that an outside loss reserve specialist be used by the auditor in the evaluation of the estimate.); 6. The variability inherent in loss reserve estimates, the need for the auditor to evaluate this variability, how variability is evaluated, and reporting implications when variability is considered to be significant.

• 

  Comment letters on on the exposure draft of the proposed statement on auditing standards, Reports on the Processing of Transactions by Service Organizations

  American Institute of Certified Public Accountants. Auditing Standards Board

• 

  Proposed statement on auditing standards : compliance auditing applicable to governmental entities and other recipients of governmental financial assistance;Compliance auditing applicable to governmental entities and other recipients of governmental financial assistance; Exposure draft (American Institute of Certified Public Accountants), 1991, Apr. 9

  American Institute of Certified Public Accountants. Auditing Standards Board

  Since the issuance of Statement on Auditing Standards (SAS) No. 63, Compliance Auditing Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance, certain developments have occurred that affect the guidance provided by that Statement. These developments include the issuance by the Office of Management and Budget (OMB) of Circular A-133, Audits of Institutions of Higher Education and Other Nonprofit Institutions, and the revision of the OMB Compliance Supplement for Single Audits of State and Local Governments. In addition, the Auditing Standards Board became aware of certain issues related to the implementation of SAS No. 63 that required clarification. To address these matters, the Auditing Standards Board is considering the issuance of this proposed Statement to revise the guidance provided in SAS No. 63. This proposed Statement would amend SAS No. 63 to: 1. Provide guidance on the auditor's responsibility when, during an audit in accordance with generally accepted auditing standards, the auditor becomes aware that the entity is subject to an audit requirement that is not encompassed in the terms of the engagement. 2. Require the issuance of a report on the general requirements in an audit conducted in accordance with the Single Audit Act of 1984 and OMB Circular A-128, Audits of State and Local Governments, whether or not the entity has major programs. (SAS No. 63 requires this report only when the entity has major programs.) 3. Provide guidance on the auditor's compliance auditing responsibilities under OMB Circular A-133. 4. Provide guidance on the auditor's responsibilities when the auditor is engaged to conduct a program-specific audit. 5. Eliminate from the appendixes of SAS No. 63 certain excerpts of the Compliance Supplement for Single Audits of State and Local Governments that have been superseded. (To ensure that they are using up-to-date guidance, practitioners should refer to the appropriate federal sources to obtain the applicable federal requirements.) 6. Make certain conforming and editorial changes. This proposed Statement would supersede SAS No. 63. For purposes of this exposure draft, the language to be revised is shown with a line drawn through it and the new language is presented in boldface italics.

• 

  Proposed statement on auditing standards : letters to underwriters in conjunction with filings under the securities act of 1933 and letters issued to a requesting party in conjunction with other financing transactions;Letters to underwriters in conjunction with filings under the securities act of 1933 and letters issued to a requesting party in conjunction with other financing transactions; Exposure draft (American Institute of Certified Public Accountants), 1991, May 10

  American Institute of Certified Public Accountants. Auditing Standards Board

  The service of accountants providing letters to underwriters developed following enactment of the Securities Act of 1933 (the "Act"). Section 11 of the Act provides that underwriters, among others, could be liable if any part of a registration statement contains material omissions or misstatements. The Act also provides for an affirmative defense for underwriters if it can be demonstrated that, after a reasonable investigation, the underwriter had reasonable grounds to believe that there were no material omissions or misstatements. Consequently, underwriters request accountants to assist them in developing a record of reasonable investigation, called "due diligence," to help establish their affirmative defense under section 11 of the Act. The accountants' letters to underwriters, also known as "comfort letters," are one of a number of elements developed to establish that an underwriter has conducted this reasonable investigation. Other elements, not necessarily involving accountants, include (1) the due diligence meetings, which afford members of the underwriting group an opportunity to hear management's presentation about an offering and to question management, (2) various meetings held by the managing underwriter and its representatives with management to develop the disclosure document, (3) field inspections, and (4) inspection of the issuer's books and records. Thus, obtaining the accountants' letter is but one of an array of activities that underwriters undertake to respond to the liability imposed on them under section 11 of the Act. The guidance in paragraphs 2-48 provides for this traditional service. Included is the present practice of providing negative assurance about the presentation of unaudited financial data in accordance with generally accepted accounting principles. The accountant provides that negative assurance as long as the underwriter specifies the procedures the accountant is to perform for the underwriter's purposes. Furthermore, the guidance in Statement on Auditing Standards (SAS) No. 49, Letters for Underwriters, concerning an accountant's comments in a comfort letter on a financial forecast, pro forma financial information, and other assertions has been revised to be consistent with related guidance (that is, Statements on Standards for Attestation Engagements Attestation Standards, Financial Forecasts and Projections, and Reporting on Pro Forma Financial Information) issued subsequent to SAS No. 49. Since SAS No. 49 was issued, accountants have been requested to issue comfort letters to parties other than underwriters and in connection with securities offerings other than those registered under the Act. This proposed Statement provides guidance on those parties to whom accountants may provide comfort letters. It also provides guidance on the type of letters the accountant may provide for parties who do not have liability under section 11 of the Act. Under this service, the accountant may perform requested procedures and report on the findings obtained but would not provide negative assurance based on such procedures. This proposed Statement (Letters to Underwriters): 1. States that the accountant may provide comfort letters only to those parties with a due diligence defense under section 11 of the Act. 2. Prohibits the accountant from providing any additional letters to the underwriter or others in connection with the same transaction in which the accountant comments on items for which comment is otherwise precluded by this document. 3. Provides guidance on the effect on the comfort letter of an accountant's report on the audited financial statements included in the registration statement that contains an explanatory 4. Revises the guidance and related example letters to conform with the Statements on Standards for Attestation Engagements Attestation Standards, Financial Forecasts and Projections, and Reporting on Pro Forma Financial Information, which were issued subsequent to SAS No. 49. Two of the most significant changes are the following: a. This Statement removes the prohibition against commenting in a comfort letter on a financial forecast and provides guidance on how the accountant may comment in a comfort letter on a financial forecast. b. This Statement permits the accountant to give negative assurance on compliance as to form with certain specified disclosure requirements of Regulation S-K as long as specific criteria are met. This proposed Statement (Letters to a Requesting Party in Conjunction With Financing Transaction): 1. Limits statements by an accountant to procedures performed and findings obtained about (1) unaudited condensed interim financial information, (2) capsule financial information, (3) pro forma financial information, (4) financial forecasts, and (5) subsequent changes or decreases. 2. Prohibits the accountant from providing negative assurance based on agreed-upon procedures applied to the foregoing items. 3. In these situations, the accountant may perform a SAS No. 36 review on interim financial information and provide negative assurance thereon, if the client so requests. This proposed Statement (Letters in Connection With Matters Relating c76 to Solvency): 1.Incorporates the guidance from the February 1988 interpretation of Statement on Standards for Attestation Engagements Attestation Standards on responding to requests for reports on matters relating to solvency. 2. Revises the example letter to conform with the guidance in "Letters to a Requesting Party in Conjunction With Financing Transactions." The differences between SAS No. 49 and the proposed revision are discussed in greater detail in the appendix. This proposed Statement: 1. Will supersede SAS No. 49. 2. Amends SAS No. 35, Special Reports—Applying Agreed-Upon Procedures to Specified Elements, Accounts, or Items of a Financial Statement, to note that if the accountant is requested to perform an agreed-upon procedures engagement in connection with a financing transaction, as defined, he or she must follow the guidance in the SAS No. 49 revision. 3. Amends the Statements on Standards for Attestation Engagements Attestation Standards and Financial Forecasts and Projections to note that the practitioner must follow the guidance in the SAS No. 49 revision when requested to perform agreed-upon procedures on an assertion or on a forecast and report on such procedures in (1) a letter to an underwriter in connection with a filing under the Act, and (2) a letter to a party who does not have liability under section 11 of the Act in connection with a financing transaction. 4. Deletes paragraph 20 of AICPA Professional Standards, AU section 504, "Association With Financial Statements," because the guidance in paragraphs 49 through 61 of this proposed Statement would cover requests from those parties previously covered by AU section 504, paragraph 20.

• 

  Proposed statement on auditing standards : reports on the processing of transactions by service organizations;Reports on the processing of transactions by service organizations; Exposure draft (American Institute of Certified Public Accountants), 1991, Feb. 27

  American Institute of Certified Public Accountants. Auditing Standards Board

  The Auditing Standards Board is issuing this proposed statement on auditing standards (SAS) to provide guidance to practitioners engaged to audit the financial statements of an entity that uses a service organization in connection with the processing of transactions. This proposed Statement also provides guidance to auditors who issue reports for use by other auditors on procedures performed at service organizations. Examples of such service organizations include bank trust departments that invest and hold assets for employee benefit plans and electronic data processing service centers that process transactions and related data for user organizations. This proposed Statement provides guidance to assist the auditor in: 1. Considering the effect of a service organization on the internal control structure of a user organization. 2. Evaluating whether the available audit evidence is sufficient to obtain an understanding of the internal control structure, assess control risk, and perform substantive procedures. 3. Using a service auditor's report. 4. Fulfilling the responsibilities of a service auditor. This proposed Statement would supersede SAS No. 44, Special-Purpose Reports on Internal Accounting Control at Service Organizations. It differs from SAS No. 44 in that the proposed Statement: 1. Incorporates the audit risk concept presented in SAS No. 47, Audit Risk and Materiality in Conducting an Audit, as well as the terminology and concepts of SAS No. 55, Consideration of the 2. Requires a minimum six-month period of coverage for reports expressing an Opinion on a description of policies and procedures placed in operation at a service organization and tests of operating effectiveness. 3. No longer includes reports expressing an opinion on the system of internal accounting control of a segment of a service organization in the classification "service auditors' reports." Such reports commonly have been issued by auditors of bank trust departments and used by auditors of employee benefit plans to fulfill their responsibility regarding internal control; however, these reports generally do not provide the auditor with the means to obtain an understanding of the aspects of the internal control structure at a service organization that may be relevant to a user organization. The appendix of the proposed Statement illustrates the application of the proposed Statement to fiduciaries of employee benefit plans subject to the requirements of the Employee Retirement Income Security Act (ERISA).

• 

  Proposed statement on auditing standards : review of or performing procedures on interim financial information;Review of or performing procedures on interim financial information; Exposure draft (American Institute of Certified Public Accountants), 1991, July 31

  American Institute of Certified Public Accountants. Auditing Standards Board

  The Auditing Standards Board is issuing this proposed statement on auditing standards (SAS) to provide expanded guidance to accountants in performing reviews of, or procedures on, interim financial information. This proposed Statement: 1. Clarifies the knowledge of the entity's internal control structure that the accountant needs to obtain when the accountant is engaged to review interim financial information but has not audited the most recent annual financial statements. 2. Incorporates additional guidance on accounting estimates and performing analytical procedures in connection with a review of interim financial information. 3. Requires the accountant, in performing a review of interim financial information, to assure himself or herself that the audit committee, or those with equivalent authority and responsibility, is adequately informed of: a. Any irregularities or illegal acts of which the accountant becomes aware during the review, unless those irregularities or illegal acts are clearly inconsequential. b. Reportable conditions of which the accountant becomes aware during the review. c. Matters identified in SAS No. 61, Communications With Audit Committees, that have a significant effect on interim financial information. 4. Incorporates the communication requirements contained in SAS No. 66, Communication of Matters About Interim Financial Information Filed or to Be Filed With Specified Regulatory Agencies—An Amendment to SAS No. 36, Review of Interim Financial Information. 5. Revises the accountant's review report to include a statement of management's responsibility for the interim financial information. 6. Notes that an entity may publish various documents that contain information in addition to interim financial information and the independent accountant's review report on that information. In those circumstances, the accountant may wish to refer to the guidance in SAS No. 8, Other Information in Documents Containing Audited Financial Statements (AICPA, Professional Standards, vol. 1, AU sec. 550). 7. Adds a footnote to the applicability paragraph noting that when a public entity does not have its annual financial statements audited, an accountant may be requested to review its annual or interim financial statements. In those circumstances, an accountant may make a review and look to the guidance in Statements on Standards for Accounting and Review Services for the standards and procedures and form of report applicable to such an engagement. This proposed Statement would supersede SAS Nos. 36 and 66. It differs from SAS No. 36 in that the proposed Statement incorporates the communications required by SAS No. 66, which amended SAS No. 36 to add guidance on required communication of matters relating to interim financial information.

• 

  Proposed statement on auditing standards : the meaning of "Present fairly in conformity with generally accepted accounting principles" in the independent auditor's report;Meaning of "Present fairly in conformity with generally accepted accounting principles" in the independent auditor's report; Exposure draft (American Institute of Certified Public Accountants), 1991, May 31

  American Institute of Certified Public Accountants. Auditing Standards Board

  The Financial Accounting Foundation (FAF) has oversight responsibilities for the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). In late 1989, the FAF determined that "an entity subject to the jurisdiction of one board should not be required to change its reporting principles as a result of a standard issued by the other board." In making this determination, the FAF recognized that the existing hierarchy of generally accepted accounting principles (GAAP) contained in AICPA Professional Standards, volume 1, AU section 411, "The Meaning of 'Present Fairly in Conformity With Generally Accepted Accounting Principles' in the Independent Auditor's Report," would need to be revised. The Auditing Standards Board (ASB) formed a task force to reconsider the existing GAAP hierarchy. That task force included representatives of the Accounting Standards Executive Committee (AcSEC, the AlCPA's senior technical committee on financial accounting and reporting standards), the FASB, the GASB, and the ASB. In addition to revising the hierarchy so that the FASB and the GASB would each have primary responsibility for setting standards for those reporting entities subject to the jurisdiction of that board, the task force evaluated whether certain sources of GAAP were classified in the appropriate category and whether each category should have a separate level of authority. The task force developed the guidance described in this exposure draft, which would revise the existing hierarchy described in AU section 411, the sources for which are Statement on Auditing Standards (SAS) Nos. 5, 43, and 52. This proposed Statement would: 1. Establish two separate but parallel hierarchies: one for state and local governmental entities and one for nongovernmental entities (see the summary chart immediately following this summary). 2. Distinguish between AcSEC documents that have been cleared by either the FASB or the GASB and those documents that have not been cleared. AcSEC's operating policies permit the committee to issue accounting guidance over the objection of the FASB or GASB. The proposed Statement notes that the word cleared means that the rule 203 body— the FASB or the GASB—has not objected to the issuance of a proposed pronouncement. 3. Establish a separate category for cleared AICPA AcSEC Practice Bulletins and Emerging Issues Task Force consensus positions (category (c) of the proposed hierarchy). 4. Make each successive category in the hierarchy a different level of authority. (Categories (b) and (c) of the existing hierarchy, both sources of established accounting principles, are considered to be equal in authority.) As shown in the summary chart, this change would elevate the authority of certain accounting pronouncements, such as AICPA AcSEC Statements of Position, Audit and Accounting Guides, and Practice Bulletins that have been cleared, as well as Emerging Issues Task Force consensuses, that are effective after the effective date of this proposed Statement above the authority of widely recognized and prevalent industry accounting practices. The intent of this proposed Statement is for the revised levels of authority of the respective categories to apply prospectively. Thus, although the issuance of this proposed Statement would not in itself trigger accounting changes, accounting pronouncements in categories (b) and (c) of paragraphs .08 and .10 that are effective after the effective date of this proposed Statement might require accounting changes since they would be of greater authority than widely recognized and prevalent industry accounting practices. Thus, for example, a non-state-and-local-govemmental entity that follows a widely recognized and prevalent industry practice would need to change to an accounting treatment specified by a cleared AICPA Statement of Position, a cleared AICPA Industry Audit and Accounting Guide, a cleared AcSEC Practice Bulletin, or a consensus position of the FASB Emerging Issues Task Force whose effective dates are after the effective date of the proposed Statement. This proposed Statement would replace paragraphs .05 through .11 of AU section 411 (AICPA, Professional Standards, vol. 1). Those paragraphs set forth the existing hierarchy, which is presented in the summary chart immediately following this summary.

• 

  Proposed statement of position : accounting and reporting by health and welfare benefit plans : proposed amendment to AICPA audit and accounting guide, Audit of employee benefit plans;Proposed statement of position : accounting and reporting by health and welfare benefit plans : proposed amendment to AICPA audit and accounting guide, Audit of employee benefit plans; Exposure draft (American Institute of Certified Public Accountants), 1991, Sept. 5

  American Institute of Certified Public Accountants. Employee Benefit Plans Committee

  This proposed statement of position (SOP) would amend chapter 4 of the AICPA Audit and Accounting Guide Audits of Employee Benefit Plans, as of March 31, 1991 (hereafter referred to as the guide). This proposed SOP updates the guide to conform to the following accounting standards: 1. Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 105, Disclosure of Information About Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk 2. FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions, as applicable This proposed SOP also makes the following changes or clarifications in accounting and reporting requirements set forth in the guide: 1. The objective of financial reporting by a defined-benefit health and welfare plan has been clarified (see paragraph 19). 2. Defined-benefit health and welfare plans, both single and multiemployer, should account for and separately report benefit obligations, including postretirement benefit obligations (see paragraphs 36 through 49). 3. The requirement to recognize claims incurred but not reported has been clarified (see paragraph 39). 4. Benefit obligations should not include death benefits actuarially expected to be paid during the active service period of participants (see paragraph 36). 5. Defined-contribution health and welfare plans are distinguished from defined-benefit health and welfare plans (see paragraphs 3 and 23). 6. The requirements for determining the obligation for accumulated eligibility credits have been clarified (see paragraph 43). The recommendations in this proposed SOP are effective for audits of financial statements for plan years beginning after December 15, 1992; the application of this proposed SOP to plans with no more than 500 participants in the aggregate shall be effective for plan years beginning after December 15, 1994. Earlier application is encouraged. Accounting changes adopted to conform to the provisions of this proposed SOP shall be made retroactively. Financial statements of prior plan years are required to be restated to comply with the provisions of this proposed SOP only if presented together with financial statements for plan years beginning after December 15,1992. If accounting changes were necessary to conform to the provisions of this proposed SOP, that fact shall be disclosed when financial statements for the year in which this proposed SOP is first applied are presented either alone or with financial statements of prior years.