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Exposure Drafts, Comment Letters, and Statements of Position

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Proposed statement of position : audits of state and local governmental entities receiving federal financial assistance ;Audits of state and local governmental entities receiving federal financial assistance; Exposure draft (American Institute of Certified Public Accountants), 1991, July 31

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

This proposed statement of position (SOP) supersedes chapter 3, paragraphs 3.1-3.4, and chapters 21-23 of the AICPA Audit and Accounting Guide Audits of State and Local Governmental Units and example 23 of SOP 89-6, Auditors' Reports in Audits of State and Local Governmental Units, and provides additional guidance on compliance auditing and single audits. The SOP updates the guide to reflect the following standards affecting the audits of federal financial assistance programs under the Single Audit Act: 1. Statement on Auditing Standards (SAS) No. 55, Consideration of the Internal Control Structure in a Financial Statement Audit; 2. SAS No. 60, Communication of Internal Control Structure Related Matters Noted in an Audit; 3. SAS No. 63, Compliance Auditing Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance; 4. The 1988 revision of Government Auditing Standards, issued by the Comptroller General of the United States. The recommendations in this SOP are effective for audits done in accordance with the Single Audit Act for fiscal years beginning on or after January 1, 1991. Earlier application is permissible.
Comment letters on Proposed Industry Accounting Guide for Insurance Agents and Brokers dated August 15, 1991

American Institute of Certified Public Accountants. Insurance Agents and Brokers Task Force
Proposed industry accounting guide : insurance agents and brokers ;Insurance agents and brokers; Exposure draft (American Institute of Certified Public Accountants), 1991, Aug. 15

American Institute of Certified Public Accountants. Insurance Agents and Brokers Task Force

This proposed industry accounting guide (guide) provides guidance on applying generally accepted accounting principles in financial statements of insurance agents and brokers (brokers). Briefly, the proposed guide recommends the following: 1. For services involving the placement of insurance coverage, brokers should recognize revenue from regular commissions, negotiated commissions, and shared or split commissions on the revenue recognition date, which is the date when all of the following criteria are met: a. Protection is afforded under the insurance policy (that is, coverage is effective). b. The premium due under the policy is known or can be reasonably estimated. c. Substantially all required services related to placing the insurance have been rendered. That date generally is the date on which the premium is billable to the client. d. No significant obligation exists to perform services after the insurance has become effective. The proposed guide also provides guidance for the recognition of revenues related to contingent commissions, commission adjustments, installment billing arrangements, multiyear policies, direct billing arrangements, fees in lieu of commissions, and fee-for-service arrangements. 2. A broker's costs associated with the placement of insurance coverage and costs of subsequent servicing of such coverage should be expensed as incurred. If a broker specifically obligates itself by agreement with the client to provide services after placing the coverage, and the subsequent costs can be associated directly with the coverage placed by the broker, a portion of the broker's related revenue should be deferred and recognized as the services are performed. 3. Fiduciary funds and premiums receivable should be included as assets, and premiums payable to underwriters should be included as liabilities in brokers' balance sheets. The amounts of fiduciary funds, premiums due from clients, advances to underwriters and clients, and premiums payable to underwriters should be disclosed in brokers' financial statements. The proposed guide provides additional guidance on revenue and expense recognition practices by reinsurance intermediaries, managing general agents, and life insurance agents and brokers. The proposed guide also discusses expense recognition by brokers affiliated with insurance underwriters and intangible assets acquired in a business combination.
Proposed statement of position : determination, disclosure, and financial statement presentation of income, capital gain, and return of capital distributions by investment companies : proposed amendment to AICPA audit and accounting guide, Audits of investment companies;Determination, disclosure, and financial statement presentation of income, capital gain, and return of capital distributions by investment companies : proposed amendment to AICPA audit and accounting guide, Audits of investment companies; Exposure draft (American Institute of Certified Public Accountants), 1992, Feb. 10

American Institute of Certified Public Accountants. Investment Companies Committee

This proposed statement of position (SOP) provides guidance on financial reporting, by investment companies, for distributions to shareholders, including returns of capital. Although the proposed SOP recognizes that financial statements of investment companies are prepared on the basis of generally accepted accounting principles (GAAP), it recommends that, to avoid shareholder confusion, the term tax return of capital be used to report portions of shareholders' distributions that are in excess of tax-basis current and accumulated earnings and profits.
Proposed statement on standards for consulting services : definitions and standards;Definitions and standards; Exposure draft (American Institute of Certified Public Accountants), 1991, Apr. 1

American Institute of Certified Public Accountants. Management Advisory Services Executive Committee

Consulting Services provided by CPAs in public practice have not been clearly defined in the existing Statements on Standards for Management Advisory Services. This proposed Statement on Standards for Consulting Services describes six categories of CPA consulting services, distinguishes them from attest services, reaffirms the basic standards in rule 201 of the AICPA Code of Conduct as applying to such services, and establishes three general consulting services standards that are client-oriented. The proposed Statement on Standards for Consulting Services in this exposure draft is intended to supersede the three current Statements on Standards for Management Advisory Services. The proposed Statement specifies that it does not apply to audits, reviews, other attest services, compilations, personal financial planning, tax preparation, and tax planning services. It affirms the requirement for independence when performing consulting services for attest clients
Proposed statement of position : audits of not-for-profit organizations receiving federal awards;Audits of not-for-profit organizations receiving federal awards; Exposure draft (American Institute of Certified Public Accountants), 1991, Aug. 30

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

This proposed statement of position (SOP) provides guidance on the auditor's responsibilities when conducting an audit in accordance with Office of Management and Budget (OMB) Circular A-133, Audits of Institutions of Higher Education and Other Non-profit Institutions. This proposed SOP would amend the following AICPA audit and accounting guides: 1. Audits of Voluntary Health and Welfare Organizations; 2. Audits of Colleges and Universities; 3. Audits of Certain Nonprofit Organizations. In addition to providing an overview of the auditor's responsibilities in an audit of federal awards, this proposed SOP: 1. Describes the applicability of OMB Circular A-133. 2. Summarizes the differences between Circular A-133 and OMB Circular A-128, Audits of State and Local Governments. 3. Describes the auditor's responsibility for considering the internal control structure and performing tests of compliance with certain laws and regulations. 4. Describes the auditor's responsibility for reporting and provides examples of the reports required by Circular A-133.
Omnibus proposal of Professional Ethics Division interpretations and rulings; Exposure draft (American Institute of Certified Public Accountants), 1991, Nov. 8

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

1. PROPOSED REVISION OF INTERPRETATION 101-9 UNDER RULE 101: The Meaning of Certain Independence Terminology and the Effect of Family Relationships on Independence 2. PROPOSED ETHICS RULING UNDER RULE 101: Campaign Treasurer 3. PROPOSED ETHICS RULING UNDER RULE 101: Member on Board of Component Unit and Auditor of Oversight Entity 4. PROPOSED ETHICS RULING UNDER RULE 101: Member on Board of Material Component Unit and Auditor of Another Material Component Unit 5. PROPOSED ETHICS RULING UNDER RULE 301: Disclosure of Confidential Client Information 6. PROPOSED ETHICS RULING UNDER RULES 302 AND 503: Receipt of Contingent Fees or Commissions by Member's Spouse 7. PROPOSED ETHICS RULING UNDER RULES 302 AND 503: Definition of the Receipt of a Contingent Fee or a Commission 8. PROPOSED ETHICS RULING UNDER RULE 503: Sale of Products to Clients 9. PROPOSED ETHICS RULING UNDER RULE 503: Billing for Subcontractor's Services 10. PROPOSED ETHICS RULING UNDER RULE 503: Referral of Products of Others 11. PROPOSED REVISION OF ETHICS RULING NO. 175: Bank Director 12. PROPOSED DELETION OF ETHICS RULING NO. 63 UNDER RULE 101: Review of Prospective Financial Information â€” Member's Independence of Promoters
Proposed revision of ethics interpretations 101-1.A.4 and 101-5 : regarding loans to and from clients for whom services are performed requiring independence;Regarding loans to and from clients for whom services are performed requiring independence; Exposure draft (American Institute of Certified Public Accountants), 1991, July 9

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

The Professional Ethics Executive Committee recently considered existing pronouncements on independence in the AlCPA's Code of Conduct regarding loans to members from clients. The ethics committee concluded that in the circumstances of today's practice environment these pronouncements permitted financial relationships between the member and the client that could impair the appearance of independence. Accordingly, the ethics committee proposes a revision of the existing pronouncements that, in effect, will prohibit a member or a member's firm from having a loan to or from a client. However, the following loans will be grandfathered under the proposed revision: fully secured mortgage loans (including a home equity loan) on a primary residence obtained under normal lending procedures, terms, and requirements prior to (a) the effective date of this proposed revision, or (b) the date on which the borrower is subject to the independence rules with respect to the holder of the loan. All other loans must be disposed of within twelve months of the later of (a) the effective date of this proposed revision, (b) the date on which the borrower is subject to the independence rules with respect to the holder of the loan, or (c) the date on which a member becomes aware that a client acquired all or part of the loan. If this proposed revision is adopted, the ethics committee intends to issue ethics rulings on two related issues. The rulings will permit (a) the use of a credit card from a financial institution client (including a retailer that extends credit to the general public) as long as the balance is paid in full upon receipt of a statement, and (b) a borrowing of cash value under terms of an insurance policy. Such activities are not considered to be loans as defined in Interpretation 101-5, "The Meaning of Certain Terminology Used in Interpretation 101-1.A.4" (AICPA, Professional Standards, vol. 2, ET sec. 101.07).
Proposed statement of position : accounting for foreign property and liability reinsurance;Accounting for foreign property and liability reinsurance; Exposure draft (American Institute of Certified Public Accountants), 1991, Aug. 22

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

This proposed statement of position (SOP) provides guidance on how U.S. companies should account for property and liability reinsurance assumed from foreign insurance companies (foreign reinsurance). The periodic method should be used to account for foreign reinsurance premiums except when, because of local revenue recognition policies, the foreign ceding company cannot provide the information required by the assuming company to estimate both the ultimate premiums and the appropriate periods of recognition in accordance with U.S. generally accepted accounting principles. In such circumstances, the open year method should be used. The periodic and open year methods are not interchangeable in the same circumstances. The zero balance method should not be used. The provisions of this proposed Statement would be effective for contracts entered into in fiscal years beginning on or after December 15, 199X.
Proposed statement of position : guidance for assessing risk transfer in property and liability reinsurance contracts;Guidance for assessing risk transfer in property and liability reinsurance contracts; Exposure draft (American Institute of Certified Public Accountants), 1991, Sept. 10

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

Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 60, Accounting and Reporting by Insurance Enterprises, provides guidance to insurance enterprises on how to determine whether reinsurance contracts provide for indemnification against loss or liability and on how to account for such contracts. In applying this guidance, each insurance enterprise has to interpret the expression "indemnification . . . against loss or liability," which could be interpreted differently for similar contracts. This proposed statement of position (SOP) provides guidance for assessing risk transfer in property and liability reinsurance contracts. It discusses the various kinds of risks involved, such as insurance risk (which has two componentsâ€”uncertainties about the ultimate amount of any claim payments [underwriting risk] and uncertainties about the timing of those payments [timing risk]), investment-yield risk, credit risk, and expense risk. The proposed SOP concludes that a contract should be accounted for as providing reinsurance if the ceding company's insurance risk (both underwriting and timing) has been transferred to the assuming company. A ceding company's insurance risk has been transferred when all the following conditions have been satisfied: 1. The terms of the contract, for a fixed or reasonably determinable cost, provide for the reinsurer to assume a specified level or percentage of the ceding company's claims incurred or exposure to claim occurrences. 2. The terms of the contract, including any adjustable features, do not allow the ultimate underwriting margin or deficit under the contract to be determinable in advance. Therefore, after application of any adjustable features contained in the contract, there should still be a reasonable degree of potential variability in the ultimate underwriting results under the contract in relation to the total consideration paid. (For purposes of applying this condition to contracts that provide for adjustments based on actual or imputed investment earnings, such adjustments should be considered, as appropriate, in determining whether the underwriting margin or deficit under the contract is determinable in advance.) 3. The terms of the contract provide for the timely reimbursement of covered losses by the reinsurer. Provisions that delay reimbursement to the ceding company, such as predetermined payment schedules, do not provide for the timely reimbursement of covered losses. Reinsurance contracts that do not transfer both components of insurance risk must be accounted for as deposits under the provisions of paragraph 40 of FASB Statement No. 60. The proposed SOP provides guidance on accounting for reinsurance contracts and the disclosures that should be made.
Proposed statement of position : software revenue recognition;Software revenue recognition; Exposure draft (American Institute of Certified Public Accountants), 1991, Jan. 16

American Institute of Certified Public Accountants. Task Force on Accounting for the Development and Sale of Computer Software

This proposed statement of position (SOP) provides guidance on applying generally accepted accounting principles in recognizing revenue on software transactions. The basic principle is that revenue is recognized on delivery of software; some exceptions are discussed. The proposed SOP also discusses accounting for related services, accounting for transactions involving software that are primarily service transactions, the application of contract accounting to software transactions, and accounting for postcontract customer support. Briefly, the proposed SOP recommends the following: 1. Software licenses with no other vendor obligationsâ€”If collectibility is probable and the vendor has no obligations remaining under the sales or licensing agreement after delivering the software, revenue from the software licensing fees should be recognized on delivery of the software. 2. Software licenses with other insignificant vendor obiigationsâ€”If the vendor has insignificant obligations remaining under the sales or licensing agreement after delivering the software, revenue from the software licensing fees should be recognized on delivery of the software if collectibility is probable, and the remaining costs should be accrued or a pro rata portion of revenue should be deferred until completion of performance. 3. Software licenses with other significant vendor obligationsâ€”If, in addition to the obligation to deliver the software, the sales or licensing agreement includes other significant vendor obligations, the agreement should first be examined to determine whether it should be accounted for using contract accounting or as a service transaction. For agreements with significant vendor obligations beyond delivery of the software that are not accounted for using contract accounting or as service transactions, revenue should be deferred until all of the following conditions are met: a. Delivery has occurred. b. Other vendor obligations remaining are no longer significant. c. Collectibility is probable. 4. Significant uncertainties about customer acceptanceâ€”If, after delivery, there is significant uncertainty about customer acceptance of the software, license revenue should not be recognized until the uncertainty is removed. 5. Absence of a reasonable basis for estimating the degree of collectibility of receivablesâ€”Receivables associated with software transactions for which there is no reasonable basis of estimating the degree of collectibility should be accounted for using either the installment method or the cost recovery method of accounting. 6. Contract accountingâ€”If a contract to deliver software or a software system, either alone or together with other products, requires significant production, modification, or customization of software, a system, or the other products, that contract should be accounted for in conformity with ARB 45, Long-Term Construction-Type Contracts, using the relevant guidance in SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. However, transactions that are normally accounted for as product sales should not be accounted for as long-term contracts merely to avoid the delivery requirements for revenue recognition normally 7. Service transactionsâ€”If, in addition to the obligation to deliver the software, the sales or licensing agreement includes obligations to perform services that (a) are not interdependent with the providing of a software product and (b) are separately stated and priced such that the total price of the agreement would be expected to vary as a result of the inclusion or exclusion of the services, the sales or licensing component and the services should be accounted for separately. If collectibility is probable, revenue from software services should generally be recognized as the services are performed or, if no pattern of performance is discernible, ratably over the period during which the services are performed. If significant uncertainty about customer acceptance of the services exists, revenue should not be recognized until the uncertainty is removed. 8. Postcontract customer support. If collectibility is probable, revenue from postcontract customer support (PCS), including revenue that is contractually bundled with initial licensing fees, should be recognized ratably over the term of the contract.
Software revenue recognition; Statement of position 91-1;

American Institute of Certified Public Accountants. Task Force on Accounting for the Development and Sale of Computer Software
Comment letters on the exposure draft, "Internal Control — Integrated Approach," Volume 1

Committee of Sponsoring Organizations of the Treadway Commission
Comment letters on the exposure draft, "Internal Control — Integrated Approach," Volume 2

Committee of Sponsoring Organizations of the Treadway Commission
Comment letters to COSO exposure draft, "Internal Control - Integrated Framework," March 12 - June 14, 1991 Vol. 1;

Committee of Sponsoring Organizations of the Treadway Commission
Comment letters to COSO exposure draft, "Internal Control - Integrated Framework," March 12 - June 14, 1991 Vol. 2;

Committee of Sponsoring Organizations of the Treadway Commission
Definition of the term substantially the same for holders of debt instruments, as used in certain audit guides and a statement of position : February 13, 1990 amendment to AICPA industry audit guide, Audits of banks and AICPA audit and accounting guides Audits of brokers and dealers in securities and Savings and loan associations; Statement of position 90-03;

American Institute of Certified Public Accountants. Accounting Standards Division
Financial accounting and reporting by continuing care retirement communities : November 28, 1990 : amendment to AICPA audit and accounting guide Audits of providers of health care services; Statement of position 90-08;

American Institute of Certified Public Accountants. Accounting Standards Division
Proposed statement of position : Accounting for foreclosed assets;Accounting for foreclosed assets; Exposure draft (American Institute of Certified Public Accountants), 1990, Dec. 11

American Institute of Certified Public Accountants. Accounting Standards Division. Accounting Standards Executive Committee

This proposed statement of position (SOP) provides guidance for financial reporting of foreclosed assets after foreclosure. Briefly, the proposed SOP recommends the following: 1. There is a presumption that foreclosed assets will be sold. 2. Foreclosed assets that will be sold should be carried at the lower of cost or fair value. 3. Periodic net cash payments related to foreclosed assets held for sale should be charged to income; periodic net cash receipts related to foreclosed assets held for sale should be credited to the assets' carrying amount; no depreciation or amortization expense should be recognized. 4. The carrying amount of foreclosed assets held for the production of income instead of sale should not exceed net realizable value; revenue and expense cash flows are recognized in income; depreciation or amortization expense is recognized.
Disclosure of certain information by financial institutions about debt securities held as assets : November 30, 1990 : amendment to AICPA audit and accounting guides Audits of banks, Audits of credit unions, Audits of finance companies (including independent and captive financing activities of other companies), Audits of property and liability insurance companies, Savings and loan associations, and Audits of stock life insurance companies; Statement of position 90-11;

American Institute of Certified Public Accountants. Accounting Standards Executive Committee
Proposed statement of position : reporting by financial institutions of debt securities held as assets;Reporting by financial institutions of debt securities held as assets; Exposure draft (American Institute of Certified Public Accountants), 1990, May 25

American Institute of Certified Public Accountants. Accounting Standards Executive Committee

This proposed statement of position (SOP) provides guidance on applying generally accepted accounting principles in reporting by financial institutions of debt securities held as assets. Briefly, the proposed SOP recommends the following: 1. A financial institution should designate debt securities held as assets as investments, assets held for sale, or trading assets at acquisition and at each subsequent balance sheet date. 2. A financial institution should designate debt securities as investments and report them at amortized cost only if it currently has the ability to hold the securities to maturity and it intends to hold them for the foreseeable future, as defined in this exposure draft. 3. Debt securities that do not meet the criteria for classification as investments and that are not trading assets should be reported in a separate asset category as assets held for sale at the lower of their amortized cost or market value. 4. A decline in value of debt securities that is other than temporary should be reported as a realized loss and should result in reducing the reported amount of the debt securities to a new historical cost basis. The provisions of this proposed Statement would be effective for financial statements for periods ending on or after December 15, 1990.
Proposed statement on auditing standards : communication of matters about interim financial information filed or to be filed with specified regulatory agencies;Communication of matters about interim financial information filed or to be filed with specified regulatory agencies; Exposure draft (American Institute of Certified Public Accountants), 1990, June 15

American Institute of Certified Public Accountants. Auditing Standards Board

Pursuant to the Securities Exchange Act of 1934, certain entities are required to file periodic interim financial information with the Securities and Exchange Commission or another specified regulatory agency. This interim financial information, which is available to the public, is not required to be timely reviewed by an independent auditor. These entities are also required to notify the appropriate regulatory agency about a change of auditor, which provides public information about the identity of the auditors of these entities' annual financial statements. In recognition of these unique filing requirements, this proposed Statement establishes requirements for communications to management and, in certain situations, to audit committees concerning certain matters involving interim financial information filed or to be filed with specified regulatory agencies. This proposed Statement: 1. Applies only to auditors of entities that file interim financial information with the Securities and Exchange Commission or another specified regulatory agency pursuant to the Securities Exchange Act of 1934. 2. Requires the auditor to communicate with management as soon as practicable when he or she has given substantive attention to the accounting for, or financial reporting of, specific events or transactions of the entity and, as a result of that attention, becomes aware of information that causes him or her to believe that interim financial information is probably materially misstated. 3. Requires the auditor to communicate the above matter to the audit committee if management does not respond appropriately within a reasonable period of time. 4. Requires the auditor to consider whether to serve, or continue to serve, as the entity's auditor if the audit committee does not respond appropriately within a reasonable period of time. This proposed Statement does not amend or supersede an existing statement on auditing standards.
Proposed statement on auditing standards : omnibus statement on auditing standards, 1990;Omnibus statement on auditing standards, 1990; Exposure draft (American Institute of Certified Public Accountants), 1990, July 17

American Institute of Certified Public Accountants. Auditing Standards Board

This proposed statement on auditing standards contains three amendments to existing statements. These amendments: 1. Make explicit the required language that the auditor should include in an explanatory paragraph of the report when he or she concludes that there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time not to exceed one year from the balance-sheet date. 2. Clarify language in the auditor's report to describe the level of service the successor auditor performs on adjustments made to restate prior-year financial statements audited by a predecessor auditor whose report is not presented. 3. Clarify language in the auditor's report to describe the level of service the auditor performs on the combination of financial statements following a pooling-of-interests transaction when the auditor is asked to report on restated financial statements of one or more prior years when other auditors have audited one or more of the entities included in such financial statements. This proposed Statement consists solely of amendments to existing statements. For each statement affected, the paragraph being amended is shown with a line drawn through the amended language and the new wording is presented in boldface italics. The proposed amendments are outlined as follows: I. Paragraph 12 of SAS No. 59, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern (AICPA, Professional Standards, vol. 1, AU sec. 341.12) This proposed amendment: A. Makes explicit the required language for the explanatory paragraph (following the opinion paragraph) in the report that describes the auditor's conclusion that there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time not to exceed one year from the balance-sheet date. B. Requires explicitly in the explanatory paragraph the use of the phrase "substantial doubt about its [the entity's] ability to continue as a going concern" or similar wording that includes the terms substantial doubt and going concern. II. Paragraph 83 of SAS No. 58, Reports on Audited Financial Statements (AICPA, Professional Standards, vol. 1, AU sec. 508.83) This proposed amendment: A. Modifies the explanatory language for the successor auditor when the prior-year financial statements audited by a predecessor auditor are restated and the predecessor auditor's report is not presented. B. Replaces the phrase "We also reviewed the adjustments" with the phrase "We also audited the adjustments." The Board, along with the staff of the Securities and Exchange Commission (SEC), believes that the use of the term reviewed confuses users of the successor auditor's report by connoting a different level of service than the service performed. III. Paragraph 16 of SAS No. 1, Codification of Auditing Standards and Procedures, section 543, "Part of Audit Performed by Other Independent Auditors" (AICPA, Professional Standards, vol. 1, AU sec. 543.16) This proposed amendment: A. Modifies the reporting guidance for the auditor who, following a pooling-of-interests transaction, is asked to report on the combination of restated financial statements for one or more prior years when other auditors have audited one or more of the entities included in such statements. B. Conforms the explanatory report language for the same reason the Board is proposing amendment to paragraph 83 of SAS No. 58 (discussed previously). This proposed amendment would replace the phrase "We also have applied procedures to the combination" with the phrase "We also audited the combination." How lt Would Change Existing Standards The proposed amendment solely amends the specific paragraphs of the three existing statements discussed previously.
Proposed statement on auditing standards : the confirmation process;Confirmation process; Exposure draft (American Institute of Certified Public Accountants), 1990, Nov. 13

American Institute of Certified Public Accountants. Auditing Standards Board

The Auditing Standards Board is considering the issuance of this proposed Statement to provide practitioners with additional guidance about the use of confirmations. The Board determined that additional guidance was necessary after reviewing problems identified in the peer review process, in the SEC Enforcement Releases, and in research. The Board's review indicated that practitioners do not always appropriately consider: 1. The financial statement assertions addressed by confirmations; 2. The design of the confirmation request; 3. The third party to whom the request was addressed; 4. The evaluation of confirmation results. This proposed Statement provides guidance about all types of confirmations, including accounts receivable confirmations, and establishes certain performance responsibilities for auditors using confirmations in engagements performed in accordance with generally accepted auditing standards. This proposed Statement: 1. Discusses the relationship of confirmation procedures to the auditor's assessment of audit risk and discusses financial statement assertions addressed by confirmations; 2. Describes certain factors that affect the reliability of confirmations and emphasizes that proper design of the confirmation request is key to achieving specific audit objectives; 3. Provides guidance on performing alternative procedures when responses to confirmation requests are not received; 4. Provides guidance on evaluating the results of confirmation procedures. This proposed Statement retains the notion set forth in existing standards that the confirmation of accounts receivable is a generally accepted auditing procedure. It also states that there is a presumption that the auditor will request the confirmation of accounts receivable during an audit, unless certain conditions exist. If an auditor does not request confirmations in the examination of accounts receivable, this proposed Statement requires an auditor to document how he or she overcame this presumption. This proposed Statement would supersede paragraphs 3-8 of Statement on Auditing Standards (SAS) No. 1, Codification of Auditing Standards and Procedures, section 331 (AICPA, Professional Standards, vol. 1, AU sec. 331.03-.08), and the portion of paragraph 1 of section 331 that addresses the confirmation of receivables. The proposed Statement would not supersede the portion of paragraph 1 of section 331 that addresses the observation of inventories.
Proposed statement on auditing standards : the Proposed statement on auditing standards : the auditor's consideration of the internal audit function in an audit of financial statements ;Auditor's consideration of the internal audit function in an audit of financial statements; Exposure draft (American Institute of Certified Public Accountants), 1990, Mar. 12

American Institute of Certified Public Accountants. Auditing Standards Board

The Auditing Standards Board is considering the issuance of this proposed Statement to provide practitioners with expanded guidance when considering work performed by internal auditors. Internal auditors are responsible for providing analyses, evaluations, assurances, recommendations, and other information to the entity's management and board of directors or others with equivalent authority and responsibility. Many of these activities are relevant to the audit because they provide evidence about the design and effectiveness of internal control structure policies and procedures or direct evidence about misstatements of financial data contained in financial statements. This proposed Statement contains factors to assist auditors in considering the extent of the effect of internal auditors' work on the audit and incorporates concepts of SAS No. 47, Audit Risk and Materiality in Conducting an Audit, and the new terminology and concepts of SAS Nos. 53 through 61, issued in April 1988, particularly SAS No. 55, Consideration of the Internal Control Structure in a Financial Statement Audit.This proposed Statement provides guidance to assist the auditor in: 1. Obtaining an understanding of the internal audit function. 2. Assessing the competence and objectivity of internal auditors. 3. Considering the effect of the internal auditors' work on the auditor's understanding of the internal control structure, assessment of control risk, and design of substantive audit procedures. 4. Evaluating the extent of the effect of the internal auditors' work. 5. Coordinating the audit work with internal auditors. 6. Evaluating and testing the quality and effectiveness of internal auditors' work. 7. Requesting internal auditors to provide direct assistance to the auditor. This proposed Statement would supersede SAS No. 9, The Effect of an Internal Audit Function on the Scope of the Independent Audit.
Auditors' reports under U.S. Department of Housing and Urban Development's Audit guide for mortgagors having HUD insured or Secretary held multifamily mortgages; Statement of position 90-04;

American Institute of Certified Public Accountants. Auditing Standards Division
Directors' examinations of banks : September 17, 1990 amendment to AICPA industry audit guide, Audits of Banks; Statement of position 90-06;

American Institute of Certified Public Accountants. Banking Committee
Inquiries of representatives of financial institution regulatory agencies : August 31, 1990 amendment to AICPA industry audit guide, Audits of banks, AICPA audit and accounting guide, Audits of credit unions, and AICPA audit and accounting guide, Savings and loan associations; Statement of position 90-05;

American Institute of Certified Public Accountants. Banking Committee
Proposed statement on standards for formal continuing professional education (CPE) programs;Statement on standards for formal continuing professional education (CPE) programs; Exposure draft (American Institute of Certified Public Accountants), 1990, June 1

American Institute of Certified Public Accountants. Continuing Professional Education Division. CPE Standards Subcommittee

This proposed statement on standards for formal Continuing Professional Education (CPE) programs was developed by the AlCPA's CPE Standards Subcommittee. It was approved for issuance by the AICPA Board of Directors and CPE Executive Committee. The standards incorporate parts of and supersede the AlCPA's 1971 Resolution of Council regarding CPE and the 1976 Statement on Standards for Formal Group and Formal Self-Study Programs. The standards were widely exposed and the feedback carefully considered in order to promote uniformity and gain the widest possible acceptance from individual state boards of accountancy, the National Association of State Boards of Accountancy (NASBA), state societies of CPAs, other professional associations, appropriate government agencies, and other interested parties. The AICPA urges all groups who set CPE standards for accounting professionals to adopt these standards. The AICPA plans to interpret and revise these standards as necessary.
Proposed audit and accounting guide : audits of employee benefit plans;Audits of employee benefit plans; Exposure draft (American Institute of Certified Public Accountants), 1990, Aug. 31

American Institute of Certified Public Accountants. Employee Benefit Plans Committee

A significant period of time has elapsed since the publication in 1983 of the AICPA Audit and Accounting Guide Audits of Employee Benefit Plans. Many changes have taken place in the generally accepted auditing standards and the application of these standards to the requirements of employee benefit plans, the types of plans offered, and the regulatory and financial reporting requirements. These changes have created the need for revised guidance. The objectives of this proposed guide are to provide (1) a general background of the plan environment and (2) practical guidance to the practitioner on the accounting, auditing, and financial reporting for employee benefit plans. In addition, the guide identifies relevant Employee Retirement Income Security Act of 1974 (ERISA) requirements, regulations, and professional accounting and auditing pronouncements and summarizes key provisions of those regulations and pronouncements. This proposed guide would supersede the 1983 Audit and Accounting Guide Audits of Employee Benefit Plans and the 1988 second edition of the guide, which contains AICPA Statement of Position 88-2, Illustrative Auditor's Reports on Financial Statements of Employee Benefit Plans Comporting With Statement on Auditing Standards No. 58. Reports on Audited Financial Statements.
Accountants' services on prospective financial statements for internal use only and partial presentations : January 5, 1990; Statement of position 90-01;

American Institute of Certified Public Accountants. Financial Forecasts and Projections Task Force
Proposed statement of position : questions and answers on reasonably objective basis and other issues affecting prospective financial statements (Proposed amendment to AICPA guide to prospective financial statements) ;Questions and answers on reasonably objective basis and other issues affecting prospective financial statements (Proposed amendment to AICPA guide to prospective financial statements); Exposure draft (American Institute of Certified Public Accountants), 1990, Feb. 5

American Institute of Certified Public Accountants. Financial Forecasts and Projections Task Force

The proposed SOP contains four questions and answers (Qs & As) that provide guidance to responsible parties preparing financial forecasts as well as guidance to practitioners engaged to perform services in connection with such forecasts. The guidance in these Qs & As is summarized below. 1. Section 400.04 of the Guide requires a responsible party to have a reasonably objective basis to present a financial forecast. A responsible party has a reasonably objective basis if sufficiently objective assumptions can be developed for each key factor. 2. Because responsible parties should limit the length of their forecasts to periods for which they have a reasonably objective basis, a question arises as to what they should do when they believe it is necessary to include certain disclosures, in the forecast, about the effects of anticipated events and circumstances beyond the forecast period. Users of financial forecasts often need this information to evaluate the long-term consequences of their investment decisions. 3. In practice, financial forecasts have been presented for various periods of time, sometimes exceeding ten years. However, the Guide does not specify any fixed minimum or maximum time period to be covered by a financial forecast. The proposed guidance indicates that responsible parties should balance the information needs of users with their ability to estimate prospective results when evaluating the length of the forecast period. It also encourages presentation of financial forecasts that do not exceed three to five years by stating that it ordinarily would be difficult to establish that a reasonably objective basis exists to present longer forecasts. 4. The Guide indicates, in section 500.14, that an accountant engaged to compile or examine a financial forecast should consider whether a responsible party has a reasonably objective basis to present a financial forecast. It also clarifies that both the compilation procedures in section 600 and the examination procedures in section 700 of the Guide contemplate such a consideration.
Auditor's consideration of the internal control structure used in administering federal financial assistance programs under the Single Audit Act : November 28, 1990 : amendment to AICPA audit and accounting guide, Audits of state and local governmental units, and supersession of SOP 89-6, example 26; Statement of position 90-09;

American Institute of Certified Public Accountants. Government Accounting and Auditing Committee
Proposed statement of position : the auditor's consideration of internal controls over federal financial assistance programs under the Single Audit Act : proposed amendment to AICPA industry audit guide, audits of state and local governmental units and supersession of SOP 89-6, Example 26;Auditor's consideration of internal controls over federal financial assistance programs under the Single Audit Act (Proposed amendment to AICPA industry audit guide, audits of state and local governmental units and supersession of SOP 89-6, Example 26); Exposure draft (American Institute of Certified Public Accountants), 1990, Mar. 21

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

This proposed statement of position (SOP) would amend chapter 21 in the AICPA Industry Audit Guide Audits of State and Local Governmental Units, and would supersede example 26 in SOP 89-6, Auditors' Reports in Audits of State and Local Governmental Units. The proposed SOP would update the guide and SOP 89-6 to reflect the following standards affecting the auditor's consideration of, and reporting on, internal controls over federal financial assistance under the Single Audit Act: 1. SAS No. 55, Consideration of the Internal Control Structure in a Financial Statement Audit; 2. SAS No. 60, Communication of Internal Control Structure Related Matters Noted in an Audit; 3. SAS No. 63, Compliance Auditing Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance; 4. The 1988 revision of Government Auditing Standards, issued by the Comptroller General of the United States. The recommendations in this proposed SOP would be effective for audits done in accordance with the Single Audit Act for fiscal years beginning on or after January 1, 1990. Earlier application would be permissible.
Reports on audited financial statements of property and liability insurance companies : November 30, 1990 : amendment to AICPA audit and accounting guide Audits of property and liability insurance companies; Statement of position 90-10;

American Institute of Certified Public Accountants. Insurance Companies Committee
Omnibus proposal of Professional Ethics Division interpretations and rulings; Exposure draft (American Institute of Certified Public Accountants), 1990, Oct. 23

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

1. PROPOSED ETHICS RULING UNDER RULE 101: Member's Investment in a Partnership That Invests in Member's Client; 2. PROPOSED ETHICS RULING UNDER RULE 101: The Meaning of a Joint Closely Held Business Investment; 3. PROPOSED REVISION OF INTERPRETATION 101-8 UNDER RULE 101: Effect on Independence of Financial Interests in Nonclients Having Investor or Investee Relationships With a Member's Client; 4. PROPOSED ETHICS RULING UNDER RULE 101: Member's Investment in a Limited Partnership; 5. PROPOSED REVISION OF ETHICS RULING NO. 69 UNDER RULE 101: Joint Investment With a Promoter and/or General Partner; 6. PROPOSED DELETION OF ETHICS RULING NO. 62 UNDER RULE 101: Member and Client Are Limited Partners in a Limited Partnership; 7. PROPOSED REVISION OF INTERPRETATION 101-10 UNDER RULE 101: The Effect on Independence of Relationships Proscribed by Rule 101 and Its Interpretations With Nonclient Entities Included With a Member's Client in the Financial Statements of a Governmental Reporting Entity; 8. PROPOSED REVISION OF ETHICS RULING NO. 57 UNDER RULE 101: MAS Engagement to Evaluate Service Bureaus; 9. PROPOSED DELETION OF ETHICS RULING NO. 42 UNDER RULE 101: Members as Life Insurance Policyholders; 10. PROPOSED ETHICS RULING UNDER RULE 502: Use of the AICPA Accredited Personal Financial Specialist Designation
Omnibus proposal of Professional Ethics Division interpretations and rulings;Proposed ethics ruling under Rule 101: Member Joining Client Credit Union;Member Joining Client Credit Union;Proposed ethics ruling under Rule 101: Member as Guarantor of Client's Loan Member as Guarantor of Client's Loan;Proposed ethics ruling under Rule 102: Individual Considering or Accepting Employment With the Client Individual Considering or Accepting Employment With the Client;Proposed ethics ruling under Rule 102: Service on Board of Tax Appeals;Service on Board of Tax Appeals;Proposed revision of interpretation 501-1 under Rule 101: Client's Records and Accountant's Workpapers;Client's Records and Accountant's Workpapers;Proposed revision of ethics ruling no. 17 under Rule 101: Member as Stockholder in Country Club;Member as Stockholder in Country Club;Proposed deletion of ethics ruling no. 34 under Rule 101: Member as Auditor of Common Trust Funds;Member as Auditor of Common Trust Funds;Proposed deletion of ethics ruling no. 17 under Rule 101: Member as Auditor of Mutual Fund and Shareholder of Investment Adviser/Manager;Member as Auditor of Mutual Fund and Shareholder of Investment Adviser/Manager; Exposure draft (American Institute of Certified Public Accountants), 1990, July 23

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

1. The committee concluded that if a credit union meets the definition of a financial institution as provided in interpretation 101-5 and the loan is consistent with the requirements of interpretation 101-1-A4, membership in the credit union would not impair the member's and the member's firm's independence. If the credit union does not meet the definition of a financial institution or the loans or deposits are not in accordance with the interpretations and rulings of the AICPA Code of Professional Conduct, membership in the client credit union would cause the independence of the member and the member's firm to be impaired. 2. The Professional Ethics Executive Committee has been requested to provide guidance to members who question whether their independence would be considered to be impaired with respect to clients for whom the members have guaranteed loans. The committee has concluded that independence would be impaired if the guarantee exists during certain time periods specified in the ruling. 3. The Professional Ethics Executive Committee has concluded that in circumstances in which employment with a client is being offered to or sought by a member, Rule 102, "Integrity and Objectivity," is applicable. The rule requires that a member maintain objectivity and integrity when performing professional services. The committee believes that Rule 102 requires that a member remove himself or herself from the engagement in situations in which client employment is being offered or sought. 4. Rule 102, "Integrity and Objectivity," of the AICPA Code of Professional Conduct provides, in part, that in the performance of any professional services, a member "shall be free of conflicts of interest." Ethics interpretation 102-2 provides that "a conflict of interest may occur if a member performs a professional service for a client or employer and the member or his or her firm has a significant relationship with another person, entity, product, or service that could be viewed as impairing the member's objectivity." The Professional Ethics Executive Committee plans to issue ethics rulings to provide guidance on what circumstances may be viewed as creating conflicts of interest. 5. The proposed revised interpretation requires a member to return clients' records upon request whether or not the member's fees have been paid. Client records are defined as any accounting or other records belonging to the client that were provided to the member by or on behalf of the client. Workpapers are the member's property. 6. The Professional Ethics Executive Committee proposes to revise current Ethics Ruling No. 17 (ET section 191.033-.034) to indicate that an equity interest held by a member in an organization such as a country club constitutes direct financial interest that impairs a member's independence. Further, ownership of a debt interest in such entity would constitute a loan to a client that impairs independence. Membership in a club, absent an equity or debt interest, would not impair independence. 7. The Professional Ethics Executive Committee recommends the deletion of ruling no. 34 because the common trust funds of a bank are not part of the financial statements with respect to which the audit is being performed. 8. The Professional Ethics Executive Committee recommends that ruling no. 47 be deleted. Virtually all mutual funds are subject to the jurisdiction of the Securities and Exchange Commission (SEC). The SEC's rules on auditor independence differ from AICPA rules. It would therefore be misleading for this ruling to be a part of AICPA independence literature.
Omnibus proposal of Professional Ethics Division interpretations and rulings ;Proposed revision of interpretation 101-9 under Rule 101: The Meaning of Certain Independence Terminology and the Effect of Family Relationships on Independence;Meaning of Certain Independence Terminology and the Effect of Family Relationships on Independence;Proposed revision of ethics ruling no. 14 under Rule 101: Member on Board of Directors of United Fund;Member on Board of Directors of United Fund;Proposed revision of ethics ruling no. 41 under Rule 101; Member as Auditor of Mutual Insurance Company;Member as Auditor of Mutual Insurance Company;Proposed deletion of ethics ruling no. 45; Past Due Billings: Client in Bankruptcy;Past Due Billings: Client in Bankruptcy;Proposed revision of ethics ruling no. 52 under Rule 101: Past Due Fees Past Due Fees;Proposed revision of ethics ruling no. 54 under Rule 101; Member Providing Actuarial Services;Member Providing Actuarial Services;Proposed deletion of interpretation 201-4 under Rule 201: Definition of the Term Engagement as Used in Rule 201;Definition of the Term Engagement as Used in Rule 201; Exposure draft (American Institute of Certified Public Accountants), 1990, May 22

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

The Professional Ethics Executive Committee has reconsidered interpretation 101-9 and concluded that revisions are necessary. The following significant revisions are proposed: (1) a revised definition of a member or a member's firm, which includes contractors and entities controlled by persons included in the definition of a member or a member's firm; (2) deletion of reference to "key assistants" to certain financial executives as positions with a client indicating significant influence; (3) a new section defining the phrase "office participating in a significant portion of the engagement"; (4) inclusion of specific time periods during which relationships of the auditor's nondependent close relatives cause independence impairments; and (5) reference to cohabitants as having a relationship that may cause an independence impairment. The Professional Ethics Executive Committee proposes to revise Ethics Ruling No. 14 (ET section 191.027-.028) to recognize that a member's service on the board of a federated fund-raising organization could impair the member's independence with respect to recipients of the funds distributed by that organization. Specifically, independence would be impaired if the fund-raising organization can affect the management decisions of the recipient organizations. The Professional Ethics Executive Committee proposes a revision of Ethics Ruling No. 41 (ET section 191.081-.082) to provide that a member's independence would not be considered to be impaired with respect to an insurance company that receives, holds in a pooled separate account, and invests contributions with respect to the member's retirement plan. The current ruling addresses independence in terms of the materiality of the member's retirement plan funds in relation to the net worth of the insurance company. The Professional Ethics Executive Committee proposes to delete Ethics Ruling No. 45 (ET section 191.089-.090) because the proposed revision of the current ruling on unpaid fees included elsewhere in this exposure draft discusses unpaid fees in relation to bankruptcy. The Professional Ethics Executive Committee proposes a revision of Ethics Ruling No. 52 (ET section 191.103-. 104) to clarify the intent and language of the ruling. The ruling deals with the issue of the effect on an auditor's independence of unpaid fees. The proposed revision clarifies the nature of unpaid fees, specifies the time when fees may impair an auditor's independence, and provides a rationale for such impairment. The Professional Ethics Executive Committee proposes to revise Ethics Ruling No. 54 (ET section 191.107-. 108) to include a member's performance of appraisal and valuation services within the professional services covered by the ruling. Ethics interpretation 101-1-B1 provides that independence would be considered to be impaired if the member was connected with the client in a capacity equivalent to that of a member of management. The proposed addition of appraisal and valuation services does not alter the requirement in the ruling consistent with interpretation 101-1-B1 that all significant matters of judgment relating to these additional services must be determined or approved by the client and the client must be in a position to have an informed judgment on the results of these services. The purpose of this interpretation was to cause attestation and certain other standards that were not covered under rules 202 and 204 of the pre-January 12, 1988 Code of Professional Ethics, to be enforceable under rule 201. As rule 202 of the new Code of Professional Conduct requires members performing professional services to comply with standards promulgated by bodies designated by Council, interpretation 201-4 is no longer necessary. The Professional Ethics Executive Committee therefore recommends the deletion of this interpretation from the Code.
Proposed statement of position : accounting for real estate syndication income;Accounting for real estate syndication income; Exposure draft (American Institute of Certified Public Accountants), 1990, Dec. 5

American Institute of Certified Public Accountants. Real Estate Committee

This proposed statement of position (SOP) provides guidance on applying generally accepted accounting principles in accounting for real estate syndication income. Briefly, the SOP arrives at the following conclusions: 1. FASB Statement No. 66, Accounting for Sales of Real Estate, applies to the recognition of profit on the sale of real estate by syndicators to partnerships. 2. The guidance in FASB Statement No. 66 should be applied by analogy to the recognition of profit on real estate syndication transactions, even if the syndicators never had ownership interests in the properties acquired by the real estate partnerships. 3. FASB Statement No. 66 does not apply to the recognition of fees excluded from sales value. 4. All fees charged by syndicators should be included in the determination of sales value in conformity with FASB Statement No. 66, except (1) fees for which future services must be performed and (2) syndication fees. 5. Syndicators should recognize fees for future services when they render the services. 6. Syndicators should recognize syndication fees when the earnings process is complete and collectibility is reasonably assured. 7. If syndicators are exposed to future losses or costs from (1) material involvement with the properties, partnerships, or partners or (2) uncertainties regarding the collectibility of partnership notes, they should defer income recognition on syndication fees and fees for future services until the losses or costs can be reasonably estimated. 8. Regardless of contractual provisions, for the purpose of determining whether buyers' initial and continuing investments satisfy the requirements for recognizing profit in full in conformity with FASB Statement No. 66, cash received by syndicators should be allocated to unpaid syndication fees before being allocated to sales value. After the syndication fee is fully paid, additional cash received should first be allocated to unpaid fees for future services, to the extent those services have been performed by the time the cash is received, before being allocated to sales value.
Proposed audit and accounting guide : audits of savings institutions ;Audits of savings institutions; Exposure draft (American Institute of Certified Public Accountants), 1990, Aug. 31

American Institute of Certified Public Accountants. Savings and Loan Associations Guide Special Committee

This proposed audit and accounting guide has been prepared to assist the independent auditor in auditing and reporting on the financial statements of savings institutions. It describes relevant matters or procedures unique to those entities and focuses on specific problems of auditing and reporting on the financial statements of savings institutions. This proposed guide would supersede the audit and accounting guide Savings and Loan Associations (Fourth Revised Edition). This proposed guide includes illustrations of the form and content of financial statements for savings institutions and the auditors' reports thereon.
Report on the internal control structure in audits of futures commission merchants : February 12, 1990, amendment to AICPA audit and accounting guide, Audits of brokers and dealers in securities; Statement of position 90-02;

American Institute of Certified Public Accountants. Stockbrokerage and Investment Banking Committee
Financial reporting by entities in reorganization under the bankruptcy code : November 19, 1990; Statement of position 90-07;

American Institute of Certified Public Accountants. Task Force on Financial reporting by Entities in Reorganization under the Bankruptcy Code
Proposed statement of position : financial reporting by entities in reorganization under the bankruptcy code ;Financial reporting by entities in reorganization under the bankruptcy code; Exposure draft (American Institute of Certified Public Accountants), 1990, Apr. 4

American Institute of Certified Public Accountants. Task Force on Financial Reporting by Entities in Reorganization under the Bankruptcy Code

This proposed statement of position provides guidance for financial reporting by entities that have filed petitions with the Bankruptcy Court and expect to reorganize as going concerns under Chapter 11 of title 11 of the United States Code. It recommends that all such entities report the same way while reorganizing under Chapter 11, with the objective of reflecting their financial evolution. To do that, their financial statements should distinguish transactions and events that are directly associated with the reorganization from the operations of the ongoing business as it evolves. The statement recommends that, on emergence from Chapter 11, entities meeting specified criteria adopt fresh start reporting since, in substance, the creditors have acquired the entities. It also recommends how entities not meeting those criteria should report their liabilities.
Proposed interpretation of statement on responsibilities in tax practice (1988 revision) no. 1 : Realistic possibility standard ;Realistic possibility standard, includes SRTP no. 1, 1988 rev;Statements on responsibilities in tax practice, no. 1, 1988 rev; Exposure draft (American Institute of Certified Public Accountants), 1990, Aug. 15

American Institute of Certified Public Accountants. Tax Division

In August 1988 the AICPA Tax Division issued revised Statements on Responsibilities in Tax Practice (SRTPs). The primary purpose of these advisory statements on appropriate standards of tax practice is educational. SRTP (1988 Rev.) No. 1, 'Tax Return Positions," contains the standards a CPA should follow in recommending tax return positions and in preparing or signing tax returns and claims for refunds. The standard in SRTP (1988 Rev.) No. 1 requires that a CPA have "a good faith belief that the [tax return] position [being recommended] has a realistic possibility of being sustained administratively or judicially on its merits if challenged." This standard is referred to in this exposure draft as the "realistic possibility standard." Pursuant to SRTP (1988 Rev.) No.1, if a CPA concludes that a tax return position does not meet the realistic possibility standard, the CPA may still recommend the position to the client, or prepare and sign a return containing the position, if the position is not frivolous and is adequately disclosed on the tax return or claim for refund. This exposure draft interprets the realistic possibility standard. Its purpose, like that of the SRTPs themselves, is educational. This interpretation of the realistic possibility standard was approved by both the Responsibilities in Tax Practice Committee and the Federal Taxation Executive Committee. After the termination of the comment period, the Responsibilities in Tax Practice Committee will consider what changes should be made to the interpretation in light of comments received from the AICPA Tax Division membership and others. The interpretation will again be put to the vote of the Responsibilities in Tax Practice Committee and the Federal Taxation Executive Committee and, if approved in each committee by a two-thirds majority, will become effective.
Proposed revisions to Statements on responsibilities in tax practice (1988 revision) nos. 6 and 7, "knowledge of error" ;Statements on responsibilities in tax practice (1988 revision) nos. 6 and 7, "knowledge of error" Knowledge of error; Exposure draft (American Institute of Certified Public Accountants), 1990, Dec. 18

American Institute of Certified Public Accountants. Tax Executive Committee and American Institute of Certified Public Accountants. Responsibilities in Tax Practice Committee

In August 1988, the AICPA Tax Division issued revised Statements on Responsibilities in Tax Practice (SRTPs). The primary purpose of these advisory statements on appropriate standards of tax practice is educational.. SRTP (1988 Rev.) Nos. 6 and 7 included footnotes indicating that future statements would address (1) the effect of retroactive laws, regulations or court decisions and (2) erroneous accounting methods. The proposed revisions included here modify SRTP (1988 Rev.) Nos. 6 and 7 to address these issues. This exposure draft defines an error as any position, omission, or method of accounting that, at the time the return is filed, fails to meet the standards set out in SRTP (1988 Rev.) No. 1. The definition of error also includes a position taken on a prior year's return that no longer meets these standards because of retroactive laws, judicial decisions, or administrative pronouncements. These revisions were approved by both the Responsibilities in Tax Practice Committee and the Tax Executive Committee. After the termination of the comment period, the Responsibilities in Tax Practice Committee will consider what changes will be made to the standards in light of all comments received. The revision to SRTP Nos. 6 and 7 will again be put to the vote of the Responsibilities in Tax Practice and Tax Executive Committees and, if approved in each committee by a two-thirds majority, will become effective.
Financial accounting and reporting by providers of prepaid health care services; Statement of position 89-5;

American Institute of Certified Public Accountants. Accounting Standards Division
Proposed statement of position : accounting and reporting by continuing-care retirement communities for fees and the obligation to provide future services and the use of facilities, and the use of facilities, and for initial direct costs of acquiring continuing-care contracts ;Accounting and reporting by continuing-care retirement communities for fees and the obligation to provide future services and the use of facilities, and the use of facilities, and for initial direct costs of acquiring continuing-care contracts; Exposure draft (American Institute of Certified Public Accountants), 1989, Jan. 9

American Institute of Certified Public Accountants. Accounting Standards Division and American Institute of Certified Public Accountants. Health Care Committee

This proposed statement of position provides guidance to continuing-care retirement communities on applying generally accepted accounting principles in accounting and reporting for fees, the obligation to provide future services and the use of facilities to current residents, and for initial direct costs of acquiring continuing-care contracts. Briefly, the statement recommends that: 1. Refundable fees should be accounted for and reported as a liability and reclassified to nonrefundable deferred revenue when the obligation to refund fees is removed. The deferred revenue should be amortized to income over future periods based on the remaining estimated lives of the residents (paragraphs 22-23). 2. Fees to be paid to current residents (or designees) only from the proceeds of reoccupancy of the contract holder's unit should be accounted for as deferred revenue. In addition, similar amounts received from new residents in excess of amounts to be paid to previous residents (or designees) should be deferred. The deferred revenue should be amortized to income over future periods based on the remaining useful life of the facility (paragraphs 31-32). 3. Nonrefundable fees should be accounted for as deferred revenue. The deferred revenue should be amortized straight-line to income over the actuarially determined remaining life span of each individual (paragraphs 43-44). 3. A liability recognizing an obligation to provide future services and the use of facilities to current residents in excess of related anticipated revenues should be recorded when the present value of future net cash outflows exceeds unamortized deferred revenue plus depreciation of facilities to be charged related to the contracts and unamortized initial direct costs of acquiring the related continuing-care contracts (paragraphs 53-56). 5. Initial direct costs of acquiring continuing-care contracts that are expected to be recovered from future contract revenues and related to contracts actually issued should be capitalized and amortized to expense on a straight-line basis over the average expected remaining lives of the residents under contract (paragraph 63). The provisions of this statement would be effective for fiscal years beginning on or after the date of final issuance of the statement (with that date to be determined).
Comment letters on on the Proposed SAS, The Confirmation Process

American Institute of Certified Public Accountants. Auditing Standards Board