Current Accounting Issues and Risks 2008 — Strengthening Financial Management and Reporting

Designed for members of an entity’s financial management and audit committee, this Financial Reporting Alert identifies current accounting and regulatory developments affecting an entity’s financial reporting. This alert is intended to help you achieve a more robust understanding of the economic and business environment in which your entity operates and is also an important tool in identifying the significant risks that may result in the material misstatement of your entity’s financial statements.

Specifically, in this alert you will find information on recently issued accounting standards such as:

• Business Combinations (FASB Nos. 160 and 141(R))
• Fair Value Accounting Standards (FASB Nos. 157 and 159)
• Accounting for Defined Benefit Pension and Other Postretirement Pension Plans (FASB No. 158)
• Income Tax Accruals and Deferred Income Taxes FIN 48

You will also find information on emerging issues such as:

• Convergence with International Financial Reporting Standards
• The FASB Codification Project
• Private Company Financial Reporting
• XBRL

This document has not been approved, disapproved, or otherwise acted on by a senior technical committee of the AICPA.

How This Alert Helps You

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This Financial Reporting Alert (alert) is designed to be used by members of an entity's financial management and audit committee to identify and understand current accounting and regulatory developments affecting the entity's financial reporting. This alert is intended to help you achieve a more robust understanding of the economic and business environment in which your entity operates. This alert is an important tool in helping you identify the significant risks that may result in the material misstatement of your entity's financial statements. To help you understand relevant industry, economic, and regulatory factors affecting your financial management and reporting, the AICPA also offers industry and topic-specific alerts to be used in conjunction with this alert. These alerts can be obtained by calling the AICPA at (888) 777-7077 or visiting http://www.cpa2biz.com. You should refer to the full text of pronouncements as well as the full text of any rules or publications that are discussed in this alert.

Understanding Your Entity and Its Environment to Assess Risks

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As a member of an entity's financial management or audit committee, it is important for you to have a sufficient understanding of the entity and the current environment in which it operates to perform not only an adequate risk assessment, but also an opportunity assessment for the entity. A proper risk assessment will assist you in understanding the risk that your entity's financial statements may be misstated. An understanding of the entity and the environment in which it operates may consist of an understanding of the following aspects:

• Current economic conditions
• Nature of the industry in which your entity operates and how it is changing
• Industry, regulatory, and other external factors
• Business objectives and strategies and related risks
• Current, past, and projected financial performance of the entity
• Competitors' financial performance
• Internal control within your entity, which includes the selection and application of accounting policies