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AICPA's Annual Accounting and Auditing Update Workshop (2008-2009 Edition)

Author/Moderator: Mark Beasley, Ph.D., CPA, and Ronald E. Carlson, Ph.D., CPA
Publisher: AICPA
Availability: 05/30/2008
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Description

Ideal for self-study or on-site training

Whether you are in industry or public practice, this course keeps you current and informed and shows you how to apply the most recent standards.

Objectives: Apply the recently issued FASB Statements and Interpretations, AICPA Statements of Position, Statements on Auditing Standards, Statements on Standards for Accounting and Review Services and Statements on Standards for Attestation Engagements to accounting and auditing problems

Prerequisite:  Experience in accounting and auditing.

Value Aid! Numerous examples, illustrations and the AICPA’s Audit Risk Alert The Video Moderator is Mary S. Stone, Ph.D., CPA, Hugh Culverhouse Professor and Director of the Culverhouse School of Accountancy at the University of Alabama. Appearing on the video are Suzanne Q. Bielstein, CPA, Director of Major Projects and Technical Activities at the Financial Accounting Standards Board; Lillian Ceynowa, Director of Professional Practice and Member Relations at the Center for Audit Quality; Michael Glynn, AICPA Technical Manager, Audit and Attest Standards team; Ahava Goldman, AICPA Technical Manager, Audit and Attest Standards team; Jay D. Hanson, CPA, Partner and National Director of Accounting at McGladrey & Pullen, LLP; and Hiram Hasty, AICPA Technical Manager, Audit and Attest Standards team.

*(195-min. video) The DVD disk contains the video presentation and a viewable copy of the Manual. **The Additional Manual is for group study training only. Unlike other formats, it has no exam answer sheet and cannot be used to earn self-study credit.

Table of Contents

  • Chapter 1
    • Changing Definitions and Measurements
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • Liabilities Recognition and Measurement
      • Definition and Recognition
      • Measurement
    • Fair Value Measurements
      • Mixed-Attribute Model vs. Fair Value Model
    • Present Value Measurements
      • SFAC No. 7
      • Objective of Present Value Measurements
      • Traditional Present Value Approach
      • The Expected Present Value Approach
    • Summary
      • Applications
    • Questions
  • Chapter 2
    • Most Recent FASB Standards
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • SFAS No. 153 – Exchanges of Nonmonetary Assets
      • Introduction
      • Amendments to APBO No. 29
      • Effective Date and Transition
    • SFAS No. 152 – Accounting for Real Estate Time-Sharing Transactions
      • Amendments to SFAS No. 66 and SFAS No. 67
      • Effective Date and Transition
    • SFAS No. 151 – Inventory Costs
      • Introduction
      • Inventory Costs
      • Effective Date and Transition
    • SFAS No. 123(R) – Share-Based Payment
      • Scope
      • Recognition Principle for Share-Based Payment Transactions
      • Measurement Principle for Share-Based Payment Transactions
      • Measurement Date of Share-Based Payment Transactions with Nonemployees
      • Accounting for Share-Based Payment Transactions with Employees
      • Certain Transactions with Related Parties and Other Economic Interest Holders
      • Employee Share Purchase Plans
      • Measurement Principle for Share-Based Transactions with Employees
      • Measurement of Awards Classified as Equity
      • Awards Classified as Liabilities
      • Measurement Objective and Measurement Date for Liabilities
      • Recognition of Compensation Cost for an Award Accounted for as an Equity Instrument
      • Effect of Market, Performance, and Service Conditions on Recognition and Measurement of
      • Compensation Cost
      • Modifications of Awards of Equity Instruments
      • Accounting for Tax Effects of Share-Based Compensation Awards
      • Disclosures
      • Earnings per Share Implications
      • Effective Dates and Transition
    • Straightforward Examples
      • Example 1, Fixed Stock Option Plan with Cliff Vesting
      • Example 2, Stock Option Plan with Graded Vesting
      • Example 3, SARs
    • Some Complexities
      • The Valuation Model
      • Selecting the Assumptions for Use in the Options-Pricing Model
      • Market, Performance, and Service Conditions
      • Explicit, Implicit, and Derived Requisite Service Periods
      • Minimum Disclosure
    • Questions
  • Chapter 3
    • Other FASB Standards
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • FASB Interpretation No. 46 (R) Consolidation of Variable Interest Entities
      • Background
      • An Initial Scenario
      • Definition of Terms
      • Use of the Terms "Entity" and "Enterprise"
      • Scope
      • When to Determine if FIN 46 Applies
      • Exhibit Variable Interests
      • Determining Whether an Entity Is a Variable Interest Entity (VIE)
      • Expected Losses, Expected Returns, and Expected Variability
      • Development Stage Enterprises
      • Variable Interests and Interests in Specified Assets of a VIE
      • Reconsideration of VIE Status
      • Consolidate the VIE with Whom?
      • Related Parties
      • Initial Measurement
      • Disclosure
      • Effective Date and Transition
      • A Common Example
      • Some Complexities
    • FSPs Related to FIN 46
      • FSP FIN 46-1 – Applicability of FASB Interpretation No. 46, Consolidation of Variable Interest Entities, to Entities Subject to the AICPA Audit and Accounting Guide, Health Care Organizations
      • FSP FIN 46-2 – Reporting Variable Interests in Specified Assets of VIEs as Separate VIE under paragraph 13 of FASB Interpretation No. 46, Consolidation of Variable Interest Entities
      • FSP FIN 46-3 – Application of Paragraph 5 of FASB Interpretation No. 46, Consolidation of Variable Interest Entities, When Variable Interests in Specified Assets of a Variable Interest Entity Are Not Considered Interests in the Entity under Paragraph 12 of Interpretation 46
      • FSP FIN 46-4 – Transition Requirements for Initial Application of FASB Interpretation No. 46, Consolidation of Variable Interest Entities
      • FSP FIN 46-5 – Calculation of Expected Losses under FASB Interpretation No. 46, Consolidation of Variable Interest Entities
      • FSP FIN 46-6 – Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities
      • FSP FIN 46-7 – Exclusion of Certain Decision Maker Fees from Paragraph 8(c) of FASB Interpretation 46, Consolidation of Variable Interest Entities
      • FSP FIN 46-8 – Evaluating Whether as a Group the Holders of the Equity Investment at Risk Lack the Direct or Indirect Ability to Make Decisions about an Entity's Activities through Voting Rights or Similar Rights under FASB Interpretation 46, Consolidation of Variable Interest Entities
    • FSPs Related to FIN 46 (R)
      • FSP FIN 46(R)-1 – Reporting Variable Interests in Specified Assets of Variable Interest Entities as Separate Variable Interest Entities under Paragraph 13 of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (February 12, 2004)
      • FSP FIN 46(R)-2 – Calculation of Expected Losses under FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (February 12, 2004)
      • FSP FIN 46(R)-3 – Evaluating Whether as a Group the Holders of the Equity Investment at Risk Lack the Direct or Indirect Ability to Make Decisions about an Entity's Activities through Voting Rights or Similar Rights under FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities (February 12, 2004)
      • FAS FIN 46(R)-4 – Technical Correction of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, Relating to Its Effects on Question No. 12 of EITF Issue No, “Implementation Issues in Accounting for Leasing Transactions involving Special-Purpose Entities” (April 30, 2004)
      • FSP FIN 46(R)-5 – Implicit Variable Interests Resulting from Related Party Relationships under FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities
    • SFAS No. 150 – Accounting for Certain Financial Instruments with Characteristics of Both Liabilities
      • and Equity
      • Introduction
      • Key Terms
      • Scope
      • Mandatorily Redeemable Financial Instruments
      • Obligations to Repurchase the Issuer's Equity Shares by Transferring Assets
      • Certain Obligations to Issue a Variable Number of Shares
      • Freestanding Financial Instrument
      • Embedded Feature
      • Scope Limitation
      • Presentation
      • Disclosures
      • Effective Date and Transition
    • FSPs Related to SFAS
      • No. 150 No – Issuer's Accounting for Freestanding Financial Instruments Composed of More Than One Option or Forward Contract Embodying Obligations under FASB Statement
      • No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity No. SFAS No – Accounting for Mandatorily Redeemable Shares Requiring Redemption by Payment of an Amount that Differs from the Book Value of Those Shares, under FASB Statement
      • No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity FSP FAS 150-3 – Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under FASB Statement
      • No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity All Entities FSP FAS 150-4 – Issuers' Accounting for Employee Stock Ownership Plans under FASB Statement
      • No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity
    • Examples of What Might Have Been and What Still Might Be
      • Example 1 – All Shares Redeemable at 150% of Book Value
      • Example 2 – 50% of Shares Redeemable at 150% of Book Value
      • Example 3 – All Shares Redeemable at Fair Value
      • Example 4 – 50% of Shares Redeemable at Fair Value
    • FIN 45 – Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
      • Guarantees of Indebtedness of Others, an Interpretation of FASB Statements Nos. 5, 57, and 107 3-62
      • Scope and Applicability
      • Scope Exceptions from the Entire Interpretation
      • Scope Exceptions from Only the Initial Recognition and Initial Measurement Provisions
      • Initial Recognition and Initial Measurement of the Liability for a Guarantor's Obligations
      • Disclosures about a Guarantor's Obligations under Guarantees
      • Indirect Guarantees of Indebtedness of Others Encompassed by Paragraph 12 of FAS 5
      • Rescission of FIN 34
      • Effective Date and Transition
      • Dissents
    • FSPs Related to FIN 45
      • FSP FIN 45-1 – Accounting for Intellectual Property Infringement Indemnifications under FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others
      • FSP FIN 45-2 – Whether FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, Provides Support for Subsequently Accounting for a Guarantor's Liability at Fair Value
    • FAS 149 – Amendment of Statement 133 on Derivative Instruments and Hedging Activities
      • Introduction
      • Amendments to FAS 133
    • Questions
  • Chapter 4
    • FASB Exposure Drafts and Projects, EITF and FSP Update
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • FASB's Exposure Drafts of SFASs
      • Fair Value Measurements
      • Accounting Changes and Error Correction
      • Earnings per Share – An Amendment to FASB Statement No. 128
      • Qualifying Special-Purpose Entities and Isolation of Transferred Assets
      • Liabilities and Equity
    • Proposed FASB Interpretation
      • Accounting for Conditional Asset Retirement Obligations
    • Proposed Amendment to FASB Concept Statement
      • Amendment to Concepts Statement No. 6 to Revise the Definition of Liabilities
    • Selected EITF Issues
      • 04-13 – Accounting for Purchases and Sales of Inventory with the Same Counterparty
      • 04-12 – Determining Whether Equity-Based Compensation Awards Are Participating Securities
      • 04-11 – Accounting in a Business Combination for Deferred Postcontract Customer Support Revenue of a Software Vendor
      • 04-10 – Determining Whether to Aggregate Operating Segments That Do Not Meet the Quantitative Thresholds
      • 04-9 – Accounting for Suspended Well Costs 04-8 – The Effect of Contingently Convertible Instruments on Diluted Earnings per Share
      • 04-7 – Determining Whether an Interest Is a Variable Interest in a Potential Variable Interest Entity
      • 04-6 – Accounting for Stripping Costs Incurred during Production in the Mining Industry
      • 04-5 – Investors Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights
      • 04-4 – Allocation of Goodwill to Reporting Units for a Mining Enterprise
      • 04-3 – Mining Assets: Impairment and Business Combinations
      • 04-2 – Whether Mineral Rights Are Tangible or Intangible Assets
      • 04-1 – Accounting for Preexisting Relationships between the Parties to a Business Combination
      • 03-1 – “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments”
      • Listing of Recent EITF Issues Inventory of Open Issues
    • Recent EITF Topics
      • Topic No. D-108, "Use of the Residual Method to Value Acquired Assets Other Than Goodwill." 4-35
    • FASB Staff Positions (FSPs)
      • Final FSPs
      • Proposed FSPs
    • Other FASB Projects
      • Introduction
      • Business Combinations
      • Noncontrolling Interests
      • Combinations of Not-for-Profit Organizations
      • Conceptual Framework
      • Equity-Based Compensation
      • Fair Value Measurement
      • Liabilities and Equity
      • Liability Extinguishment
      • Financial Performance Reporting by Business Enterprises
      • Tentative Conclusions
      • Revenue Recognition
      • Short-Term International Convergence
      • Research and Development
      • Statement 140 Issues
      • Fair Value Option
      • Interpretation of FASB Statement No. 87
      • Interpretation of Statement No. 143
      • Uncertain Tax Provisions
      • GAAP Hierarchy
    • Questions
  • Chapter 5
    • Revenue Recognition
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • Revenue Recognition
      • Introduction
      • Current Conceptual Guidance
      • Related FASB Authoritative Literature
      • The EITF
      • SEC Staff Accounting Bulletin 104
      • The FASB’s Revenue Recognition Project
    • Questions
  • Chapter 6
    • AcSEC Update
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • SOP 04-2 – Accounting for Real Estate Time-Sharing Transactions
      • Summary
    • SOP 04-1 – Auditing the Statement of Social Insurance
      • Introduction
      • SOP 03-5 – Financial Highlights of Separate Accounts, an Amendment to the Audit and Accounting Guide Audits of Investment Companies
      • SOP 03-4 – Reporting Financial Highlights and Schedule of Investments by Nonregistered Investment Partnerships
    • SOP 03-3 – Accounting for Certain Loans or Debt Securities Acquired in a Transfer
    • SOP 03-2 – Attest Engagements on Greenhouse Gas Emissions Information
    • SOP 03-1 – Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-
    • Duration Contracts and for Separate Accounts
      • Summary
    • Proposed SOPs
      • Proposed SOP – Accounting by Insurance Enterprises for Deferred Acquisition Costs on Internal Replacements
      • Proposed SOP – Clarification of the Scope of the Audit and Accounting Guide Audits of Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies
      • Proposed SOP – Allowance for Credit Losses Proposed Guide – Certain Financial Institutions and Entities That Lend to or Finance the Activities of Others, an Amendment of Existing AICPA Audit and Accounting Guides
    • AcSEC Agenda Projects
    • Questions
  • Chapter 7
    • Auditing in a Changing Environment
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • The Changing Auditing Environment
      • Return to Core Values on Every Engagement
      • Lessons from Recent Events
    • Considering Economic Conditions to Lower Audit Engagement Risk
      • Current Economic Factors
    • Understanding the Implications of Sarbanes-Oxley
      • Public Company Accounting Oversight Board
      • Registering with the PCAOB
      • Redefining “The Client”
      • Implications for Auditor Independence
      • Implications for Auditing Standards
      • Implications for the Public Company
      • Implications for Auditors of Non-Public Companies
      • New Focus for AICPA Auditing Standards Board
    • Summary
    • Questions
  • Chapter 8
    • Considering Fraud in a Financial Statement Audit
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • SAS No. 99, Consideration of Fraud in a Financial Statement Audit
      • A Little Background Information
      • Current Fraud Trends
    • Overview of SAS No. 99 Revision
      • Auditor Fraud Detection Responsibility
      • Context for Considering Risks of Fraud – Three Conditions of Fraud
      • Requirements for Discussions among Engagement Personnel
      • Focus on Professional Skepticism
      • Expanded Sources of Information about Fraud Risks
      • Using Information to Identify Fraud Risks
      • Effective Date
    • Management Antifraud Programs and Controls
      • Creating a Culture of Honesty and High Ethics
      • Management’s Responsibility to Evaluate Risks of Fraud
      • Audit Committee Oversight
    • Summary
    • Questions
  • Chapter 9
    • New Standards Issued by the AICPA’s Auditing Standards Board
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • New Vision for AICPA Auditing Standards Board
    • Newly Issued Statements on Auditing Standards
      • SAS No. 100, Interim Financial Information
      • SAS No. 101, Auditing Fair Value Measurements and Disclosures
    • Newly Issued Auditing Interpretations
      • Clarification of Audit Report of the Extent of Testing of Internal Control over Financial Reporting in Accordance with Generally Accepted Auditing Standards – AU §9508
      • Reference to PCAOB Standards in an Audit Report on a Non-Issuer – AU §9508
      • Evaluation of the Appropriateness of Informative Disclosures in Insurance Enterprises’ Financial Statements Prepared on a Statutory Basis – AU §9623
      • Evaluating Adequacy of Disclosure and Presentation in Financial Statements Prepared in Conformity with an Other Comprehensive Basis of Accounting (OCBOA) – AU §9623
      • Auditor Reports on Regulatory Accounting or Presentation When the Regulated Entity Distributes Financial Statements to Parties Other Than the Regulatory Agency Either Voluntarily or Upon Specific Request – AU §9623
      • Requirement to Consult with Continuing Accountant – AU §9625
    • Practice Alerts
      • Practice Alert 03-01 – Audit Confirmations
      • Practice Alert 03-02 – Journal Entries and Other Adjustments
      • Practice Alert 03-03 – Acceptance and Continuance of Clients and Engagements
      • Documentation
      • Practice Alert 04-01 – Illegal Acts
    • Newly Issued Guidance for Attestation Engagements
      • Attest Engagements on Financial Information Included in XBRL Instance Documents – AT §9101
      • Reporting on Attestation Engagements Performed in Accordance with Government Auditing Standards – AT §9101
    • Newly Issued Statement on Quality Control Standards
    • Audit Implications of Recent AICPA Statements of Position
      • SOP 03-2, Attest Engagements on Greenhouse Gas Emissions Information
      • SOP 04-1, Auditing the Statement of Social Insurance
    • Newly Issued AICPA Toolkits
      • Auditing Fair Value Measurements and Disclosures: A Toolkit for Auditors
      • Accounting and Auditing for Related Parties and Related Party Transactions: A Toolkit for Accountants and Auditors
    • Summary
    • Questions
  • Chapter 10
    • On the Horizon: Issues for Audits of Nonpublic Entities
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • Overview of Existing Auditing Standards Board Projects
    • Exposure Draft Related to Audit Documentation
      • How It Affects Existing Standards
      • Key Components of New SAS
    • Exposure Draft Related to Certain Terminology Affecting Requirements in Professional Standards
      • How It Affects Existing Standards
      • Key Components of New SAS and SSAE
    • Exposure Draft Related to the Auditor’s Communication of Internal Control Related Matters Noted in an Audit
      • How It Affects Existing Standards
      • Key Components of New SAS
    • Exposure Draft Related to the Auditor’s Risk Assessment and Risk Response Processes
      • Overview of the Collective Effect of the Proposed Seven SASs
      • 1. Proposed SAS: Amendment to SAS No. 95, Generally Accepted Auditing Standards
      • 2. Proposed New SAS: Audit Evidence
      • 3. Proposed New SAS: Audit Risk and Materiality in Conducting an Audit
      • 4. Proposed New SAS: Planning and Supervision
      • 5. Proposed New SAS: Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement
      • 6. Proposed New SAS: Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained
      • 7. Proposed SAS Amendment to SAS No. 39, Audit Sampling
    • Other Current ASB Projects
      • Task Forces of the ASB
      • Other Activities of the Auditing Standards Board
    • Summary
    • Questions
  • Chapter 11
    • On the Horizon: Issues for Audits of Public Entities
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • PCAOB Standards Setting Scope and Process
      • Rule 3100
      • Due Process
      • Standing Advisory Group
      • References to Auditing and Professional Practice Standards
    • Newly Issued PCAOB Auditing Standards
      • Establishment of Interim Standards
      • PCAOB Auditing Standard No. 1, References in Auditor’s Reports to the Standards of the Public Company Accounting Oversight Board
      • PCAOB Auditing Standard No. 2, An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements
      • PCAOB Auditing Standard No. 3, Audit Documentation Rule 3101, Certain Terms Used in Auditing and Related Professional Practice Standards
    • Proposed New PCAOB Standards
      • Proposed Auditing Standard – Reporting on the Elimination of a Material Weakness
      • Proposed Ethics and Independence Rules – Concerning Independence, Tax Services, and Contingent Fees
    • Auditing Standards Board Recommendations to PCAOB
    • Summary
    • Questions
  • Chapter 12
    • Compilation and Review Update
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • Overview of New Statements on Standards for Accounting and Review Services
      • SSARS No. 10, Performance of Review Engagements
      • SSARS No. 11, Standards for Accounting and Review Services
    • New SSARS
      • Interpretation and Revised Appendix Interpretation No. 26: “Communicating Possible Fraud and Illegal Acts to Management and Others” (AR 9100)
      • Revised Illustrative Management Representation Letter (Appendix F of AR 100)
      • Exposure Drafts of Proposed SSARS
      • Exposure Draft: Compilation of Financial Statement Elements, Accounts, or Items of a Financial Statement and Pro Forma Financial Information
      • Exposure Draft: Restricting the Use of an Accountant’s Compilation or Review Report
      • Exposure Draft: Omnibus Statement on Standards for Accounting and Review Services – 2005
    • Effect of Sarbanes-Oxley Act of 2002 on Compilation and Review Engagements
    • Consideration of Fraud in Compilation and Review Engagements
      • Compilation Engagements
      • Review Engagements
    • Understanding the “Submission” of Financial Statements
      • Preparing Financial Statements
      • Presenting Financial Statements
    • Management-Use Only Financial Statements
      • Definition of Third Parties
      • Management's Use, Not Internal Use
      • Communication Requirements: Options Available
    • Overview of the Compilation and Review Alerts
      • Generating Monthly Financial Statements Efficiently
      • Online Accounting Services
      • Accounting for Goodwill
      • Different Levels of Assurance on a Single Set of Financial Statements (Split-Level Reporting)
      • Applicability of the SSARSs to Financial Statements Included in Consulting Reports
      • Independence and Client Services
      • Distribution of Draft Financial Statements
      • Documentation
      • Management Representation Letters in Review Engagements
      • Representation Letters for the Compilation of Personal Financial Statements
      • Use of Emphasis and Going-Concern Paragraphs in Compilation and Review Reports
      • Deciding When to Use OCBOA Financial Statements
      • Recurring Deficiencies Noted in Compilation and Review Engagements
    • Summary
    • Questions
  • Chapter 13
    • Other Issues Affecting Auditors
      • Learning Objectives
      • Introduction
      • Pre-Chapter Quiz
    • New “Yellow Book”
      • Overview of the Key Changes
    • COSO’s Enterprise Risk Management – Integrated Framework
      • What Is Enterprise Risk Management?
      • Overview of COSO’s Enterprise Risk Management Framework
    • Uniform CPA Exam
      • Key Differences
      • Frequency of Testing
      • More Information
    • Professional Ethics Activities
      • Code of Conduct Revisions
      • New Ethics Interpretations
      • Revision of Interpretation 501-5 under Rule 501 – “Failure to Follow Requirements of Governmental Bodies, Commissions, or Other Regulatory Agencies”
      • Two Revisions of Interpretation 101-3 under Rule 101 – “Performance of Non-Attest Services”
      • Exposure Draft: Proposed New Interpretation under Rule 101, Independence
    • AICPA Center for Public Company Audit Firms
    • Audit Committee Effectiveness Center
      • Employee Benefit Plan Audit Quality Center
    • Private Company Financial Reporting Task Force
    • Overview of Assurance Services
      • How Do Assurance Services Differ from Audits and Other Attest Services?
    • What Standards Apply to Assurance Services?
    • What Type of Report Is Generated in an Assurance Engagement?
    • Categories of Assurance Services
      • Risk Assessment
      • Business Performance Measurement
      • Systems Reliability Assurance
      • Health Care Performance Measurement
      • ElderCare Plus
      • Electronic Commerce Assurance
    • CPA Trust Services
      • Why Change from SysTrust and WebTrust to Trust Services?
      • How Trust Services Changes the SysTrust and WebTrust Services?
      • Common Set of Principles and Criteria
      • Security Principle
      • Availability Principle
      • Processing Integrity Principle
      • Online Privacy Principle
      • Confidentiality Principle
      • Periodic Examinations
      • Licensing
    • CPA Performance View Service
    • Summary of Assurance Services Engagements
    • Summary
    • Questions
  • Chapter 14
    • Ethics Focus: Accounting and Auditing
      • Ethics Overview
      • Interpretation 101-3
      • Key Ethical Dilemmas
      • Addressing Ethical Dilemmas
      • Available Resources
  • Chapter 15
  • Latest Developments
  • Value Aid
  • AICPA’s Audit Risk Alert

Excerpts

Chapter 1

Fair Value Measurements: Current Status and Future Plans

Learning Objectives

Upon completing this chapter, you should be able to

  • Identify new FASB Statements and Interpretations that require measurement of assets or liabilities at fair value.
  • Understand the Fair Value Hierarchy.
  • Apply the fair value option.

Introduction

Most new FASB Statements and Interpretations require recognition of certain assets and liabilities at fair value. A quick review of new standards reveals the following:

Exhibit 1-1
Recent Standards Requiring Recognition and Measurement at Fair Value
Standard Number and Title Recognition Measurement
SFAS No. 142, Goodwill and Intangible Assets a. Acquired intangible assets.
b. Impaired goodwill		 a. Fair value.
b. Fair value.
SFAS No. 143, Accounting for Asset Retirement Obligations Asset retirement obligations. Fair value.
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets Impaired assets. Fair value.
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities Certain costs and liabilities associated with exit and disposal activities. Fair Value.
SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity a. Redeemable financial instruments.
b. Certain obligations to issue a variable number of shares.		 a. Fair value.
b. Fair value.
FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure for Guarantees, Including Indirect Guarantees of Others For certain guarantees, the guarantor’s obligation to stand ready. Fair value.
FASB Interpretation 46 (revised December 2003), Consolidation of Variable Interest Entities Recognize newly consolidated assets, liabilities and noncontrolling interest of a VIE1. Fair value.
SFAS No. 123 (revised 2004), Share-Based Payment a. Recognize certain share-based payment awards as liabilities.
b. Recognize certain share-based payment awards as equity.		 a. Fair value.
b. Fair value.
SFAS 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 Asset received in a nonmonetary exchange that has commercial substance. Fair value.

The above Statements require the recognition at fair value of an asset, a liability, or an owners’ equity amount. Thus, fair value measurements are more frequently being required for balance sheet accounts.

Because of the emphasis placed on fair value by the FASB, this chapter includes a discussion of that topic by reviewing the FASB literature related to fair value measurements. The FASB has stated its objective that all financial instruments should be measured at fair value in financial statements and has issued several documents that enable accountants to better understand its views and the conceptual issues related to measuring accounting amounts at fair value or estimates thereof.

  • Preliminary Views on major issues related to Reporting Financial Instruments and Certain Related Assets and Liabilities at Fair Value (Preliminary Views).
  • Statement of Financial Accounting Concepts (SFAC) No. 7, Using Cash Flow Information and Present Value in Accounting Measurements.
  • The FASB exposure draft, Fair Value Measurements.
  • The FASB exposure draft, Fair Value Option for Financial Assets and Financial Liabilities.

Although those documents do not establish GAAP and the FASB has not decided when, if ever, to implement its objective by issuing FASB Statements requiring fair value measurement for financial instruments, its objective has been implemented on a case by case basis as evidenced in Exhibit 1-1.

Although fair value measurement is a current topic in the financial instruments area, fair value measurements, and estimates thereof, are used in the accounting for assets, liabilities, and equity interests that are not financial instruments. SFAC No. 7 provides conceptual guidance related to using cash flow information and present value techniques in the measurement of fair value of both financial instruments and nonfinancial assets, liabilities, and equities.

Pre-Chapter Quiz

  1. Essentially all assets and liabilities are measured at fair value at initial recognition.
    • True.
    • False.
  2. GAAP currently uses a mixed-attribute model for valuing financial instruments. That mixed attribute model may recognize a loss as the result of a good economic decision and recognize a gain as a result of a poor economic decision.
    • True.
    • False.
  3. Fair value is an exit price, that is, the price an entity would receive if it sold an asset or the price it would pay to "lay-off" a liability.
    • True.
    • False.
1 Unless the primary beneficiary and VIE are under common control.

 

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NASBA Field of Study: Accounting and Auditing
Level: Update
Recommended CPE Credit: Text-28 (Accounting-14, Auditing-14); DVD/Manual-31 (Accounting-15, Auditing-16)
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