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February 2010 Issue
As we enter what is hopefully the last six weeks of winter, according to Punxsutawney Phil, here are some updates to consider for upcoming annual and quarterly reports and proxy statements. Also, you can follow our updates on Twitter; we promise not to tweet excessively: 
Corp Fin Updates Guidance on Disclosure of Non-GAAP Financial Measures
The Division of Corporation Finance updated the Compliance and Disclosure Interpretations (C&DIs) on Non-GAAP Financial Measures on January 11th and again on January 15th. These C&DIs were originally issued in a Frequently Asked Questions document in 2003, after the Non-GAAP rules were issued. Disclosing a non-GAAP measure that eliminated a recurring charge proved difficult under prior FAQs 8 and 9, due in part to SEC staff focus on cautionary disclosure of how management used the measure and how management expected investors to use the measure. The most significant changes address this issue and include:
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The staff has revised their position, now in Questions 102.03 and 102.04 of the Non-GAAP C&DIs, seemingly opening the door to eliminating charges or gains that are not considered non-recurring, infrequent or unusual, as long as the description of the adjustment is appropriate and in accordance with the other requirements of Regulation G and Item 10(e) of Regulation S-K.
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Question 102.05 revises prior FAQ 11 to eliminate disclosure of how management uses the non-GAAP measure.
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The staff revised prior FAQ 28, now Question 106.01, to provide further clarification for foreign private issuers related to when a measure may be considered “expressly permitted” and therefore may be appropriate to display even if it is a non-GAAP measure that would otherwise be prohibited under Item 10(e) of Regulation S-K.
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The staff scaled back some of the language discouraging the presentation the presentation of Non-GAAP measures and eliminated several of the FAQs in Section 104, Segment Information.
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The staff sent a few questions to the Archive section of the website and added a few new Questions in other areas: 102.08, 102.10, 102.11, and 105.07.
See the revised C&DIs at: www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm
SEC Issues Interpretive Guidance on Climate Change Disclosure
The Commission recently approved interpretive guidance to clarify and enhance existing disclosure rules that may require a company to disclose the impact that business or legal developments related to climate change may have on its business. The rules the Commission cites are those related to disclosure of the business, risk factors, MD&A, and legal proceedings. See the press release and a video of Chairman Shapiro’s comments at:
http://www.sec.gov/news/press/2010/2010-15.htm
The release can be found at:
www.sec.gov/rules/interp.shtml
Update on Proxy Disclosure Enhancements Rule
The staff of the Division of Corporation Finance recently issued new C&DIs to provide additional guidance on matters related to the Commission’s Proxy Disclosure Enhancements Rule, approved in December; see the following C&DIs:
Also in January, the Commission finalized its rule related to Shareholder Approval of Executive Compensation of TARP Recipients, which permits, pursuant to the Emergency Economic Stabilization Act of 2008, a separate shareholder advisory vote to approve executive compensation for companies that have a TARP obligation outstanding.
The final rule can be found at: www.sec.gov/rules/final/2010/34-61335.pdf
Corp Fin Issues Small Entity Compliance Guide on Oil and Gas Reporting Modernization
The staff of the Division of Corporation Finance recently issued the latest Small Entity Compliance Guide on Oil and Gas Reporting Modernization. The Guide summarizes and explains the related rule that was issued by the Commission in late 2008 and which is effective for registration statements and annual reports on Forms 10-K and 20-F that contain financial statements for fiscal years ending on or after December 31, 2009. The final section of the guide has links to other resources, such as to the regulations that were amended and to C&DIs that have been issued on the rules. You can find the Guide at:
www.sec.gov/info/smallbus/secg/oilgasreporting-secg.htm
SEC Approves PCAOB Auditing Standard No. 7, Engagement Quality Review
In January, the Commission approved PCAOB Auditing Standard No. 7, Engagement Quality Review (EQR). The PCAOB adopted the new EQR standard in July 2009 and the approval by the SEC clears the way for adoption under the effective dates the PCAOB set in its standard, for audits and interim reviews for fiscal periods that began on or after December 15, 2009.
See AS7 at: www.pcaobus.org/Standards/Auditing/Pages/Auditing_Standard_7.aspx
See the SEC’s approval order at: www.sec.gov/rules/pcaob/2010/34-61363.pdf
Venezuela’s Economy is Determined to be Highly Inflationary
A heads up for any companies that have operations in Venezuela – because the cumulative three-year inflation rates for both of Venezuela’s inflation indices were over 100% at the end of 2008, the Venezuela economy meets the definition of highly inflationary. As a result, issuers should begin to account for Venezuela as a highly inflationary economy for purposes of applying ASC 830-10-45 (formerly in EITF D-55 and SFAS 52) as of January 1, 2010. Corp Fin is expecting expanded disclosure of the effect of the change to a highly inflationary economy and of the devaluation that occurred early this year; for example, MD&A disclosure would be required if the company has incurred related losses or the company has identified a trend or uncertainty that may cause historical financial results not to be indicative of future results, in this case due to currency fluctuations of other charges. The situation reminds us of the disclosure deficiencies alleged in an Enforcement case settled by Caterpillar, Inc. in 1992 – see the Accounting and Auditing Enforcement Release (AAER No. 363) at:
www.content.lawyerlinks.com/default.htm#http://content.lawyerlinks.com/library/sec/sec_enforcement/caterpillar.htm
Related International Resources:
The Center for Audit Quality (CAQ) SEC Regulations Committee’s International Practices Task Force (the IPTF) meets periodically with the SEC staff to discuss emerging technical accounting and reporting issues relating to SEC rules and regulations. The IPTF issued minutes of a conference call in July 2009 discussing the highly inflationary status of the Venezuela economy. Those minutes can be found at:
www.thecaq.org/iptf/pdfs/highlights/IPTF 7-27-09 Conference Call HLs - FINAL.pdf
Section XI of the Division of Corporation Finance International Reporting and Disclosure Issues Outline provides guidance from the SEC staff on determining when a country’s economy is highly inflationary for ASC 830-10-45 (guidance formerly in EITF D-55 and SFAS 52). While the outline is a bit dated, the topic in question, with the exception of the GAAP references, is still relevant and can be found at:
www.sec.gov/divisions/corpfin/internatl/cfirdissues1104.htm.
Several organizations have issued guidance on the highly inflationary issue, as well as on the subsequent devaluation of the Venezuelan currency. For an example of one, see the following Deloitte publication:
www.deloitte.com/assets/Dcom-UnitedStates/Local Content/Articles/AERS/Accounting-Standards-Communications/Financial-Reporting-Alert/us_assur_Financial_Reporting_Alert_10-1.pdf
FASB Issues Its First FASB Update
In an effort to expand communication with constituents around important projects, the FASB intends to issue brief informative updates on a periodic basis. The FASB also hopes this form of outreach will elicit more feedback from investors and other constituents in the standard-setting process. The first update includes information on the FASB’s Financial Statement Presentation and Accounting for Insurance Contracts joint projects with the IASB and can be found at:
www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176156636010
FASB Codification and Recent ASU's
At the end of 2009, the FASB made the four-volume bound edition of the FASB Accounting Standards Codification available for sale on its website for $195. An interesting fact that the FASB pointed out in its first FASB Update: as measured by the recently-issued bound version of the Codification – the Codification reduced the total page count of US GAAP from approximately 10,000 pages to approximately 2,900 pages. Believe it or not…
To order your bound copy of the codification, go to:
https://www.fasb.org/jsp/FASB/Page/Store/ProductPage&subjectId=25COD
And, for your reference, here are the most recent updates to the codification:
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Update No. 2010-08—Technical Corrections to Various Topics
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Update No. 2010-07—Not-for-Profit Entities (Topic 958): Not-for-Profit Entities: Mergers and Acquisitions
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Update No. 2010-06—Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements
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Update No. 2010-05—Compensation—Stock Compensation (Topic 718): Escrowed Share Arrangements and the Presumption of Compensation (SEC Update)
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Update No. 2010-04—Accounting for Various Topics—Technical Corrections to SEC Paragraphs (SEC Update)
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Update No. 2010-03—Extractive Activities—Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures
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Update No. 2010-02—Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification
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Update No. 2010-01—Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash—a consensus of the FASB Emerging Issues Task Force
We all hope that your
reporting goes well! Thank you for allowing us to serve you.
The SEC Institute Conference and Workshop Leaders
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February 2010
For course schedule, click the course title --
To register, click the course city
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19
IPO: Your Guide to Going Public
February 19
San Francisco
The Fairmont |
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23
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Accounting for Business Combinations
February 24
San Francisco
InterContinental Mark Hopkins |
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March 2010
For course schedule, click the course title --
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SOX 404: Mastering the ICFR Evaluation Process
March 8
Las Vegas
Mandalay Bay Resort & Casino |
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April 2010
For course schedule, click the course title --
To register, click the course city
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21
SEC Reporting Skills Workshop
April 21-22
New York
The Westin at
Times Square |
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Accounting for Derivatives & Hedging Activities Under US GAAP
April 26-27
Las Vegas
Mandalay Bay Resort & Casino |
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Revenue Recognition In-Depth Workshop
April 28-29
Las Vegas
Mandalay Bay Resort & Casino |
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30
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UPCOMING EVENTS LIST - Dates, locations, descriptions and links |
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