Body Text:*

United States Country Report
Prepared for the IFAC Public Sector Accounting Standards Board
November 2007

Federal Accounting Standards Advisory Board (FASAB)
Governmental Accounting Standards Board (GASB)
Financial Accounting Standards Board (FASB)
AICPA Accounting Standards Executive Committee (AcSEC)
AICPA Auditing Standards Board (ASB)
AICPA Accounting and Review Services Committee (ARSC)
AICPA Professional Ethics Executive Committee (PEEC)
AICPA Task Forces
U.S. Governmental Accountability Office (GAO)
U.S. Office of Management and Budget (OMB)
Public Company Accounting Oversight Board (PCAOB)
Committee of Sponsoring Organizations Treadway Commission (COSO) 

Recent Activity of the Federal Accounting Standards Advisory Board (FASAB)

Proposed Statement of Federal Financial Accounting Standards (SFFAS) on Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates.  In August 2007, the FASAB issued an exposure draft (ED) of a SSFAS titled, Reporting Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates. This proposed statement provides standards for displaying the gains and losses from changes in assumptions as a discrete item on the statement of net cost, for certain note disclosures, and for selecting discount rates and valuation dates for present value measurements of expense and liability amounts. To obtain a copy of the ED and to view instructions for submitting comments, which are due November 30, 2007, visit: http://www.fasab.gov/pdffiles/ed_aug2007.pdf.

Update to Original Pronouncement Volume. The FASAB has released an update of its Original Pronouncements volume. The volume presents all the official FASAB pronouncements as of June 30, 2007, and includes all amended text. The volume can be found at http://www.fasab.gov/codifica.html

FASAB Issues Newsletter. The staff of the FASAB publishes FASAB News on the FASAB Web site to provide highlights of recent Board actions and issues. To view the most recent editions of FASAB News, visit: http://www.fasab.gov/news.html.

Back to top

Recent Activity of the Governmental Accounting Standards Board (GASB)

GASB Statement No. 51. In July 2007, the GASB issued Statement No. 51, Accounting and Financial Reporting for Intangible Assets. This statement provides guidance on how to identify, account for, and report intangible assets. The new standard characterizes an intangible asset as an asset that lacks physical substance, is nonfinancial in nature, and has an initial useful life extending beyond a single reporting period. Intangible assets must be classified as capital assets (except for those explicitly excluded from the scope of the new standard, such as capital leases). Statement No. 51 becomes effective for financial statements beginning after June 15, 2009. To order a copy of Statement No. 51, visit: www.gasb.org. 

GASB Issues Annual Bound Editions.  The GASB released its 2007-2008 Annual Bound Editions. This set of four, newly-updated reference books covers all recent changes made to GASB standards and implementation guidance. It consists of the Codification (one volume), Original Pronouncements (two volumes), and the Comprehensive Implementation Guide (one volume). The Codification and Original Pronouncements encompass all updates made to GASB standards as of June 30, 2007. The Comprehensive Implementation Guide consolidates all Implementation Guides and other guidance issued through June 30, 2007, codifying the questions and answers from the original guides and updating answers to recognize the effects of standards that have been issued since the release of the original guides.  These Bound Editions can be purchased through the GASB Web site, visit: www.gasb.org. 

Back to top

Recent Activity of the Financial Accounting Standards Board (FASB)

Proposed FASB Staff Position (FSP) on Consolidation and Equity Method Guidance for Not-for-Profit Organizations. In September 2007, FASB issued an ED titled, Omnibus Changes to Consolidation and Equity Method Guidance for Not-for-Profit Organizations. This FSP would make several changes to the guidance on consolidation and the equity method of accounting in AICPA Statement of Position 94-3, Reporting of Related Entities by Not-for-Profit Organizations, and the AICPA Audit and Accounting Guide, Health Care Organizations.  The deadline to submit comments is November 30, 2007.  To view the proposal and to obtain information on how to submit comments, visit: http://www.fasb.org/fasb_staff_positions/prop_fsp_sop94-3-a&aag_hco-a.pdf.

An FASB Agenda Proposal: Accounting for Insurance Contracts by Insurers and Policyholders, Including the International Accounting Standards Board (IASB) Discussion Paper, Preliminary Views on Insurance Contracts. In August 2007, the FASB issued an Invitation to Comment (ITC) on a proposed FASB project to develop a comprehensive standard on accounting for insurance (including reinsurance) contracts.  That proposed project would be a joint project with the IASB. The Boards’ objective in undertaking the proposed project would be to develop a common, high-quality standard that addresses recognition, measurement, presentation, and disclosure requirements for insurance contracts. That standard would provide accounting and reporting guidance for both the issuer and the holder of the insurance contract. It would replace all existing U.S. generally accepted accounting principles (GAAP) and international financial reporting standards for insurance contracts. The purpose of this ITC is to gather information from FASB constituents to help in deciding whether to add to its agenda a joint project with the IASB on insurance contracts. The deadline to submit comments was November 16, 2007.  To view the proposal, visit: http://www.fasb.org/draft/ITC_Insurance_Contracts.pdf.

FASB Emerging Issues Task Force (EITF). The following final FASB EITF Abstracts were issued since July 2007 (all are available on the FASB Web site at http://www.fasb.org/st/index.shtml):
EITF 07-6. Accounting for the Sale of Real Estate Subject to the Requirements of FASB Statement No. 66, Accounting for Sales of Real Estate, When the Agreement Includes a Buy-Sell Clause
EITF 07-5. Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock
EITF 07-4. Application of the Two-Class Method under FASB Statement No. 128 to Master Limited Partnerships

Back to top

Recent Activity of the AICPA Accounting Standards Executive Committee (AcSEC)

Technical Practice Aids (TPAs).  The following TPAs were issued since July 2007 (all are available on the AICPA Web site at http://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/
Accounting+Standards/recent_tpas.htm).
TPAs for 6140 – Not-for-Profit Organizations Fund-Raising Expenses
TPA 6931.08 - .10  – Employee Benefit Plans
TPA 6910.21-.24  –  Investment Companies TPAs
TPA 5700.01  – Income Tax Accounting for Contributions to Certain Nonprofit Scholarship Funding Organizations
TPA 2210.28  –  Accounting for Certain Liquidated Damages
TPA 1400.32 –  Parent-Only Financial Statements and Relationship to GAAP
TPAs for SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer TPA 2130.09-.35  and TPA 2130.36-.37
TPA 1400.29 - FIN 46 (R) on variable interest entities 

Back to top

Recent Activity of the AICPA Auditing Standards Board (ASB)

ASB Issues Statement on Quality Control Standards No. 7.  The ASB has issued Statement on Quality Control Standards (SQCS) No. 7, A Firm’s System of Quality Control, which replaces all previously issued SQCSs. The new SQCS requires a CPA firm to establish a system of quality control to provide it with reasonable assurance that the firm’s accounting and auditing practice as well as its personnel comply with professional standards and applicable regulatory and legal requirements, and that reports issued by the firm or engagement partners are appropriate in the circumstances. The SQCS requires a firm’s system of quality control to address specific elements of quality control.  A firm is required to document its quality control policies and procedures and communicate them to its personnel. To assist practitioners in implementing the standard, the ASB is developing a Practice Aid, Establishing and Maintaining a System of Quality Control for a CPA Firm’s Accounting and Auditing Practice thatwill be issued in the fall.  To obtain a copy of SQCS No 7, visit www.cpa2biz.com and request product number 067025. To read more about this standard in the latest ASB quarterly newsletter In Our Opinion, visit:  http://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/
Audit+and+Attest+Standards/Opinion/.

Clarity Project. The ASB issued a discussion paper in March 2007 seeking reactions to a proposal to revise the format, structure, and style of the professional standards issued by the ASB. The ASB considered comments from respondents on the discussion paper at its August 2007 meeting, and approved the way forward for a project that will address concerns regarding the clarity, length, and complexity of standards issued by the ASB (clarity project). Going forward, drafters of professional standards will adhere to new drafting conventions resulting in standards that have a different look and feel. Some of the more noticeable changes will include: (1) paragraphs containing requirements will be presented separately from those containing application material; (2) each standard will also include an objective that provides context for the requirements; (3) new terms will be defined and presented in a separate section of the standard; and (4) standards will include sections that contain special considerations for small, less complex entities and for governmental entities. Additionally, the ASB plans to harmonize ASB standards with those of the International Auditing and Assurance Standards Board. The ASB will also consider whether other changes to standards should be made to remove any unnecessary differences between the two sets of standards.  The process of redrafting and revising standards is expected to take two to three years. To read more about this project in the latest ASB quarterly newsletter In Our Opinion, visit: http://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/
Audit+and+Attest+Standards/Opinion/ .

Back to top

Recent Activity of the AICPA Accounting and Review Services Committee (ARSC)

ED on a Proposed Standards for Accounting and Review Services (SSARS).  This proposed SSARS titled, Omnibus Statement on Standards for Accounting and Review Services – 2008 would amend AR sections 100, 200, 300 and 400 as well as a number of interpretations with new terminology and definitions.  Comments are due on December 28, 2007.  To view the ED, visit: http://www.aicpa.org/download/exposure/EDOmnibus2007.pdf.

ED on Defining Professional Requirements in SSARS.  This proposed SSARS titled, Defining Professional Requirements in SSARS would define levels of responsibilities that accounts have in compilation and review engagements in a fashion similar to Statement of Auditing Standards No. 102, Defining Professional Requirements in Statements on Auditing Standards. Standards for compilation and review engagements will be clarified, and the imperatives used in such standards will be consistent with the standards for audit engagements.  Comments were due on October 25, 2007.  To view the ED, visit: http://www.aicpa.org/download/exposure/Defining_Prof_Req.pdf.

Issues Paper on Performance of Review Engagements. This Issues Paper, applicable to SSARS 10, Performance of Review Engagements, is intended to provide accountants with information that may help them understand certain requirements related to the use of analytical procedures in review engagements and how the use of analytical procedures should be documented in those engagements.  To view the Issues Paper, visit http://www.aicpa.org/download/auditstd/arsc/issupap_2004_05_ssars10.pdf.

Back to top

Recent Activity of the AICPA Professional Ethics Executive Committee (PEEC)

ED of Interpretation 101-17 Under Rule 101, Independence. In August 2007, PEEC issued an ED of Interpretation 101-17, titled Networks and Network Firms and Related New and Revised Definitions to ET Section 92.  The proposed interpretation specifies that when firms and entities in an association cooperate with each other for the purpose of enhancing their capabilities to provide professional services and when they share certain characteristics, the association is considered to be a network, and the firms and other entities that belong to the network are considered to be network firms and must be independent of certain attest clients of the other network firms.  Comments were due November 13, 2007. To view the ED, visit: http://www.aicpa.org/download/ethics/August_13_2007_Exposure_Draft.pdf

Back to top

Recent Activity of AICPA Task Forces

Guidance Issued for Evaluating Control Deficiencies in Single Audits.  An AICPA task force issued guidance intended to emulate the guidance in SAS No. 112, Communicating Internal Control Related Matters Identified in an Audit, for consideration when evaluating control deficiencies in a single audit.  Using it will help practitioners meet the requirements of SAS No. 112 and promote consistency in practice.  The guidance will be published in the upcoming 2007 AICPA Audit Risk Alert (ARA), Government Auditing Standards and Circular A-133 Audits available by visiting www.cpa2biz.com. To read the guidance in its entirety, visit: /Resources/Archived+GAQC+Update+Newsletters/GAQC+Alert+No.+62.htm.

Back to top

Recent Activity of the U.S. Government Accountability Office (GAO)

Comprehensive Slide Set.  GAO has issued an updated comprehensive set of annotated slides to assist the government audit community in developing training on the July 2007 revision of Government Auditing Standards.  In addition to highlighting the major revisions, the slides contain information about the process used to issue the July 2007 Yellow Book, the reasons for the changes, what the changes will mean for government auditors, and effective dates.  The slides should be used in conjunction with the summary of major changes and the complete text of the July 2007 revision. To review these documents, visit: http://www.gao.gov/govaud/ybk01.htm.

Back to top

Recent Activity of the U.S. Office of Management and Budget (OMB)

OMB Corrects Compliance Supplement Guidance for Research and Development Cluster.  The OMB made a correction to the guidance in the 2007 Compliance Supplement for the Research and Development (R&D) cluster relating to cost transfers. The language that appeared in the 2006 Compliance Supplement on this topic should have been carried forward to the 2007 Compliance Supplement. However, due to an administrative error it was inadvertently changed.  Upon being notified of the error, OMB corrected the language that originally was included in the 2007 Compliance Supplement. The revised guidance appears in Part 5, Clusters of Programs, in the R&D Cluster section on Allowable Costs/Cost Principles.  If you are auditing R&D clusters as part of your single audits, check the Compliance Supplement section that you are using to be sure that the cost transfers guidance is the correct version.  To view the 2007 Compliance Supplement, visit: http://www.whitehouse.gov/omb/circulars/a133_compliance/07/07toc.html.

Back to top

Recent Activity of the Public Company Accounting Oversight Board (PCAOB)

1. Auditing Standard No. 5. In July 2007, the Securities and Exchange Commission (SEC) approved Auditing Standard (AS) No. 5 titled, An Audit of Internal Control Over Financial Reporting That Is Integrated with an Audit of Financial Statements.   The standard supersedes AS No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements. Per the PCAOB, AS 5 is a principles-based standard designed to focus the auditor on the most important matters, increasing the likelihood that material weaknesses will be found before they cause material misstatement of the financial statements. The standard also eliminates audit requirements that are unnecessary to achieve the intended benefits, provides direction on how to scale the audit for a smaller and less complex company, and simplifies and significantly shortens the text of the standard.  Also, the new standard conforms certain terms to the SEC’s rules and guidance, such as the definition of “material weakness” and use of the term “entity-level controls” instead of “company-level controls.”  To view the standard, visit: http://www.pcaob.org/Standards/Standards_and_Related_Rules/
   Auditing_Standard_No.5.aspx.

Rule 3526. In July 2007, the PCAOB proposed Rule 3526, Communication with Audit Committees Concerning Independence. This rule would incorporate the current requirement under Independent Standards Board (ISB) No. 1, requiring the auditor to disclose to the audit committee, among other things, all relationships between the auditor and its related entities and the company and its related entities that, in the auditor’s professional judgment, may reasonably be thought to bear on independence.  The rule would build on the communication standards in ISB No. 1 by requiring the registered public accounting firm, prior to accepting and initial engagement pursuant to the standards of the PCAOB, to make additional communications to the audit committee.  Comments were due September 17, 2007. To obtain a copy of the proposed Rule, visit: http://www.pcaob.org/Rules/Docket_017/2007-07-24_Release_2007-008.pdf.

Back to top

Recent Activity of the Committee of Sponsoring Organizations Treadway Commission (COSO)

Discussion Document with Guidance on Monitoring Internal Control Released. In September 2007, COSO released its discussion document, Guidance on Monitoring Internal Control Systems. The guidance is designed to help organizations monitor the quality of their internal control systems. This guidance more fully develops the monitoring component of COSO’s Internal Control - Integrated Framework. The guidance applies to the internal control objectives over financial reporting, as well as the objectives related to effective operations and compliance. In addition, it includes the principles of effective internal control over financial reporting developed by COSO in 2006, and reiterates the importance of those principles to all organizations — regardless of size.  The comment period ended October 31, 2007 and an ED is expected later this year, including tools, case studies, and implementation guidance. The final full publication currently is scheduled for release during the first quarter of 2008. To view the discussion document, visit: http://www.coso.org/Publications/COSO_Monitoring_discussiondoc.pdf.

Back to top

Body Text To be used by Import Tool: