January 2010

"What Goes Up, Must Come Down"
While the housing collapse started as early as 2006, the US recession wasn't declared official until December 2008. In financial reporting circles, the FASB and the SEC have been at the center of the discussion throughout the credit crisis. Both bodies issued new guidance, some of which responded directly to criticism of existing US GAAP that was spurred by the downturn. That theme is visible in a number of pronouncements discussed below. To assist you with closing the books on 2009, this newsletter provides a reminder of several practice issues in light of the economic slowdown. Next, we discuss guidance that had to be adopted or permitted early adoption in 2009 and then peek forward to standards that will be adopted in 2010. We’ve also included a comprehensive list of recently-issued accounting standards as an appendix.

But before diving into the details, you'll note numeric references throughout this newsletter to the  accounting literature such as Accounting Standards Codification (ASC) 105-10-05. To explain, the FASB Codification became the single source of authoritative nongovernmental U.S. generally accepted accounting principles (US GAAP) last year. The Codification is effective for interim and annual periods ending after September 15, 2009. All previous level (a)-(d) US GAAP standards issued by a standard setter were superseded. All other accounting literature not included in the Codification is considered nonauthoritative. The Codification is the result of a major five-year project, with a topical structure that is significantly different from the structure of previous standards (FASB Statements, EITF Issues, etc.). New standards are now issued in the form of Accounting Standards Updates (ASUs). The purpose of the Codification is to centralize, organize and simplify access to all US GAAP. It may be accessed online (registration required for the free "Basic View" access) at http://asc.fasb.org/.

2009 Reminders
In our last annual review, we indicated tight credit conditions and economic difficulties can have far-reaching and perhaps unanticipated impact on financial reporting--something that didn't change in 2009. Read more...

New in 2009
Business combinations
In 2009, the accounting for mergers and acquisitions (M&A) changed significantly under ASC 805 (formerly FAS 141R). Although the activity in the M&A market was slow during most of 2009, there has been a recent up-tick in acquisition activity as financially stronger entities acquire weaker ones. Additionally, some sellers concluded they wouldn't receive a higher price by holding out further. Key areas of change in accounting for M&A include: Read more...

Other Changes in 2009
Collaborative arrangements
ASC 808 (formerly EITF 07-1) addresses situations in which entities enter into arrangements without the creation of a separate legal entity to participate in a joint operating activity. These activities might include the development and commercialization of intellectual property, a drug candidate, software, computer hardware or a motion picture. The new literature provides guidance on the income statement presentation of costs incurred and revenue generated from third parties, as well as payments between the participants in the collaborative arrangement. A number of disclosures are also required. Read more...

2010 Developments
Financial asset transfers and consolidation of variable interest entities
On June 12, 2009, the FASB issued two new standards that will have a significant impact on many enterprises beginning in 2010. Under ASC 860 (formerly FAS 166), companies will have to meet more stringent criteria in order to treat the transfers of financial assets, such as trade receivables and loans, as sales rather than secured financings. Under ASC 810 (formerly FAS 167), more special purpose entities (SPEs) and variable interest entities (VIEs) will be consolidated. Read more...

Appendix of Effective Dates

In Other News...
2010 Seminars. Our seminars calendar for 2010 keeps expanding. Don't miss our popular Somerset Practical MBA Program, which includes a live webinar simulcast so those of you outside the Indianapolis area can participate. Please go online to see the schedule and register.

Get Financially Fit in 2010 - A new year is here and it's time to get your financial goals on track! As part of your 2010 financial planning, take action by completing the Somerset Financial Fitness Survey. Your response will be reviewed by Somerset wealth management professionals, and they will contact you to help you meet your goals, build wealth and achieve personal financial success. If you complete the survey by February 28, you will be entered to win a $250 Visa gift card. Take the Somerset Financial Fitness Survey now.
 

Somerset Turns 50 in 2010 - We are proud to be celebrating our 50th anniversary in 2010! Somerset’s roots began in 1960 with the founding of Whipple & Company, a certified public accounting firm. Read more...

Tell Us How We Are Doing and You May Win Pacers Tickets - If you are a Somerset client, please take our survey concerning the services we have provided to you by February 15, you will be entered into our drawing for a pair of tickets to the Pacers vs. Chicago on Saturday, February 27, 2010. Take survey now.

Financial Reporting News is provided by Somerset’s Assurance Team for our clients and other interested persons upon request. For additional information on the issues discussed, please contact us. Since technical information is presented in generalized fashion, no final conclusion on these topics should be made without further review. 

These articles were written by and published herein with the permission from professionals of BDO Seidman, LLP.  Somerset is a member of the BDO Seidman Alliance, a nationwide association of independently owned accounting and consulting firms.