Pershing Yoakley & Associates, P.C. is pleased to present the May 2011 Audit & Accounting Update. This publication is designed to provide direct access to current audit and accounting information that is relevant to you.
FASB Activities
Recently Completed Projects and Exposure Drafts
The Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03 and Proposed Accounting Standards Update (PASU) No. 2011-180 in April. Summaries of these items have been included below.
ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements
The amendments in this ASU remove from the assessment of effective control, the criteria requiring the transferor to have the ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee, and the collateral maintenance implementation guidance related to that criteria. The remaining existing criteria relating to the assessment of effective control are not changed by the amendments in this ASU. The guidance in this ASU is effective for the first interim or annual period beginning on or after December 15, 2011, and should be applied prospectively. Early adoption is not permitted. To view the ASU in its entirety, please click here.
PASU No. 2011-180, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment
The objective of this PASU is to simplify how an entity is required to test goodwill for impairment. The current guidance requires an entity to test for goodwill impairment on at least an annual basis by calculating and comparing the fair value of a reporting unit to its carrying amount (Step 1). If the calculated fair value is determined to be less than the carrying amount, then a second step must be performed to measure the amount of the impairment loss, if any (Step 2). This PASU introduces a qualitative approach for testing goodwill for impairment whereby an entity would be allowed to first determine whether it was more likely than not (or a likelihood of greater than 50%) that a reporting unit’s fair value exceeds its carrying amount. If this determination can be made, a Step 1 analysis is not required. However, if the qualitative analysis suggests that it is more likely than not that the carrying amount of a reporting unit exceeds its fair value, the entity would be required to perform Step 1 of the two-step impairment test as described above. The FASB is currently accepting comments on this PASU and the deadline for comments is June 6, 2011. If passed, the amendments would be effective for reporting periods beginning after December 15, 2011, and early adoption would be permitted. To view the PASU in its entirety, please click here.
For more information, please contact the experts listed below at PYA, (800) 270-9629.
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