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KPMG’s CFO Financial ForumFinancial Forum WebcastQuarterly Outlook for Accounting and Financial Reporting Matters

March 19, 2013

Sam Kerlin, Partner

Angie Storm, Partner

Anthony Isaacson, Senior Manager

Jeremy Peters Senior ManagerJeremy Peters, Senior Manager

Agenda

Current Financial Reporting Matters

Upcoming Financial Reporting Matters

L ki Ah d Looking Ahead:

− Ongoing Standard-Setting Activities

− EITF Activities

− SEC Activities

PCAOB Activity and COSO update

Wrap-up

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Wrap-up

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Reference materials are available


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3

GlossaryGlossary

Glossary

AOCI – Accumulated Other Comprehensive IncomeASC – Accounting Standards CodificationASU – Accounting Standards UpdateCAQ – Center for Audit QualityCOSO – Committee of Sponsoring Organizations CTA – Currency Translation AdjustmentED – Exposure DraftED – Exposure DraftEITF – Emerging Issues Task ForceFASB – Financial Accounting Standards BoardFV-NI – Fair Value – Net IncomeFV-OCI – Fair Value – Other Comprehensive IncomeGAAP – Generally Accepted Accounting PrinciplesI&A – Interest and AmortizationIASB – International Accounting Standards BoardICFR –Internal Control over Financial ReportingIFRS – International Financial Reporting StandardsLIBOR – London Interbank Offered RateMD&A – Management Discussion and AnalysisNASDAQ – National Association of Securities Dealers Automated QuotationsNYSE – New York Stock ExchangeOCI Oth C h i I


OCI – Other Comprehensive IncomePCAOB – Public Company Accounting Oversight BoardPCC – Private Company CouncilRepo – Repurchase AgreementROU – Right-of-use SCA – Service concession arrangementSEC – Securities and Exchange CommissionSLE – Straight Line ExpenseVIE – Variable Interest EntityXBRL – eXtensible Business Reporting Language

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Current Financial Reporting Matters

American Taxpayer Relief Act of 2012

Signed on January 2, 2013 extending:

Research and ActiveLook-through Treatment of Various nonResearch and

Development Credit

Active Financing Exception

Treatment of Payments

between Related Controlled Foreign

Corporations

Bonus Depreciation

Various non-income tax

based credits

Accounting Implications− Current and deferred taxes based on provisions of enacted tax law as

of the balance sheet date− Effects of tax law changes, including retroactive changes, are

recognized in the period the changes are enacted

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. FOR INTERNAL USE ONLY. 7

recognized in the period the changes are enacted

For calendar year companies, the effects of the new law on current and deferred tax assets and

liabilities are recognized in the first quarter of 2013

Polling question #1

Which of the following best describes the first quarter impact expected by your company as a result of the American Taxpayer Relief Act of 2012?American Taxpayer Relief Act of 2012?A. Significant impact

B. Moderate impact

C. Minimal impact

D. No impact


Venezuelan Currency Devaluation

Official exchange rate changed to 6.3 Venezuelan Bolivars per US dollar effective February 13, 2013

Venezuela continues to be considered a highly inflationary economy as of December 31, 2012

− Venezuelan-based subsidiaries will use parent’s functional currency

− Any transaction gain/loss is not extraordinary item

Currency devaluation impact should be recognized in the period of the devaluation

Nonrecognized subsequent event prior to February 13, 2013


Currency devaluation impact should be recognized in the period of the devaluation (i.e., for calendar year companies, adjustment, if any, recorded in Q1 2013)

Consider disclosure in the notes and/or in MD&A

Consider potential impairments of Venezuelan Bolivar-denominated monetary assets and nonmonetary assets held by Venezuelan entities

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Presentation of Comprehensive Income and Reclassifications Out of AOCI (ASU 2011-05)

Requires total comprehensive income and its components be reported in either a single continuous statement or two separate but consecutive statementsstatement or two separate but consecutive statements

• Eliminates the option to report OCI and its components in the statement of changes in stockholder’s equity

• No change to items reported in AOCI (e.g. available-for-sale securities, deferred gain/loss on cash flow hedges, etc.)

• Effective date and transition (early adoption permitted):


For public entities, annual periods and

interim periods within those years beginning

after December 15, 2011

For non-public entities, annual periods ending after December 15,

2012, and interim and annual periods thereafter

Retrospective transition required

Reporting of Amounts Reclassified Out of AOCI (ASU 2013-02)

Bucket 1 - Items entirely reclassified from AOCI into net income: Disclose the impact on each affected net income line item; and

B k t 2 It t ti l l ifi d f AOCI i t t Bucket 2 - Items not entirely reclassified from AOCI into net income: Provide cross reference to other required disclosures

Disclosure required in the notes; however, parenthetical presentation on the income statement permitted when reclassifications are limited to Bucket 1 items

Effective date and transition (early adoption permitted):


For public entities, annual periods beginning after

December 15, 2012 and interim periods within

those years

For non-public entities, annual periods beginning

after December 15, 2013, and interim and

annual periods thereafter

Prospective transition

Scope of Disclosures about Offsetting Assets and Liabilities (ASU 2013-01)

• Short-term payables and receivables due from customers or suppliers in the normal course of business are not within the scope of ASU 2011-11

• Short-term payables and receivables due from customers or suppliers in the normal course of business are not within the scope of ASU 2011-11

Scope Clarification pp

• Limited to:• Derivatives, including embedded derivatives• Repurchase and reverse repurchase agreements• Securities borrowing and lending transactions that are subject to an

enforceable master netting arrangement or similar agreement

• Limited to:• Derivatives, including embedded derivatives• Repurchase and reverse repurchase agreements• Securities borrowing and lending transactions that are subject to an

enforceable master netting arrangement or similar agreement

Disclosure Requirements


• Annual periods beginning on or after January 1, 2013 and interim periods within those annual periods

• Retrospective application required

• Annual periods beginning on or after January 1, 2013 and interim periods within those annual periods

• Retrospective application requiredEffective Date

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Scope of Fair Value Disclosures for Nonpublic Entities (ASU 2013-03)

Clarifies the scope of the fair value disclosure exemption for nonpublic entitiesdisclosure exemption for nonpublic entities

• Exemption applies to all nonpublic entities• A nonpublic entity is not required to disclose the level of

the fair value hierarchy for items disclosed but not measured at fair value on the balance sheet


Effective upon issuance – applies to 12/31/2012 financial statements

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Iran and Syria Threat Reduction Act

Signed August 2012 Impacts issuers filing reports under Section 13 of the

Securities Exchange Act of 1934Securities Exchange Act of 1934 Required disclosures for a “sanctionable activity”

Type and extent of the activity

The related gross revenues and net

profits

Whether the issuer or its affiliates

intend to continue the activity


Required in interim and annual reports that are required to be filed after February 6, 2013 (e.g., 2012 annual reports for calendar year companies)

Separate notice to SEC also required

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Polling question #2

My company’s most recent filing included required disclosures as a result of “sanctionable activities”?

A. Yes

B. No


SEC Matters – Staff Focus Areas

• Continued focus on the identification and aggregation of segments• Continually monitor significant judgments and related facts and

circumstances to determine whether changes to segments are warranted (e.g.

• Continued focus on the identification and aggregation of segments• Continually monitor significant judgments and related facts and

circumstances to determine whether changes to segments are warranted (e.g.

Segment Identification and Aggregation

c cu sta ces to dete e et e c a ges to seg e ts a e a a ted (e gacquisitions)c cu sta ces to dete e et e c a ges to seg e ts a e a a ted (e gacquisitions)

• Significant judgment is involved in the evaluation of positive & negative evidence to determine whether to record, maintain or reverse a valuation allowance on deferred tax assets• Staff reviews consistency of assumptions and disclosures throughout the filing

• Significant judgment is involved in the evaluation of positive & negative evidence to determine whether to record, maintain or reverse a valuation allowance on deferred tax assets• Staff reviews consistency of assumptions and disclosures throughout the filing

Income Taxes

G d ill I i t


• Disclosure considerations for reporting units that are at risk for failing Step 1 of the goodwill impairment test to provide “early warning” to investors

• An interim goodwill impairment test should be disclosed, even if it did not result in recognition of impairment

• Disclosure considerations for reporting units that are at risk for failing Step 1 of the goodwill impairment test to provide “early warning” to investors

• An interim goodwill impairment test should be disclosed, even if it did not result in recognition of impairment

Goodwill Impairment

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Other Current Reminders

Issued Standard Effective for public companies

Effective for private companies

For more information

Technical Corrections and Improvements (includes minor technical corrections related to

10/1/2012 Same as public entities

FASB ASU 2012-04 and Defining

contracts not indexed to an entity’s own equity and amendments to conform certain guidance to the definition of fair value)

Issues 12-49

Testing Indefinite-Lived Intangible Assets for Impairment

Annual and interim tests in fiscal years beginning after 9/15/2012, with early adoption permitted

Same as for public entities

FASB ASU2012-01 and Defining Issues 12-34

Not-for-Profit Entities: Classification of the Sale Proceeds of Donated Financial Assets in the Statement of

Annual and interim periods beginning after 6/15/2013


FASB ASU 2012-05 and Defining


Financial Assets in the Statement of Cash Flows

6/15/2013 Defining Issues 12-45

Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution

Fiscal years and interim reporting periods within those years beginning on or after 12/15/2012


FASB ASU 2012-06 and Defining Issues 12-45

Other Current Reminders (continued)

Issued Standard Effective for public companies

Effective for private companies

For more information

Accounting for Fair Value For impairment For impairment FASB ASU Information That Arises after the Measurement Date and Its Inclusion in the Impairment Analysis of Unamortized Film Costs

assessments performed on or after 12/15/2012

assessments performed on or after 12/15/2013

2012-07 and Defining Issues 12-45

Derecognition of in Substance Real Estate – a Scope Clarification

Fiscal years and interim reporting periods within those years beginning on or after 6/15/2012

Annual periods ending after 12/15/2013 and interim and annual periods thereafter

FASB ASU 2011-10 and Defining Issues 11-57


periods thereafterContinuing Care Retirement Communities – Refundable Advance Fees

Fiscal periods beginning after 12/15/2012

Fiscal periods beginning after 12/15/2013

FASB ASU 2012-01

Question and Answer Session I

Upcoming Financial Reporting Matters

ASU No. 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity

Sale or transfer of a nonprofit activity or a business withina foreign entity

− CTA is only released into earnings if disposition constitutes a (substantially) complete liquidation of the foreign entity.

Parent Company

Loss of controlling financial interest in an investment in a foreign entity (i.e., at the foreign entity level)

− CTA is completely released upon deconsolidation as part per ASC Topic 810.

Consolidated Foreign Entity

Foreign Equity Method

Investment

SubsidiaryGroup of assets

(b i )

Step acquisition

− Represents two events under ASC 830

− CTA should be reclassified into earnings upon disposal


(business)of previously held interest.

Partial sale of a foreign equity method investment

− Continue to apply ASC 830

− A pro rata allocation of CTA should be reclassified

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ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date

Issue

How to account for a joint and several obligation that is fixed at the reporting date? Common examples include debt arrangements, settled litigation, and judicial rulings

Scope

Applies to all entities, not limited to those under common control and related parties

Conclusion

Record an obligation that are fixed at the reporting date at the greater of the amount that the entity has agreed to pay or the amount the entity expects to pay.

Adoption

Effective for fiscal years (and Modified retrospective application is required for all


y (interim periods within those

years) beginning after December 15, 2013 for public

entities and for fiscal years ending after December 15, 2014

for nonpublic entities

Early adoption is permitted

application is required for all prior periods for obligations that

exist at the beginning of an entity’s fiscal year of adoption.

Hindsight for comparative periods is permitted but must be

disclosed

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Polling question #3

Will the guidance in ASU 2013-04 change your company’s accounting for obligations from joint and several liability arrangements for which the total amountseveral liability arrangements for which the total amount of the obligation is fixed?A. Yes – we have such arrangements and do not currently account for

them as proposed

B. No – we have such arrangements and currently account for them consistent with the ASU

C. No – we do not have any such arrangements


D. Unknown – need to assess whether we have such arrangements

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Looking Ahead: Ongoing Standard-Ongoing Standard-Setting Activities

Revenue Revenue RecognitionRecognition

Financial Financial InstrumentsInstruments

LeasingLeasing

Consolidation

Large Number of Standard Setting Activities in 2013 and Beyond

Q1 ‘13 Q2 ‘13 2nd Half

Consolidation: Policy and Procedures F

Investment Companies F

Revenue Recognition FRevenue Recognition F

Leases E

Financial Instruments – Classification & Measurement E C

Financial Instruments – Impairment E C

Financial Instruments – Hedging TBD

Insurance Contracts E

Going Concern E

Liquidation Basis of Accounting F


Reporting Discontinued Operations E

Transfers and Servicing: Repurchase Agreements and Similar Transactions C

Disclosure Framework TBD

Accounting for Financial Instruments: Liquidity and Interest Rate Disclosures TBD

C - Comment Deadline E - Exposure Draft or Proposed ASU F - Final Standard

25

Main Steps to Apply the Revenue Recognition Exposure Draft (ED) Model

Step 1• Identify the contract with a customer• Identify the contract with a customer

Id tif th t f bli ti i thId tif th t f bli ti i thStep 2

• Identify the separate performance obligations in the contract

• Identify the separate performance obligations in the contract

Step 3 • Determine the transaction price• Determine the transaction price

Step 4• Allocate the transaction price to the separate performance

obligations• Allocate the transaction price to the separate performance

obligations


26

Step 5• Recognize revenue when each separate performance

obligation is satisfied• Recognize revenue when each separate performance

obligation is satisfied

Recent Revenue Redeliberations – Potential Significant Practice Changes (through February 2013 joint board meetings)

•Revenue that may be allocated to the delivered item would no longer be limited to the amount that is not contingent upon delivery of the undelivered item

•Revenue that may be allocated to the delivered item would no longer be limited to the amount that is not contingent upon delivery of the undelivered item

Multiple Element Arrangements

•If the stand alone selling price of a good or service is highly variable or uncertain, the residual approach would be allowed (May apply to multiple performance obligations that are highly variable

•If the stand alone selling price of a good or service is highly variable or uncertain, the residual approach would be allowed (May apply to multiple performance obligations that are highly variable

Estimated approach would be allowed. (May apply to multiple performance obligations that are highly variable or uncertain and should follow behind any specific allocation of a discount.)approach would be allowed. (May apply to multiple performance obligations that are highly variable or uncertain and should follow behind any specific allocation of a discount.)Selling Price

•The transaction price allocated to performance obligations would include an estimate of variable consideration; however, that variable consideration would be subject to the constraint (revenue recognized should not be subject to a risk of significant revenue reversal).

•The transaction price allocated to performance obligations would include an estimate of variable consideration; however, that variable consideration would be subject to the constraint (revenue recognized should not be subject to a risk of significant revenue reversal).

Variable Consideration

•Meeting a collectibility threshold (e.g., “reasonably assured” or “probable”) would no longer be a criterion for recognizing revenue.

•Bad debt expense is presented separately on the face of income statement versus notes

•Meeting a collectibility threshold (e.g., “reasonably assured” or “probable”) would no longer be a criterion for recognizing revenue.

•Bad debt expense is presented separately on the face of income statement versus notesCollectibility

•The transaction price would be adjusted to reflect the time value of money if the contract has a financing component that is significant to the contract, including accretion on advance payments

•The transaction price would be adjusted to reflect the time value of money if the contract has a financing component that is significant to the contract, including accretion on advance payments

Time Value of Money


27

advance paymentsadvance payments

•Each performance obligation would be evaluated to determine whether it is satisfied (a) over time or (b) at a point in time; the criteria could result in more “over time” revenue recognition (e.g., contract manufacturers)

•Each performance obligation would be evaluated to determine whether it is satisfied (a) over time or (b) at a point in time; the criteria could result in more “over time” revenue recognition (e.g., contract manufacturers)

Timing of Revenue Recognition

•Certain fulfillment costs and contract acquisition costs would be required to be capitalized•Certain fulfillment costs and contract acquisition costs would be required to be capitalizedContract Costs

Recent tentative decisions include (continued):

Recent Revenue Redeliberations(through February 2013 joint board meetings)

Disclosures Transition Effective Date

• Retention of most disclosures with some revisions

• Retention of most disclosures with some revisions

• Cumulative effect adjustment to the beginning of retained earnings in the year of adoption

• Option for t ti

• Cumulative effect adjustment to the beginning of retained earnings in the year of adoption

• Option for t ti

• Fiscal years, including interim periods, beginning on or after January 1, 2017

• Early adoption ld t b

• Fiscal years, including interim periods, beginning on or after January 1, 2017

• Early adoption ld t b


Final standard expected Q2/Q3

28

retrospective applicationretrospective application

would not be permittedwould not be permitted

Polling question #4

What impact will the proposed revenue recognition standard have on your company?

A. Significant change to how/when revenue is recognizedg g g

B. No significant change to how/when revenue is recognized

C. Not sure what impact the proposed standard will have to my company

D. The proposed standard will not be applicable to my company


Overview of Proposed Accounting Models –Lessor and Lessee

Lessor

Models

Lessee

Right-of-Use Model

“Right to use” leased property

Recognize “right-of-use”

asset

Recognize liability to make estimated future lease payments

Lease payments

Recognize right to receive

estimated future lease payments

Recognize residual asset

Receivable and Residual Model (most equipment leases)

O ti L M d l ( t l


Do not recognize right

to receive estimated future lease payments

Operating Lease Model (most real estate leases)

Recognize leased property

Single Lease Expense (SLE) Method (most

real estate leases)

Interest & Amortization (I&A) Method

(most equipment

leases)

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Identifying Separate Lease Components

• Separation criteria aligned with proposed revenue recognition standard; separate lease elements when distinct from other leases of underlying assets

Leases Project Redeliberations – Recent Tentative Decisions (January/February 2013 joint board meetings)

when distinct from other leases of underlying assets

Lease Classification – Property and Non-Property in Single Component

• Classification test (when lease component contains both property and non-property) is based on the nature of the primary asset (primary asset to lessee) in the component

Lease Classification – Land and Building Elements within a Single Lease Component

• No allocation between land and building within a single component


• Lease classification test based on remaining economic life for property and original economiclife for non-property

Capital Lease Transition – Grandfathering

• Lessees and lessors not required to make any adjustments to the carrying amount of any assets and liabilities associated with existing leases at transition

31

Financial Instruments Project Update – CLASSIFICATION AND MEASURMENT

FASB proposed ASU issued in February 2013

IASB issued exposure draft in November 2012

• Changes how entities determine the classification and measurement of financial instruments

• Financial assets measurement based on both their contractual cash flow characteristics and the business model (amortized cost FV-OCI FV-NI)

• Changes how entities determine the classification and measurement of financial instruments

• Financial assets measurement based on both their contractual cash flow characteristics and the business model (amortized cost FV-OCI FV-NI)

• FASB and IASB proposed models are generally converged in principle, although differences in application may arise

• FASB and IASB proposed models are generally converged in principle, although differences in application may arise


cost, FV-OCI, FV-NI)• Financial liabilities are generally

measured at amortized cost• Comment period ends May 15,

2013

cost, FV-OCI, FV-NI)• Financial liabilities are generally

measured at amortized cost• Comment period ends May 15,

2013

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Financial Instruments Project Update - IMPAIRMENT

FASB Exposure Draft issued in December 2012

• Replaces multiple credit• Replaces multiple credit

IASB exposure draft expected to be issued in 1st quarter 2013

• FASB and IASB not converged• FASB and IASB not convergedReplaces multiple credit impairment models in current U.S. GAAP

• Reflects an entity’s current estimate of all contractual cash flows that it does not expect to collect• Based on all relevant

information (past events,

Replaces multiple credit impairment models in current U.S. GAAP

• Reflects an entity’s current estimate of all contractual cash flows that it does not expect to collect• Based on all relevant

information (past events,

FASB and IASB not converged at this time

• IASB tentative model includes a dual measurement attribute with a transfer notion

FASB and IASB not converged at this time

• IASB tentative model includes a dual measurement attribute with a transfer notion


(pcurrent conditions, and reasonable and supportable forecasts)

• Comment period ends April 30, 2013

(pcurrent conditions, and reasonable and supportable forecasts)

• Comment period ends April 30, 2013

33

Financial Instruments Project Update - HEDGING

Hedging Activities− FASB redeliberations have not yet

begun and timing of a finalbegun and timing of a final standard is unclear

− IASB issued a review draft (9/12) on general hedge accounting Would allow for much broader

use of hedge accounting Final standard expected in Q2

2013


34

2013− FASB received feedback in 2011

on IASB hedge accounting model for its consideration

Polling question #5

Which of the joint projects as currently proposed is expected to require the most significant effort by your organization to implement?organization to implement?A. Revenue recognition project

B. Leases project

C. Financial instruments project


Going Concern and Liquidation Basis of Accounting

• Going concern and liquidation basis of accounting were previously being addressed as a single FASB project – Disclosures about Risks and Uncertainties – Split into separate projects in May 2012.

Background:

Going Concern: Requirement to assess an entity’s ability to continue as a going concern currently in the auditing standards (e.g., AU 341).

• Proposed ASU expected in late March or early April 2013 to provide guidance regarding management’s responsibility to evaluate and

Liquidation Basis: Minimal guidance under current U.S. GAAP

• Clarifies when and how an entity should apply the liquidation basis of accounting.

• Comment period ended October 1


responsibility to evaluate and disclose uncertainties about its ability to continue as a going concern.

• Comment period ended October 1, 2012. Final ASU expected in April 2013.

• No expected differences between public and nonpublic entities in applying the ASU.

36

Liquidation Basis of Accounting

When to apply Liquidation Basis of Accounting:− An entity should prepare financial statements on the going concern basis unless

liquidation is imminent (as defined in the standard)

ASU ill id id i t i li id ti ll th t d ASU will provide guidance on measuring assets in liquidation as well as other costs and income that an entity expects to incur or earn.

Liabilities should be recognized and measured based on the requirements of otherwise applicable U.S. GAAP. Entities should not anticipate legal release of the liability.

Requires new disclosures when the liquidity basis of accounting is being applied

Effective Date and Transition:


Effective for periods beginning after December 15,

2013.

Early adoption will be permitted.

Entities using liquidation basis of accounting at

effective date required to apply a cumulative-effect

adjustment to adjust for any changes needed to comply

with the standard.

37

Private Company Council (PCC)

PCC held its second meeting on February 12, 2013.

Three projects were added to its agenda:

FASB staff to develop research memorandum on two

Consolidation of VIEs

Plain vanilla interest rate

swaps

Acquired intangible

assets


padditional potential agenda items:

38

Stock-based compensation

Cumulative presentation for development stage

companies

Polling question #6

What three projects were added to the PCC’s agenda in February 2013? A VIEs interest rate swaps and intangible assetsA. VIEs, interest rate swaps and intangible assets

B. VIEs, interest rate swaps and uncertain tax positions

C. VIEs, interest rate swaps and asset retirement obligations

D. VIEs, stock-based compensation and interest rate swaps

E. Interest rate swaps, stock-based compensation and taxes


FASB Proposes New Guidance on Repos

FASB Exposure Draft Issued

• Repo to maturity would be accounted for as a• Repo to maturity would be accounted for as a• Repo-to-maturity would be accounted for as a secured borrowing

• Guidance on whether the financial asset sold is “substantially the same” as the financial asset to be repurchased

• Repurchase financings would be evaluated as

• Repo-to-maturity would be accounted for as a secured borrowing

• Guidance on whether the financial asset sold is “substantially the same” as the financial asset to be repurchased

• Repurchase financings would be evaluated as


two units of account – financial asset transfer and repurchase agreement

• New disclosures

two units of account – financial asset transfer and repurchase agreement

• New disclosures

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Polling question #7

Do you believe the new guidance proposed for repo transactions would result an improvement to current practice?

A. Yes

B. No


Looking Ahead-EITF Activities

EITF – Ongoing Activities

• Issue No. 12-B, Not for Profit Entities: Personnel Services Received from an Affiliate for Which the Affiliate Does Not Seek Compensation

• Issue No 12 G Accounting for the Difference Between the Fair Value of the

Final Consensus Reached

• Issue No. 12-G, Accounting for the Difference Between the Fair Value of the Assets and the Fair Value of the Liabilities of a Consolidated Collateralized Financing Entity

• Issue No. 13-A, Inclusion of the Fed Funds Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

• Issue No. 13-B, Accounting for Investments in Affordable Housing Tax Credits• Issue No. 13-C, Presentation of a Liability for an Unrecognized Tax Benefit

Wh N t O ti L T C dit C f d E i t

Consensus for Exposure Reached


When a Net Operating Loss or Tax Credit Carryforward Exists

• Issue No. 12-F, Recognition of New Accounting Basis (Pushdown) in Certain Circumstances

• Issue No. 12-H, Accounting for Service Concession Arrangements

Certain Issues Expected to be Discussed at future EITF Meeting

43

Looking Ahead-SEC Activity

SEC Matters – Approval of NYSE and NASDAQ Rules about Compensation Committees

Compensation committee independence and charter requirements

• NYSE rule will require all members of a compensation committee to be independent

• NASDAQ rule will require at least two independent directors• Both NYSE and NASDAQ rules will require issuer to adopt a formal written

compensation committee charter• Will apply on the earlier of a company’s 2014 annual shareholder meeting

or October 31, 2014

Compensation adviser requirements


p q

• Under both NYSE and NASDAQ rules, the compensation committee must evaluate independence of compensation adviser, including the six factors identified in SEC Rule 10C-1

• Effective July 1, 2013

45

Polling question #8

Will the new NYSE and NASDAQ rules result in a change to the current composition of your compensation committee?

A. Yes

B. No


SEC Matters - General

Conflict Minerals − Requires annual disclosure on new Form SD of the use of conflict minerals

(e.g., tin, tantalum, tungsten and gold) that:

O i i t d i th D ti Are necessary to the functionality or

− All issuers must initially file by May 31, 2014 for calendar year 2013, regardless of fiscal year

Extractive Industry Payments− Disclose certain payments made to the U.S. government and foreign

governments if issuer engages in oil, gas or mineral development

Originated in the Democratic Republic of Congo (DRC) or

adjoining (covered) countries, AND

Are necessary to the functionality or production of a product

manufactured or contracted to be manufactured by the company


governments if issuer engages in oil, gas or mineral development

− File new Form SD beginning with fiscal years ending after 9/30/13

SEC Staff Updates Financial Reporting Manual− On January 18, 2013 the Division of Corporation Finance posted their

Financial Reporting Manual which has sections updated as of September 30, 2012

47

Polling question #9

Which of the following best describes the anticipated level of effort for your organization to accumulate the information required for Conflict Mineral and Extractiveinformation required for Conflict Mineral and Extractive Industry Payment disclosures?A. Significant effort

B. Moderate effort

C. Minimal effort

D. No effort

E. Have not yet assessed effort


E. Have not yet assessed effort

48

PCAOB Activity and Update on InternalUpdate on Internal Control Related Matters

PCAOB Activity

• Improving the usefulness of inspection reporting• Improving analysis of inspection findings• Developing audit quality measures

Release of six near-term priorities, notable priorities include:

p g q y

• Audits of brokers and dealers – currently awaiting SEC rule making in response to Dodd-Frank provisions granting the PCAOB oversight of registered broker-dealers

• Auditor’s reporting model – in addition to issuing a proposal for public comment, the PCAOB plans to hold further roundtables and discussions on the topic

• Auditor Independence and Audit Firm Rotation August 2011 concept

“Highly ambitious” standard setting agenda for first half of 2013, key projects include:


• Auditor Independence and Audit Firm Rotation – August 2011 concept release issued for public comment, next steps under consideration

• Audit Transparency: Identification of the Engagement Partner – proposal planned for first half of 2013

• Related Parties – adoption or re-proposal planned for first half of 2013• Going Concern – the timing of proposal is dependent upon the timing of FASB’s

going concern project

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Proposed Changes to COSO’s Internal Control –Integrated FrameworkCOSO is in the process of updating its Framework, targeting release by end of March 2013

− Several elements are expected to be consistent with the original Framework− Areas of change are expected to include:

Identification of 17 principles - fundamental

concepts underlying the five components of internal

control

Increased focus on internal control considerations related to the use of

technology

Increased focus on governance best practices

as well as the role of a system of internal control with respect to fraudulent

financial reporting

SEC staff is monitoring for possible transition guidance− COSO is not a standard setting body and accordingly does not

have authority to mandate adoption


have authority to mandate adoption− The extent of effort required to implement the ‘13 Framework may

depend on whether registrants understood its explicit principles to have been implicit in the ‘92 Framework

− ‘92 Framework will still be usable in near term, so registrants may need to disclose which COSO Framework is used for the ICFR evaluation

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Question and Answer Session II

Presenters’ contact details

Sam KerlinPartner, Department of Professional Practice Phone: 212 954 3703

Anthony IsaacsonSenior Manager, Department of Professional Practice Phone: 212 909 5366Phone: 212-954-3703

Email: [email protected]

Angie StormPartner, Department of Professional PracticePhone: 212-909-5488Email: [email protected]

Phone: 212-909-5366Email: [email protected]

Jeremy PetersSenior Manager, Department of Professional Practice Phone: 212-909-5391Email: [email protected]


Financial Reporting Network: www.kpmginstitutes.com/financial-reporting-network

KPMG Learning Executive Education:www.execed.kpmg.com

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