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In its 63rd year of publication, this edition captures today's prevailing financial reporting practices with hundreds of illustrative examples from the actual financial statements of the country's most prominent publicly-traded companies.
Fully updated with all new presentation and disclosure examples, as well as narratives describing financial reporting requirements, you get the tools you need to apply the complex reporting guidance within U.S. GAAP, including statistical data revealing the latest trends in presentation and disclosures.
This 2009 edition of Trends includes highly anticipated illustrative examples of reporting and disclosure requirements for
In addition, helpful narratives describing newer accounting pronouncements are provided and include SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (FASB ASC 815), SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (FASB ASC 810), and SFAS No. 141 (R), Business Combinations (FASB ASC 805).
With companies from virtually every sector — ConocoPhillips, Ford Motor Company, Intel Corporation, and United Parcel Service, Inc., to name just a few — you'll get a rich diversity of examples that will save you hours of time. Apply this practical guidance to develop tailored solutions for difficult reporting issues.
This edition also includes an overview of International Financial Reporting Standards (IFRS) with an update on the status of global convergence.
AICPA has also developed a new Accounting Trends & Techniques for IFRS, available here.
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About This Edition of Accounting Trends & Techniques
Accounting Trends & Techniques (Trends) compiles annual reporting and disclosure data and examples from a survey of the annual reports of publicly traded entities. Trends provides accounting professionals with an invaluable resource for incorporating new and existing accounting and reporting guidance into financial statements using presentation techniques adopted by some of the most recognized entities headquartered in the United States. This 2009 edition of Trends surveyed annual reports of 500 carefully selected industrial, merchandising, technology, and service entities for fiscal periods ending between January and December 2008.
To provide you with the most useful and comprehensive look at current financial reporting techniques and methods, Trends is organized by financial statement disclosure and offers descriptive narratives about reporting requirements, statistical tables that track reporting trends, excerpts from the surveyed annual reports showing reporting techniques, and detailed indexes.
Narratives
Trends offers thorough discussions of the significant U.S. generally accepted accounting principles (GAAP) financial statement reporting requirements in narratives about each type of disclosure. These narratives also provide the related authoritative sources for each requirement.
Trend Tables
Statistical tables that follow the narratives track significant disclosure and reporting trends, providing a comparison of current survey findings with those of prior years. These tables show trends in such diverse reporting matters as financial statement format and terminology and the treatment of transactions and events reflected in the financial statements. Note that prior-year comparisons might be affected in this edition due to the sample size changing to 500 entities from the previous 600 entities.
Excerpts Showing Technique
Trends presents carefully selected excerpts from the annual reports of the survey entities to illustrate current reporting techniques and various presentation practices already subjected to the audit requirements mandated by the Public Company Accounting Oversight Board (PCAOB). Every edition of Trends includes all new annual report excerpts that were chosen to be particularly relevant and useful to financial statement preparers in illustrating current reporting practices.
Indexes
Indexes in this edition include the "Appendix of 500 Entities," which alphabetically lists each of the 500 survey entities included in the current edition and notes where in the text excerpts from their annual reports can be found; the "Pronouncement Index," which provides for easy cross-referencing of pronouncements to the applicable descriptive narratives; and a detailed "Subject Index," which is fully cross-referenced to all significant topics included throughout the narratives.FASB Accounting Standards Codification™
As of the publication of this edition of Trends, Financial Accounting Standards Board (FASB) Accounting Standards Codification™ (ASC) is the source of authoritative U.S. GAAP (see full discussion under Recent Accounting Developments). Accordingly, we have updated all narratives to include both the original title for each standard as well as the FASB ASC reference for those that were codified therein. Note that this edition of Trends does not include any example of financial statement reporting under FASB ASC because FASB ASC was not yet effective when the financial statements surveyed and excerpted herein were filed. Also note that this edition of Trends now uses "entity" instead of "company" or any other related term in accordance with FASB's choice of terminology as explained in the FASB ASC Notice to Constituents (NTC).
Recent Guidance
Note that the effective dates of recently released guidance affect the timing of its inclusion in the financial statements of the survey entities, thereby affecting the availability of illustrative excerpts for potential inclusion in each edition of Trends. This 2009 edition of Trends includes survey entities having fiscal years ending within calendar year 2008. Recently issued technical guidance for which this edition supplies illustrative annual report excerpts include SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115 (FASB ASC 825, Financial Instruments); SFAS No. 157, Fair Value Measurements (FASB ASC 820, Fair Value Measurements and Disclosures); and FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (FASB ASC 740, Income Taxes).
The 2010 edition of Trends will include survey entities having fiscal years ending within calendar year 2009. Accordingly, that edition of Trends will include illustrative annual report excerpts for SFAS No. 165, Subsequent Events (FASB ASC 855, Subsequent Events); SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (FASB ASC 815, Derivatives and Hedging); SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (FASB ASC 810, Consolidation); and SFAS No. 141R, Business Combinations (FASB ASC 805, Business Combinations), among other recently released authoritative accounting and auditing guidance.
Recent Accounting Developments
This section highlights both FASB ASC and International Financial Reporting Standards (IFRS). Because both FASB ASC and IFRS will have a notable effect on all future editions of Trends, as well as U.S. financial reporting in general, we are presenting some basic background to help acquaint you with these important developments.
FASB ASC
On the effective date of FASB Statement No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162, FASB ASC became the source of authoritative U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the SEC. At that time, FASB ASC superseded all then-existing, non-SEC accounting and reporting standards for nongovernmental entities. Once effective, all other nongrandfathered, non-SEC accounting literature not included in FASB ASC became nonauthoritative. This change affects accountants and auditors alike.
Background and Purpose
FASB ASC is a major restructuring of accounting and reporting standards designed to simplify user access to all authoritative U.S. GAAP by providing the authoritative literature in a topically organized structure. FASB ASC disassembled and reassembled thousands of nongovernmental accounting pronouncements (including those of FASB, the EITF, and the AICPA) to organize them under approximately 90 topics. FASB ASC includes all accounting standards issued by a standard setter within levels A-D of the current U.S. GAAP hierarchy. FASB ASC also includes relevant portions of authoritative content issued by the SEC, as well as select SEC staff interpretations and administrative guidance issued by the SEC; however, FASB ASC is not the official source of SEC guidance and does not contain the entire population of SEC rules, regulations, interpretive releases, and staff guidance.
FASB ASC is not intended to change U.S. GAAP or any requirements of the SEC; rather, it is part of FASB's efforts to reduce the complexity of accounting standards and also to facilitate international convergence. Moreover, FASB ASC does not include governmental accounting standards.
Structure
FASB ASC uses a topical structure in which guidance is organized into areas, topics, subtopics, sections, and subsections. These terms are defined as follows:
| • | Areas. The broadest category in FASB ASC, which represent a grouping of topics. |
| • | Topics. The broadest categorization of related content, which correlate with the International Accounting Standards (IASs) and IFRSs. |
| • | Subtopics. Subsets of a topic, which are generally distinguished by type or scope. |
| • | Sections. Categorization of the content, into such groups as recognition, measurement, or disclosure. The sections' structure correlates with the IASs and IFRS. - Subsections. Further segregation and navigation of content below the section level. |
Topics, subtopics, and sections are numerically referenced. This effectively organizes the content without regard to the original standard setter or standard fromwhich the content was derived. An example of the numerical referencing is FASB ASC 305-10-05, in which 305 is the Cash and Cash Equivalents topic, 10 represents the "Overall" subtopic, and 05 represents the "Overview and Background" section. Constituents are encouraged to begin using FASB ASC, which can be accessed at http://asc.fasb.org/ home. To read more about FASB ASC, including recent developments and updates, please see the AICPA's dedicated FASB ASC Web site at www.aicpa.org/Professional+Resources/Accounting+and+ Auditing/FASB+Accounting+Standards+Codification/.
Referencing FASB ASC in Your Documentation
You should consider how and when your entity will begin referencing FASB ASC in your documentation (policy and procedures, technical memorandums, financial statements and filings, engagement working papers, and so on). Reflecting current U.S. GAAP in your documentation is prudent. The FASB NTC includes a section on referencing FASB ASC in footnotes and other documents in which FASB encourages the use of plain English to describe broad topic references in the future. For example, to refer to the requirements of the Derivatives and Hedging topic, FASB suggests using a reference similar to "as required by the Derivatives and Hedging topic of the FASB Accounting Standards Codification." However, FASB does suggest using the detailed numerical referencing system in working papers, articles, textbooks, and related items. The NTC also provides some detailed examples of how to reflect the numerical referencing in such documents. However, if you need to reference certain grandfathered guidance not included in FASB ASC (a listing can be found in FASB Statement No. 168), use of the old terminology would still be appropriate. The following are some detailed examples of how and when to implement the new FASB referencing system:
| • | Nonpublic entities. For nonpublic entities without interim filings, financial statement preparers choosing to reference specific accounting guidance in financial statements would make those references to FASB ASC for the first annual period ending after September 15, 2009. For example, a nonpublic entity with a December 31, 2009, year-end would reference FASB ASC in its financial statements. |
| • | Public entities. The SEC recently shared with the Center for Audit Quality (CAQ) SEC Regulations Committee some views on referencing FASB ASC in financial statements. For interim and annual financial statements for periods ending after September 15, 2009, the SEC stated that any references to specific elements of GAAP should use the FASB ASC reference. Therefore, a public entity filing financial statements for the quarter ended September 30, 2009, should reference FASB ASC in its financial statements. In addition, the SEC stated that references to specific U.S. GAAP (FASB ASC references) should be on a consistent basis for all periods presented (the consistent use of references to only FASB ASC for all periods presented, including periods before the authoritative release of FASB ASC, is appropriate). However, the SEC has encouraged entities to make financial statements more useful to users by drafting financial statement disclosures to avoid specific U.S. GAAP references and to more clearly explain accounting concepts. The SEC staff does not expect public entities to revise or amend financial statements previously filed for prior periods simply because financial statements for periods ending after September 15, 2009, refer to FASB ASC. That is, an entity's December 31, 2008 Form 10-K, with references to only pre-Codification GAAP literature, may be incorporated by reference into a Form S-3 registration statement that becomes effective after September 15, 2009, even if the Form S-3 also incorporates by reference the September 30, 2009 Form 10-Q that refers to FASB ASC. The SEC has also stated that it will not require a preferability letter if an accounting change is in response to a newly issued update of FASB ASC. For further information on the SEC's views on FASB ASC, see CAQ Alert 2009-76. Public entities should not use FASB ASC references for SEC content, and rather continue to use the applicable SEC rule or regulation (e.g., Regulation S-X or a Staff Accounting Bulletin). |
It is only prudent that audit, attest, or compilation and review working papers associated with financial statements for a period ending after September 15, 2009, also would reflect FASB ASC because the underlying financial statements, which are the subjects of those engagements, reference FASB ASC.
On September 22, 2009, the PCAOB published staff questions and answers about references to authoritative accounting guidance in PCAOB standards. The series of Q&As serves as a reminder that auditors should look to FASB ASC and SEC rules for authoritative U.S. GAAP guidance for SEC registrants, even though PCAOB standards may contain descriptions of and references to U.S. GAAP as it existed prior to FASB ASC, according to a statement by the PCAOB. The Q&As are available at: pcaobus.org/Standards/Staff Questions and Answers/2009/09-02 FASB Codification.pdf.
International Financial Reporting Standards
A parallel goal of FASB ASC, in addition to reducing the complexity of U.S. GAAP, is to facilitate convergence with IFRS. Having one set of high-quality, globally accepted accounting standards may provide a number of benefits, including increased investor confidence and understanding. One set of standards brings greater transparency, credibility, and comparability of entities, regardless of political boundaries.
What Is IFRS?
IFRS is a set of accounting standards developed by International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public entity financial statements. IASB is an independent accounting standards body, based in London, that consists of 14 members from nine countries, including the United States. IASB began operations in 2001, when it succeeded the International Accounting Standards Committee (IASC). IASC was formed in 1973, soon after the formation of FASB. In 2001, IASC was disbanded and a new oversight body, the IASC Foundation, was created to oversee the IASB. This oversight role is very similar to that of the Financial Accounting Foundation (FAF) in its capacity as the oversight body of FASB.
IASB's approach has been to provide guidance more in the form of general principles rather than rules. IFRSs are developed following an international consultation process that includes, among other components, input from an external advisory group called the Standards Advisory Council (Council). The Council consists of representatives from user groups, preparers, financial analysts, academics, auditors, regulators, and others that are affected by and interested in IASB's work. Also integral to the work of IASB is the International Financial Reporting Interpretations Committee (IFRIC), an interpretative body of the IASC Foundation. IFRIC is charged with developing authoritative guidance in the form of IFRIC Interpretations to promote consistent practice.
The term IFRSs has both a narrow and a broad meaning. Narrowly, IFRSs refers to the new numbered series of pronouncements that IASB is issuing, as differentiated from IASs issued by its predecessor. More broadly, IFRSs refers to the entire body of IASB pronouncements and those of its predecessor, IASC, including IFRSs, IFRIC interpretations, IASs, and interpretations issued by the Standing Interpretations Committee (SIC), the predecessor to IFRIC.
Convergence of U.S. GAAP and IFRS
The convergence of U.S. GAAP and IFRS gained momentum when, in 2002, FASB and IASB signed what came to be known as the Norwalk Agreement. At that meeting, FASB and IASB pledged to use their best efforts (a) to make their existing financial reporting standards fully compatible as soon as is practicable and (b) to co-ordinate their future work programs to ensure that once achieved, compatibility is maintained. That agreement was reaffirmed in a February 2006 Memorandum of Understanding (MoU), which was based on three principles:
| • | Convergence of accounting standards can best be achieved through the development of high quality, common standards over time. |
| • | Trying to eliminate differences between two standards that are in need of significant improvement is not the best use of FASB's and IASB's resources—instead, a new common standard should be developed that improves the financial information reported to investors. |
| • | Serving the needs of investors means that FASB and IASB should seek convergence by replacing standards in need of improvement with jointly developed new standards. |
At their joint meeting in April 2008, FASB and IASB again affirmed their commitment to developing common, high quality standards, and agreed on a pathway to completing the MoU projects, including projected completion dates. In September 2008, the two boards together published an update of their 2006 MoU to report the progress they have made since 2006 and to set the goal of completing their major joint projects by 2011. Each board believes that such standards would improve the quality, consistency, and comparability of financial information for investors and capital markets around the world.
IFRS Accounting Trends & Techniques
For the same reasons Trends is the premier resource for financial reporting under U.S. GAAP, a new publication under development, IFRS Accounting Trends & Techniques, is poised to become the tool of choice for financial reporting under IFRS. The accounting, investor, and analyst communities are vigorously building their awareness of financial statement presentation under IFRS and the accounting policies most prevalent across different industries reporting under IFRS. The AICPA's highly anticipated release of IFRS Accounting Trends & Techniques, in December 2009, provides the first glimpse into the reporting practices of international entities that have already tackled the conversion to IFRS. See www.cpa2biz.com for ordering information (product code #0099109).
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