Monday, March 21, 2011

A U.S. Viewpoint on Lease Accounting

Following is a summary of a comment letter submitted on lease acconting, as previously published in the Journal of Accountancy.

The AICPA’s Financial Reporting Executive Committee (FinREC) commented on FASB’s Proposed Accounting Standards Update, Leases. The exposure draft was developed jointly with the International Accounting Standards Board (IASB). FinREC said it supports the boards’ overall objective to develop a single approach to lease accounting and to require assets and liabilities arising under leases to be recognized in lessees’ statements of financial position. However, FinREC believes there are fundamental application issues not addressed by the ED, and revisions that need to be made to various aspects of the boards’ proposal, including those related to the right-of-use approach to lessee accounting.

The FASB proposal would result in a single “right-of-use” approach applied consistently to lease accounting for lessees and lessors. Among other changes, the approach would result in the liability for payments under all lease contracts within the scope of the standard and the right to use the underlying asset being included on the lessee’s balance sheet. The standard setters say the changes would improve the information available to investors and other financial statement users about the economics surrounding lease contracts.

Unlike FASB’s discussion paper, Leases: Preliminary Views, published in March 2009, which focused primarily on lessee accounting, the ED, Leases, would result in changes on both sides of a lease transaction. A lessor would apply either a performance obligation approach or a derecognition approach. “The majority of FinREC members do not support the boards’ hybrid (lease classification) approach to lessor accounting—instead they support the derecognition approach as the single lessor accounting model,” FinREC said in its comment letter.

The proposal includes simplified accounting for short-term leases—leases having a maximum term of 12 months or less. The simplified accounting would allow lessees to ignore the effects of interest on the recorded assets and liabilities and allow the lessee to record the liability for lease payments at the undiscounted amount for lease payments. The simplified accounting would allow the lessor not to recognize assets or liabilities arising from a short-term lease, nor derecognize any portion of the underlying asset.

In its comment letter, FinREC said, “We do not support the boards’ approach to accounting for lease renewal options and contingent rents. We believe that the lease term should be defined as the lessee’s (lessor’s) best estimate of the lease term. We believe contingent rents and expected payments under residual value guarantees should be included in the measurement of assets and liabilities based on management’s best estimate of payments to be made (received) under the lease.”

Sunday, March 13, 2011

TESTIMONIALS

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Saturday, March 12, 2011

March 2011 - New Enquiries

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Q1- discuss the importance of doctrine of privity of contract to the contracting parties in business transaction. Support yiur discussions by referring to the relavent principles of law in aganecy, partnership, sales of goods and hire purchase. (20 Marks)

Q2.Mike sdn bhd manufacture office furniture. Nilam sdn bhd.a property developer had decised to purchase new furniture to their office buikdingn in puthurajaya. Ronald, a representative of mike, met withBong, the representative of Nilam , to describe the types, designs etc of the furniture manufactured by mike. Ronal also drew sketch plan of the alterations that was required for Nilam’s office to accommodate the installation of the new furniture.
On dece,1, 2010, Bong received a letter signed by Shela, a staff of mike, offering to sell the furniture at a cost of RM1 million. The offer contained provisions relating to the delivery schedule , warranties, and paymenet terms, but did nit specify a mode of acceptenace of the offer. Bong immediately decided to accept the offer, and telepohoned Shela’s office. Shela was on medical leave . Thus bong left the following message “looks good. We would like to continutue with the purchase. Please call me when you come to the office, so we can discuss details”.’
Using the sketch plan drawn by Roland, Bong also directed that alteration works should begin as a preparation for the installation of the new furniture.  By December 4, 2010 a wall had been demonished in 3 rooms and contact had been signed for the new electrical installations.
On Dece 5, the chairman of Nilam sdn Bhd.annouced a cut of office operational budget including renovation of the office  and purchase of new furnitutre. That afternoon , Bong received a fax from Roland stating, “All outstanding offers are withdrawn” In a subsequent telephone conversation, Shela tokd Bong  that mike woukd not deliver  the furniture for less than RM1 million.
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Was Mike obligated to sell the furniture to Nilam for RM 1 miilion ? Discuss
Assuming Mike was obligated , what are Nilam’s rights and remedies against Mike? Discuss (30 marks)

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Strategic ManagementCase Study – Kentucky Fried Chicken & The Global Fast-Food Industry in De Wit & Meyer (2004:909-927)

THE GLOBAL FAST-FOOD INDUSTRY - KENTUCKY FRIED CHICKEN
Fast food also known as Quick Service Restaurant (QSR) is the term given to food that can be prepared and served very quickly. The global fast food market grew by 3.1% in 2009 to reach a value of $201.1 billion. Americas accounts for 47.4% of the global fast food market value. The global fast food market is forecast to have a value of $239.7 billion by 2014, an increase of 19.2% since 2009. Kentucky Fried Chicken (KFC) Corporation, is a chain of fast food restaurants based in Kentucky, in the United States. The company primarily sells chicken pieces, wraps, salads and sandwiches. While its primary focus is fried chicken, it also offers a line of grilled and roasted chicken products, side dishes and desserts. Outside North America, KFC offers beef based products such as hamburgers or kebabs, pork based products such as ribs and other regional fare (http://www.kfc.co.uk/ ).

Instructions:
·         ANSWER ALL THREE QUESTIONS

  • You are expected to use the information in the case study ‘Kentucky Fried Chicken and the global fast-food industry’ by Jeffrey A. Krug cited in De Wit, B. and Meyer, R. (2004) Strategy: Process, Content, Context. An International Perspective: Thomson Learning, London, Third Edition, pp. 909-927, and your own understanding of the process of strategy, strategy content and strategy context.
·         Your answer should be based on critical ‘internal’ and ‘external’ environmental analyses using appropriate analytical techniques.             


Question One:

a)   In the context of the process of strategic thinking and strategy formation, outline what SWOT and Porter’s Value Chain techniques are, and explain their practical relevance to strategic planners at Kentucky Fried Chicken (KFC) Corporation.  (15 marks)

(a)    Use Porter’s Five Forces framework to critically evaluate the opportunities and threats that faced KFC Corporation from the mid-1990s to the year 2000. (15 marks)

c)   Explain the ‘pressures for global integration of activities’ and the ‘pressures for local responsiveness’ facing KFC Corporation in the context of current developments in the global fast-food industry. (10 marks) [40 % marks]
Question Two:

a)      In the context of strategy development at KFC Corporation, explain your understanding of Whittington’s ‘Evolutionary’ and ‘Systemic’ Schools of Thought. (10 marks)

b)      Critically evaluate how you might apply the two Schools of Thought to KFC. Explain and explore which school of thought you prefer, and why? (15 marks) (25 marks)
Question Three:
“Hofstede’s (1993) theory of cultural dimensions implies that although not all the individuals within a country’s population will have exactly the same characteristics, the cultural dimensions will colour the institutional and administrative arrangements that are made within the country, and will set the norms for behaviour.”

Hofstede, G. (1993) ‘Cultural constraints in management theories’, in De Wit, B. and Meyer, R. (2004) Strategy Process, Content, Context, 3rd Edition, Thomson, London; cited in SIM336 Module Workbook, 2011, Unit 7, page 203.

Using your understanding of Whittington’s (2000) ‘Systemic School of Thought’, critically evaluate the implications of these cultural dimensions for international strategic managers at KFC in building productive relationships with the outside world.   (25 marks)


Note: 10% of marks are allocated to report style

Suggested Reading:
Textbooks:
De Wit, B. and Meyer, R. (2004) – Strategy Process, Content, and Context: An International Perspective, 3rd Edition, Thomson Learning
Hofstede, G. (1993) ‘Cultural constraints in management theories’, in De Wit, B. and Meyer, R. (2004) Strategy Process, Content, Context, 3rd Edition, Thomson, London; cited in SIM336 Module Workbook, 2011, Unit 7, page 203).
Johnson, G., Scholes, K. and Whittington, R. (2005) Exploring Corporate Strategy: Text and Cases, 7th Edition, Financial Times, Prentice Hall.
Lynch, R. (2006) Corporate Strategy, Fourth Edition, Financial Times, Prentice Hall.
Mintzberg, H., Ahlstrand, B. and Lampel, J. (1998) Strategy Safari, Financial Times, Prentice Hall
Whittington, R. (2000) What is Strategy and does it matter? Thompson Learning.

Strategic Planning - IKEA Case Study

INTRODUCTION

Welcome   to   the   module   Strategic   Planning.   As   the   business   environment   is   becoming  ever    more     complex,      more    turbulent,    more     global    and  more      competitive,     thinking strategically about how a firm should position itself in order to compete successfully is becoming increasingly critical. Those firms that will survive, grow and create value are firms   with   a   clear   vision   of   what   is   their   competitive   advantage   and   how   to   maintain/ enhance   it.   Therefore   strategic   planning   has   become   one   of   the   core   tasks   of   leaders today.

This course will give students a foundation of basic strategic concepts for application at
both   the   corporate   and   business   unit   levels.   The   emphasis   is   on   developing   strategic thinking      to  enable    students     to  approach      complex      multi-disciplinary       problems     and opportunities   confidently.   Students   will   be   able   to   forecast   and   evaluate   the   effects   of major business decisions; assess the benefits and problems of integrating corporate and functional   strategies;   and   to   formulate   approaches  for   managing   strategic   change.   

The other key objective of this course is to review the main concepts, methods and tools
used    in   strategy   formulation      and   implementation        processes,    identifying     the  business situations   in   which   they   can   be   applied   most   effectively,   as   well   as   understanding   the limitations of various approaches.

I   do   hope   that   you   enjoy   this   module   and   find   it   worthwhile   for   your   academic   and professional development.

Assessment

Course Work:               100 % weighting:

A Strategic Plan of about 3500 words is to be developed by individual students which
creates   recommendations   for   revising   a   business   strategy   to   improve   the   competitive position and financial performance of the organisation. To support the recommendations the   student   must   identify   and   evaluate   the   current  competitive   strategy   of   a   business, analyze     the   conditions     and   trends    in  its   environment,      assess   its  resources     and competencies, and examine its organization, culture, and leadership.
COURSE WORK

                                             Assignment

                                     Due Date: March 22, 2011

                                  By 12.00 midnight (Singapore & Malaysia time)

As part of the Strategic Planning module, students are required to analyze a case study
and write a report to the CEO to help him / her on how IKEA determines the strategic
position of the company in the future. The report must address the following 5  (FIVE)
management questions:

     1.  What   business   and   corporate   level   strategy   did   Ingvar   Kamprad   predominantly follow to attain impressive growth of IKEA? What distinctive competencies has the company built over the years to achieve competitive advantage?

     2.  Why   do   you   think   IKEA   failed   in   the   USA   market   despite   its   early   signs   of  success?

     3.  IKEA’s  goal  of   maintaining    growth    would    mean    expansion     into  non-western  markets, including most notably in China where IKEA has outsourced 21 percent  of it total supplies. Assess critically the growth potential for IKEA in the Chinese
 market.   Is  IKEA’s   competitive   advantage   secured   in  China?   Present   arguments          needed here.

     4.  Based on previous experience of diversification in China and Japan, do you think
         that   IKEA   should   go   for   more   diversification   in   other   Asian   countries?   Justify  your    answer    with   arguments.     Critically   evaluate   the   diversification   strategies options   (acquisition,   internal   new   venture,   joint   venture)   that   would   add   more  value for IKEA to follow.

     5.  What form of innovations in IKEA has contributed to the growth of its business?
         What factors are critical to continue its success in innovations?

Your findings and recommendations must be supported by:

     1.  Identification of the stage of life cycle of the firm’s industry

     2.  Identification   of   any   changes   taking   place   in   the   macro   environment   (political, legal, economic, social, cultural, technological, demographic etc.) that might have an impact upon the firm’s competitiveness

     3.  Evaluation of  the  organization    in  relation   to  its  competitors    by   presenting    a strategic group map of the relevant industry

     4.   The    detailed    SWOT       analysis    and   presentation     of   TOWS      matrix     in  order   to  identify strategies (plans) for the future

     5.   Application of any other relevant strategic management framework that will make   a contribution to your analysis

As    this  is  a   dated   case   study,   part  of   your   task   would    include   researching   updated information. The case study is attached as per Appendix 1 “Ikea: Furniture Retailer to the World”

MOTIVATION AND JOB ENRICHMENT

    Instructions:
·         Read the attached essay guidelines.
·         The essay will contribute 20% to your final grade.
·         Your essay should be between 1,500 and 1,650 words (Excess writing will be disregarded).
·         Reports must be typed in Times New Roman, font size 12 with double line spacing. Pages should be stapled together (top left corner).
·         Your essay MUST be handed in (hard copy) at the designated box near INTO reception by 15.00 on Thursday 17th March 2011.
·         Any student who fails to hand in the work by this time will lose marks (See point 6 below for details).
·         You should hand in ONE hard copy of the essay.  You will also need to send an electronic copy of your essay by e-mail to your teacher: before 17:30 on Thursday 17th March 2011
·         What to include:
The essay should include:
·         A plain cover page clearly marked with your name, your group, the title of the assignment and the date that you hand it in.
·         The essay structure must include:

A: Introduction

i). Background: Introduce essay topic—general definition of motivation and job enrichment.
ii) Thesis Statement: One-two clear sentences that contain your argument.  For instance, you should say which organisation you have chosen to work for and give a brief summary why.
iii) Route map: Give an outline of the main points discussed in the body.  For example, working conditions, terms and conditions of employment, personal development and career opportunities.  Also include the main theories of motivation that apply to your discussion (and brief explanation of intrinsic/extrinsic motivation).

B: Body: Split into 2 sections
First Section: Covers analysis for the opposition (the organisation you have not chosen). Analysis should include at least 3 of the above areas, using a separate paragraph for each main point. Each paragraph should complete the following steps:

Step 1: Topic Sentence (what is the paragraph about)? ie. Working conditions, terms and conditions of employment, personal development, AND/OR career opportunities.
Step 2: Give evidence to support (complete with references)
Step 3: Analysis: Show how your point relates to theories of motivation.
*NOTE: Do not begin to say what is wrong with this organisation until you have finished the entire first section.  The SECOND half of the essay is where you overturn this point of view and say what is wrong with the organisation in terms of their motivational approach, etc.

Second Section: Include a transition into the second half of essay: eg. ‘However, X organisation offers more for their employees in terms of . . .’
For EACH paragraph:

Step 1: Topic sentence: MATCH the structure of the 1st section of the essay, being sure to address the SAME THREE AREAS.
Step 2: Give evidence to support the company’s superior policies.
Step 3: Relate your point to the theories of motivation you are discussing, saying why/how this approach is superior in terms of job enrichment.

C: Conclusion
i)         Restate your thesis
ii)       Give a general summary of the main points in the body.
iii)     End with a strong sentence which leaves an impression on the reader, leaving them in no doubt as to why the company you would choose to work for is the superior choice.
D. References and Bibliography

2.                  Students should bear in mind that plagiarism (copying material from the internet or texts without referencing) or copying from other students will result in an automatic FAIL (0%). Refer to your unit outline for the  policy on plagiarism.

3.                  Sources of information:
For this assignment students are advised to be creative and look for their own information.  However, you will find the following sources useful:
·         Pinder, C.C., 2008, Work Motivation in Organizational Behaviour, Psychology Press/ Taylor & Francis, Hove, East Sussex (2nd edn).
Gives a comprehensive overview of the development of motivation theories. Emphasises how behaviour at work is shaped by a range of factors including frustration and violence, love and sex, and power—topics which most treatments of motivation ignore.    
·         Further Business books from the INTO resource room and main university Library (See list of Resources in your unit outline).   
·         You might want to use the following as a springboard to jumpstart your own research (however, you are expected to go beyond these and find your own sources):
o       Bassett-Jones, N. and Lloyd, G.C., 2005, ‘Does Herzberg’s motivation theory have staying power?’, Journal of Management Development, 24 (10): 929-43.
Presents the results of a survey of employee attitudes, finding that money and recognition are not primary sources of motivation.  Factors linked to intrinsic satisfaction were found to be more important. This is consistent with Herzberg’s predictions, and the researchers conclude that his theory still has utility half a century after it was developed.
o       Chartered Institute of Personnel and Development, 2008, High Performance Working Factsheet, London: Chartered Institute for Personnel and Development.
Describes the components of high performance working, how to implement the approach, common barriers and how to overcome them, citing examples and further references.
o       Burke, R. J. And Cooper, C. L. (eds), 2008, The Long Work Hours Culture: Causes, Consequences and Choices, Emerald Group Publishing, Bingley.
Some observers claim that we have developed a ‘long work hours culture’ which some workaholics enjoy. But working long hours creates health and domestic problems. Using recent research, this book examines what motivates people to work long hours, and explores the costs and benefits.

PRINCIPLES OF MICROECONOMICS

INSTRUCTIONS TO STUDENTS

1.    / This assignment contains only ONE (1) question that is set in the language of the printed module for the course.

2.    Your assignment should be typed using 12 point Times New Roman font and 1.5 line spacing.

3.    Your assignment should be between 2500 to 3000 words excluding references. The number of words should be shown at the end of your assignment. Do not copy the assignment question and instructions to your answer.





ASSIGNMENT QUESTION



PURPOSE
The purpose of the assignment is to assess learners understanding on the effects of an  event to a commodity market equilibrium.

REQUIREMENT                                 
Assuming fuel is one of the main input for many sectors. When a war breaks out in Country A, which is the main producer for fuel in the world, it causes fuel supply disruptions in the world. Discuss the market equilibrium for fuel and car after the war outbreak.

Following the war, the government of Country A would like to impose tax RMx on cars. Ilustrate and explain with graph for the car market due to the taxes (Assuming the elasticity demand for car is elastic). In your opinion, who will bear more of the taxes imposed-suppliers or consumers?
_________________________________________________________________________
EVALUATION
This assignment accounts for 40 % of the marks for the course mentioned and shall be assessed based on the Rubrics where provided in the Attachment .


PLAGIARISM: MARKS DEDUCTION 
       
Warning: The submitted assignment will automatically undergo a similarity check. If plagiarism is detected, marks would be deducted as follows:

·         Assignments with 10 - 30 % overlap with others:  20% deduction from the total marks scored.
·         Assignments with more than 30% overlap with others : Zero mark would be given

Thursday, March 10, 2011

Learning IFRS

The AICPA is developing an IFRS Certificate Program. They have a number of self-study courses on IFRS in general, comparisons to U.S.GAAP, and individual topics like inventories, intangibles, impairment, EPS, etc. You can find information about the self-study courses here.

We ordered one of their self-study courses a while back. I didn't complete the course myself, but I have had good reviews from those who did.

Tuesday, March 8, 2011

Seven Accounting Changes That Will Affect Your 2010 Annual Report

The following is by Jim Brendel and was originally published in SmartPros.

There are a number of new rules that will have accounting and reporting implications for 2010 year end annual reports. They vary from changing the timing of financial results to adding to overall reporting expense.

Two new Financial Accounting Standards Board updates will have major impacts on accounting for sales contracts that contain multiple deliverables. What’s a multiple deliverable? Say your company sells dishwashers and also provides the installation. Under the old rules, you had to demonstrate objective evidence of “fair value” for each undelivered item in order to recognize revenue for the delivered item. If you could not establish the fair value of the installation, revenue recognition for the dishwasher could be delayed, even though the customer had paid for it.

Under the new revenue recognition rule ASU 2009-13 – companies don’t need the “objective” proof of each service or good, they can estimate the selling price of the installation and warranty. So in our example, the vendor - say it’s Sears or Appliance Factory - can recognize the revenue of the dishwasher – alone - at the point of sale without waiting a few weeks for the installation guys to do their thing. Then they can recognize the estimated value of the installation after it is complete.

The second major revenue recognition change for 2010 reporting , ASU 2009-14, covers software enabled devices. This has also been referred to as the iPhone rule because of the large effect that it has on Apple Computers’ revenues. Although the iPhone is a piece of hardware, it depends on embedded software for its intended use. Under the old rules, this embedded software caused iPhone sales to be governed by the software revenue recognition rules, which are much more stringent than the rules related to other goods and services. As a result, Apple had to recognize all of the revenue from the sale of an iPhone over two years because it provides software updates over that period. ASU 2009-14 says that the software revenue recognition rules no longer apply to these types of software enabled devices, so they are now governed by ASU 2009-13, like other goods and services. The result of the change? Apple reported a record quarter when it elected to adopt this rule early for its first fiscal quarter 2010. Both of these new standards are effective for fiscal years beginning after June 15, 2010, but can be adopted earlier.

Five Other Changes for 2010 Reporting

Fair value disclosures. Companies will be required to provide additional disclosures about items measured at fair value in the financial statements for their 2010 financial statements. In particular, significant transfers in and out of Level 1 (quoted market price) and Level 2 (valuation based on observable markets) must be disclosed separately, along with the reasons for the changes.

Fair value items classified as Level 3 (valuations based on internal information) will require additional disclosure of purchases and sales during the year. The FASB recently decided not to exempt private companies from these requirements. Investors have said that these new disclosures will give them better insight into the quality of reported earnings, but companies can expect to spend additional time gathering and summarizing all of this information.

Consolidation of variable interest entities. Several changes to the consolidation rules for variable interest entities, also known as special purpose entities, came into effect in 2010. The new rules require a qualitative, rather than a quantitative, analysis to determine the primary beneficiary of a variable interest entity, such as a corporation formed to hold real estate and lease it to an operating company. The primary beneficiary is the company that has the power to direct the activities and obligation to absorb the losses of the variable interest entity, which it will consolidate even though it may own less than a majority of the voting interests.

XBRL. eXtensible Business Reporting Language is a data-tagging technology that standardizes the way that financial statement items are identified, and has been frequently referred to as the next generation of EDGAR. The SEC has required the largest public companies (over $5 billion in market cap) to file financial statements with XBRL tagging since June 2009.

In June 2010, the remaining large public companies (over $700 million in market cap) were first required to provide XBRL tagging in their financial statements. Starting in June 2011, all of the remaining U.S. public companies must file financial information using XBRL.

Companies will likely require outside assistance to match their accounting records with the standard XBRL classifications, and should consider an early start on this project. It can easily cost a small public company from $30,000 to $50,000 to implement.

Non-GAAP financial disclosures. Recent SEC staff interpretations allow more latitude for companies who provide non-GAAP financial disclosures, such as EBITDA, in SEC filings, as well as additional guidance in making those disclosures. These interpretations reduced the constraints on the exclusion of recurring items from the non-GAAP measure, and let companies know that management does not have to use the measure in operating the business in order to disclose it. The new interpretations can be found
here. The effect of this change is mainly to provide more flexibility to companies in how they report non-GAAP measures of performance and won’t necessarily add or subtract from earnings statements.

Loss contingencies disclosures. A FASB proposal that would require more disclosures about loss contingencies, such as litigation, has been sent back for more deliberation after concerns were raised that the level of disclosure would put public companies at a disadvantage in the courtroom. However, the SEC is questioning whether companies are adequately complying with the current rule, which requires disclosure of an estimate of the possible loss or range of loss. The SEC believes that in too many cases, no disclosure is made until the case is settled because companies assert that they are not able to make accurate estimates of the potential loss. Companies should expect additional scrutiny of their disclosures in 2010 annual reports.

Developments to Watch in 2011


Short-term borrowing disclosures. In response to concerns about companies window-dressing their balance sheets by paying down lines of credit before year- end, the SEC has proposed rules that would require additional disclosures, such as fluctuating borrowing during the year and a qualitative discussion of the business reasons for the debt. These rules are expected to be finalized in the first quarter of 2011. However, the SEC has reminded companies that they expect to see a thorough discussion of liquidity and capital resources in the management’s discussion and analysis under the existing requirements.

Dodd-Frank Act. The Dodd-Frank Act is considered to be the most extensive overhaul of the U.S. financial system since the 1930s and will require the SEC to write over 100 rules and conduct numerous studies. You can follow the progress of these rules on the
SEC's website.

Of particular interest to public companies are the requirements for companies to establish policies to claw back incentive compensation paid to executives in the event of a financial statement restatement and to provide disclosures regarding the ratio of CEO compensation to median employee compensation.

Convergence. While the SEC continues its consideration of whether to adopt international accounting standards (IFRS), the FASB and its international counterpart, the IASB, have their own work plan to complete 11 major projects in 2011 to converge US GAAP and IFRS. Although the effective dates of these standards have not been determined, this level of standard setting activity in such a short time is unprecedented. The two projects that are getting most of the attention are a proposal to replace all industry-specific revenue recognition guidance with one comprehensive standard, and a proposal that would require all lease obligations to be recorded on the balance sheet.