From the CEO's Desk

AXIA Resources always strives for excellence as we provide consulting and advisory services to our customers. We have built strong relationships with our clients and continue to be recognized as a trusted business partner. We receive many requests by our clients for CPE training, technical updates and other industry information.

Towards that end, I am happy to announce that AXIA will circulate a periodic newsletter discussing relevant accounting issues. What's more, we are very excited to announce the kick-off of our summer CPE series. Each CPE course is designed to provide you and your team with interesting insight for professional development. We are very excited about these informative and valuable offerings and look forward to working with your team.

Technical Update

Currently Effective Standards

Credit Quality of Financing Receivables

In 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, which initially became effective for interim and annual reporting periods ending on or after December 15, 2010. In January 2011, through ASC 2011-1, the FASB deferred the effective date until interim and annual periods ending after June 15, 2011. Under the new guidance, companies must disclose a more detailed analysis of the credit quality of financing receivables and the allowance for credit losses. Specifically, the new rule requires rollforwards of the allowance by portfolio segment, as well as breakouts of nonaccruals, impaired loans, aging information and credit quality information, by class of loan.

Troubled Debt Restructurings

In April 2011, the FASB issued ASU 2011-2, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring, which becomes effective for interim and annual reporting periods beginning on or after June 15, 2011. As the recent financial crisis has resulted in a surge of loan modifications, evidence indicated that there was significant diversity in practice as to when those modifications were being disclosed as a troubled debt restructuring. The new standard aims to reduce that diversity. Under the new guidance, in evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude that both of the following exist: (1) the restructuring constitutes a concession, and (2) the debtor is experiencing financial difficulties. The guidance contains a detailed discussion of the appropriate way for companies to evaluate each conclusion.

Soon-to-Be-Effective Standards

Fair Value Measurement

In May 2011, the FASB issued ASU 2011-4, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The guidance, which applies to all reporting entities that use fair value measurements in the financial statements, will become effective for interim and annual periods beginning after December 15, 2011. The guidance specifies common fair value measurement and disclosure requirements between U.S. GAAP and IFRSs. To achieve this result, the guidance amends the wording used to describe many of the requirements in U.S. GAAP for fair value measurements and disclosures. Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The guidance should be applied prospectively, and early adoption is not permitted for public entities.

Standards Under Discussion

Goodwill Impairment Testing

In April 2011, the FASB issued a proposed ASU, Intangibles–Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The comment period ends on June 6, 2011. Under the proposed guidance, an entity would have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test would be unnecessary. The amendments in this proposed update would be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption would be permitted.

Revenue Recognition

Discussions continue on this joint FASB/IASB project to develop a consistent, robust framework for revenue recognition. At the April 2011 meeting, the Boards tentatively determined that transaction prices should be based on the consideration received. Additionally, the Boards concluded that entities should recognize revenue at the amount allocated to a satisfied performance obligation unless the entity is not reasonably assured to be entitled to that amount. Based on feedback received on the recent Exposure Draft, the Boards continue to address revenue recognition for contracts that contain services or elements of both goods and services. Additionally, redeliberations have addressed how contract acquisition costs and questionable collectability should be reported. The final document is expected to be issued during the second half of 2011.

Leases

The FASB and the IASB continue their work on a joint project to develop a new approach to lease accounting that would ensure that assets and liabilities arising under leases are recognized in the statement of financial position. The Boards’ views on a number of topics changed during redeliberations. Specifically, leases with less than one-year terms will not be capitalized; variable (contingent) rentals will only be included in the lease liability when they are index-based or in-substance fixed; and renewal options will be included in the lease liability only if there is significant economic incentive that the renewal would be exercised. The Boards continue to discuss the classification (and income statement presentation) of leases with greater than a one-year term into two types: finance leases and other-than-finance leases. The Boards still need to address many issues, including subleases, presentation on the income statement and balance sheet, the transition of existing leases, and all disclosures. The final document is expected to be issued during the second half of 2011.

IFRS Update

Condorsement? Is that a word?

It is now. The SEC's Deputy Chief Accountant, Paul Beswick, readily admits that he made up the word, but states that it may be the right approach for the U.S. when considering IFRS. Until recently, there were three schools of thought, or options, for moving to IFRS:

• Adoption / Conversion - a switch from local standards to IFRS, without converging them first.
• Convergence - migration of local standards to being closely aligned with IFRS.
• Endorsement - formal endorsement of new or amended IFRS before they become legally binding.

Mr. Beswick, in a speech given at the AICPA's National Conference on Current SEC and PCAOB Developments in December, offered a fourth approach - "condorsement". He explained that under this approach, U.S. GAAP would continue to exist, and the FASB and IASB would work to finish their joint convergence projects. The FASB would NOT begin work on any major new projects in the normal course. Rather, a new set of priorities would be established where the FASB would work to converge existing U.S. GAAP to IFRS over a period of time for standards that are not on the IASB's agenda. This is meant to ensure that on a standard by standard basis, existing IFRS standards are suitable for the U.S. capital markets.

The SEC has been consulting with U.S. constituents, and is yet to announce its position on the possible move from U.S. GAAP to IFRS, although this announcement is expected in 2011. This fourth approach suggested by Mr. Beswick is far from being an agreed methodology for IFRS in the United States, and it remains to be seen just how well the idea will be received by the financial markets and others. Regardless of how and when U.S. accounting standards will ultimately incorporate IFRS, there is little doubt of the driving need for a single set of global financial reporting standards which will benefit investors and the flow of international capital.

Other Accounting News

The SEC has proposed rules requiring listing standards related to the compensation committee of a company's board of directors and any compensation advisers, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, the proposal requires the listing standards to address the independence of the members on a compensation committee, the committee's authority to retain compensation advisers, and the committee's responsibility for the appointment, payment and work of any compensation adviser. Once an exchange's new listing standards are in effect, a listed company must meet the standards in order for its shares to continue trading on that exchange. The extended comment period for the rule proposal ended May 19, 2011.

And...Last But Not Least

We are proud to announce that AXIA International is highlighted in Forbes, Investment Guide, 2011 Edition Special Issue. AXIA International continues to expand its work overseas by leveraging our proprietary methodologies and commitment to client success.