Accounting, Tax & RUS Update Web Conference January 26, 2010 - - PDF document
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January 26, 2010
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– Lease contracts create assets and liabilities that should be recognized in the financial statements of lessees.
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– An instrument that is puttable or mandatorily redeemable upon death or retirement of the holder would be classified as equity. The term retirement is used broadly to include events such as termination, resignation, or ceasing to be a member in a cooperative
– An instrument that is puttable at the option of the holder or mandatorily redeemable if specified dates or events other than death or retirement occur would generally be classified as liabilities.
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could be used to distinguish between equity and liabilities and a related set
– An entity must classify as equity retained earnings and capital contributed without the contributor receiving a claim against the entity in exchange, even if that entity has issued no equity instruments. – An issuer must classify an instrument as a liability if the instrument has a fixed settlement date or must be settled on the occurrence of an event that is certain to
– An issuer must classify the following other instruments as equity:
actively engage in activities of the issuer and that are redeemable only if the holder dies, retires, resigns, or otherwise ceases to actively engage in the activities of the issuer. (This includes holdings, the amounts of which vary based on the volume of business transacted by the holder.) 25
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The FASB did not reach any conclusions on the accounting questions related to initial recognition and measurement of tradable offsets that are issued to an entity free of charge in a cap and trade emissions trading scheme. The FASB noted that the accounting for assets and liabilities in an emissions trading scheme involves issues that are also being discussed in the joint conceptual framework project and the IASB project to amend International Accounting Standard (IAS) 37, Provisions, Contingent Liabilities and Contingent
research to ensure that conclusions the Board may reach on this project are consistent with conclusions reached on those
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– Disclosures about litigation contingencies should focus on the contentions of the parties, rather than predictions about the future outcome. – Disclosures about a contingency should be more robust as the likelihood and magnitude of loss increase and as the contingency progresses toward resolution. – Disclosures should provide a summary of information that is publicly available about a case and indicate where users can
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The Board decided that entities should not consider the possibility of recoveries from insurance or indemnification arrangements when assessing whether a contingency should be disclosed. Regarding quantitative disclosure requirements, the Board directed the staff to develop an approach that would focus on disclosure of nonprivileged quantitative information that would be relevant to making an estimate of the potential loss, for consideration by the Board at a future meeting. The Board decided not to require entities to disclose information about settlement negotiations. The Board decided to require disclosure about possible recoveries from insurance and other sources if and to the extent that the information has been provided to the plaintiff in discovery. The Board discussed the effective date of any final guidance on this project and decided not to rule out the possibility that it could be effective for fiscal years ending after December 15, 2009.
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Statement of Financial Position Statement of Comprehensive Income Statement of Cash Flows Business
liabilities
liabilities Financing
Income taxes Discontinued operations Business
expenses
expenses Financing Financing income
Income taxes on continuing
financing Discontinued operations net of tax Other comprehensive income net of tax Business
Financing
Income taxes Discontinued operations Equity Equity
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– (a) an estimate of the future cash flows that will arise in a range of possible outcomes. – (b) an estimate of the probability of each outcome occurring. – (c) the time value of money, represented by the current market risk-free rate of interest. – (d) the price for bearing the uncertainty inherent in the regulatory asset or regulatory liability.
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In May 2008, the AICPA governing Council voted to recognize the IASB as an accounting body for purposes of establishing international financial accounting and reporting principles. This amendment to Appendix A of AICPA Rules 202 and 203 gives AICPA members the option to use IFRS as an alternative to U.S. GAAP. As such, a key professional barrier to using IFRS and therefore IFRS for SMEs has been removed. CPAs may need to check with their state boards of accountancy to determine the status of reporting on financial statements prepared in accordance with IFRS for SMEs within their individual state. Any remaining barriers may come in the form of unwillingness by a private company’s financial statement users to accept financial statements prepared under IFRS for SMEs, and a private company’s expenditure of money, time and effort to convert to IFRS for SMEs.
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simplified version of full IFRS. In creating IFRS for SMEs, the IASB eliminated many accounting topics that are not generally relevant to private companies (for example, earnings per share and segment reporting). Being based on full IFRS and missing many accounting topics, IFRS for SMEs therefore differs from U.S. GAAP in a variety of areas. Some of the key differences under IFRS for SMEs are:
and financial instruments.
not exceeding ten years.
years for changes in IFRS.
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– Do nothing and record pension expense when the contribution is paid in 2010. – Prepay the contribution in 2009. In this case you would record a prepaid asset in 2009 upon payment and you would amortize the prepaid asset to pension expense over 12 months beginning in January 2010. – Defer revenue from 2009 until 2010 (or later years as well). Create a deferred credit under SFAS 71 and recognize the deferred revenue in 2010 or later years to offset some or all
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– A detailed description of the plan and the specific accounting journal
the event that gave rise to the deferral, the amount of the deferral, and the timeframe over which the deferral will be amortized into income.
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– The journal entries required include:
fund.
– A resolution from the cooperative's board of directors stating that the cooperative is aware of the potential impact on its tax exempt and "cooperative" statuses and that it will accept the responsibility for implementation of the plan; – A resolution from the cooperative’s board of directors stating that the cash equivalent of all revenues deferred will be segregated in a special fund until such time as a like amount is subsequently amortized into revenue; and – Approval from the state regulatory commission in those states in which a commission has jurisdiction over the cooperative’s rate-making activities.
You may not defer so much revenue that you fail to meet TIER in 2009.
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– The amount to be deferred each year is limited to the 35% increase in the base contribution – You may defer revenue to future years beyond 2010 – You may defer revenue from any source – operating or nonoperating, but when you reverse the entry in subsequent years, it must be put back in the same accounts. – Instead of segregating the cash on your balance sheet with an accounting entry, you may deposit the revenue to be deferred in the cushion of credit account. In this case as long as the balance in your cushion of credit account exceeds the amount of revenue deferred from 2009, you will be deemed to have complied with the cash equivalent requirement.
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– Board resolution – Auditor approval – PSC approval if required
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– That is, each cooperative will have the same amortization period. – The average remaining service life changes but it is currently about 14 years.
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Under federal election law, a corporation, including an electric cooperative, may not contribute to federal candidates or to a federal political action committee. In some states, however, an electric cooperative may contribute to state or local candidates and political action committees. If an exempt electric cooperative contributes its own funds (as
cooperative is subject to the tax described in Internal Revenue Code section 527(f)1) and Treasury Regulation 1.527-6 and must file Form 1120-POL.
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