AFP Blogs

On Wednesday, April 7th at 2:00 p.m ET, AFP is hosting a webinar titled, “Regulatory Update: Fair Value Rules Impacting Pension Plan Estimates and Disclosures Are Changing Yet Again!” Duff & Phelps Managing Directors and a member of FASB’s Valuation Resource Group will cover the following topics and respond to all questions concerning valuing alternative assets and interests in alternative investment funds:
 

• The use of NAV to value alternative assets—what does it really say; how does it impact pension plans?
• What are auditors looking for?
• FASB/IASB Fair Value Convergence—what is changing and what impact with the changes have?
• Plan Sponsor disclosures—is the worst over, or is there more pressure to come?
• Collective Trusts
• ILPA Private Equity Principles and the IPEV Valuation Guidelines—how do they help pension plans?
• AIFM (European Alternative Investment Fund Managers) Draft proposal—will it help or hurt pension plans?

In June AFP of Canada will hold concurrent forums in Canada: AFP of Canada Treasury Management Forum and the Society of Canadian Treasurers (SCT) Institute. The former focuses on core treasury practitioners, the latter on senior-level issues.  However, the broad themes for both forums are largely the same.  One of the sessions included in the forum line up is on IFRS Convergence issues facing Canada, which will be moderated by AFP’s Director of Accounting and Financial Reporting with representatives fromKPMG, one of the Big Four accounting firms.  An accounting  webinar will also be held on April 1st on this topic titled, “IFRS adoption: Is your Company Ready for Adoption?”   Interested parties should go to the link to sign up and feel free to submit your questions and concerns.

The Government Accounting Standards Board (GASB) issued as an exposure draft titled, The Financial Reporting Entity, an amendment of GASB Statements No. 14 and No. 34. GASB said the amendments would improve financial reporting of component units, which are legally separate organizations that state and local governments include in their financial reports.

Key issues being proposed include modifying the existing criteria for inclusion of organizations that are fiscally dependent on a government by adding a requirement that the potential component unit and the primary government also have a financial benefit or burden relationship. In cases where the government determines it would be misleading to exclude an organization that does not meet the financial accountability concept from its financial reports, the guidance proposes the manner in which that determination should be made, GASB said. The proposal also would amend the criteria for “blending” or the reporting of component units as if they were part of the primary government, the board said. Moreover, it would clarify the reporting of equity interests in legally separate organizations.

This was quite an exciting week as we saw movement on two major pieces of reform legislation. On Sunday and again on Thursday, the House passed a health-care reform bill. The President signed the bill into law on Tuesday. Given how the reconciliation process works, a second vote was required to pass the compromise bill.

On Monday, the Senate Banking Committee approved a financial reform bill. The vote was straight down party lines at 13-10, with the Democrats in the majority. Since the Democrats lack a super-majority in the Senate, they will need at least 1 Republican vote to pass any legislation. It is expected there will be significant changes to the draft bill but the feeling in Washington is that a bill will become law sometime this year.

The situation in Greece continues to be in flux. After much debate as to whether any rescue package for Greece would come in the form of support from the EU or from the IMF, European leaders in Brussels crafted a compromise position. Should Greece need some sort of outside support, it would now come in the form of a mix of IMF and bilateral loans. While there has been a bit of a relief rally on the short end, there is still much uncertainty as to how this will actually play out if Greece actually finds itself in such a predicament.  

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Nominations are being accepted for practictioners interested in serving on the International Accounting Standard Board’s (IASB) Small and Medium Sized Entities Implementation Group (SMEIG), which will be chaired by Paul Pacter, the IASB’s Director of Standards for SMEs. Members selected will serve on a voluntary basis. Nominations and applications are invited by 30 April 2010.

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The International Accounting Standards Committee Foundation (IASCF) published a the first twelve training modules on IFRS for Small and Mid-sized Entities (SMEs). The IFRS for SMEs is a self-contained standard of fewer than 230 pages, designed to meet the needs and capabilities of small and medium-sized entities (SMEs), which are estimated to account for over 95 per cent of all companies around the world. The training material is designed to assist companies and accounting practitioners in applying the standards and help educators with student instruction. 

The material will eventually comprise of 35 separate modules for each section of the IFRS for SMEs.

This week started out with the much anticipated release of Chairman Dodd’s draft financial reform bill. The draft bill will be marked up by the full committee in the weeks ahead. The path ahead for the bill remains unclear. Assuming the bill clears the Banking Committee, it faces an uncertain future before the full Senate. After passing the Senate, the bill would still have to be reconciled with the House version before it could move to the President’s desk for his signature.   

On Tuesday, the FOMC met and as expected, announced no change in the current target range for the Fed Funds rate. The rate range has been set at 0.00% – 0.25% since December 2008, though recently, the effective rate has been hovering towards the higher end of the range.

The Fed is expected to raise the Discount rate in the near future. This action would not be viewed as a change in monetary policy, as much as a move towards normalization. Prior to the financial crisis, the spread between the Discount rate and the Fed Funds rate was 100bps. After the move last month, the spread increased to 50bps from 25bps. Many market participants expect the spread to be widened to 100bps prior to the Fed raising the Fed Funds rate.
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1. Both lessors and lessees would be required to evaluate whether the lease payments should be allocated between service and lease components, considering all concurrently negotiated contracts with a third party.
   
2. A lessor would be subject to the revenue recognition requirements regarding the identification of separate performance obligations within an arrangement. That is, if the service component is not considered distinct, total payments under the arrangement should be accounted for as the lease. If the service component is considered distinct, total payments under the arrangement should be allocated between the service and lease components using the same principles as those proposed in the revenue recognition project.
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At this weeks joint meeting, the FASB and the IASB discussed disclosure issues pertaining to fair value measurement. The two Boards tentatively decided:

1. To define “class” on the basis of the following principles: 
    
   * An entity should determine the appropriate classes of assets and liabilities based on the nature, characteristics and risks of the assets and liabilities, and their classification in the fair value hierarchy. 
   * A class of assets and liabilities will often require greater disaggregation than the entity’s line items in the statement of financial position
   * Judgment is needed to determine the appropriate classes of assets and liabilities.
    
2. Not to require an entity to disclose information about the change in the nonperformance risk of a nonfinancial liability. (more…)

Busy corporate treasury and finance professionals may find it hard to get out of the office for a conference these days, but one event that is definitely worth the trip is the AFP Treasury Management Forum, April 21-23, in Washington, DC.

Take a look at the companies speaking at the Forum:

•  AOL
• Bank of America Merrill Lynch
• BNY Mellon
• Citi
• Coca Cola Enterprises
• Costco
• Custom House, a Western Union Company
• Ford Motors
• General Mills
• Industrial and Commercial Bank of China
• J.P. Morgan
• McCormick
• REI
• SWIFT
• Towers Watson
• U.S. Bank
• USPS
• Zappos.com

Senior executives from these companies will cover your most important treasury concerns:

• Working Capital
• Risk Management
• Technology
• Globalization

Plus, two Members of the House Financial Services Committee have confirmed to speak as well:

• Rep. Jim Himes, D-Conn. Worked at Goldman Sachs for 12 years, rising to Vice President. Worked extensively in Latin America and headed its telecommunications technology group.
• Rep. Gary Peters, D-Mich. Vice President of investments for Paine Webber from 1989-2003. Before that, he was with Merrill Lynch.

The AFP Treasury Management Forum also is approved for CTP recertification credits and CEP credits. Register now!