FASB’s New Agenda

Standards board to look at revenue recognition, disclosure of intangible assets. Also: Andersen letterhead in the news, and Accenture lands huge contract.

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The Financial Accounting Standards Board (FASB) recently added three new projects to its agenda. The topics on the table: revenue and liability recognition, intangible asset disclosure, and accounting literature codification.

When it comes to revenue recognition, FASB says examples of the issues that will be explored include revenue arrangements involving multiple products or services, and the effect on revenue recognition of customer rights of return. “Revenue recognition is the largest single category of fraudulent financial reporting and financial statement restatements,” it added in its press release. “The proposed project would address such matters by developing an accounting standard on revenue recognition.”

FASB conceded that the existing conceptual guidance on which a new standard would be based is partially flawed. “Accordingly, the project would revise that guidance by amending certain of the Board’s Concepts Statements to provide a sound basis for developing the standard on revenue recognition,” it added.

FASB also hopes to create standards for improving disclosure of information about intangible assets that is not currently reported in financial statements. Examples include brand names, customer lists, licensing agreements and patented technology.

“The proposed scope of the project focuses on disclosure about intangible assets that are not recognized in statements of financial position but that would have been recognized if acquired either separately or in a business combination under FASB Statements No. 141, ‘Business Combinations,’ and No. 142, ‘Goodwill and Other Intangible Assets,'” FASB added. “That scope includes acquired in-process research and development assets.”

FASB promises to determine what type of information about intangible assets would be required for disclosure. “Disclosures may include quantitative information about fair values of intangible assets or costs incurred in generating them, as well as qualitative information,” it added.

FASB noted that the project to codify and simplify accounting literature is being initiated in response to concerns raised by constituents about the quantity, complexity and retrieval of the body of U.S. accounting literature. That includes guidance issued by the EITF, the American Institute of Certified Public Accountants (AICPA) and the Securities and Exchange Commission (SEC). “A key objective of this project is to improve the usability and effectiveness of that literature,” the standards board added.

FASB also plans to work with the EITF, AICPA and SEC to more clearly define their roles in setting accounting standards with the hope to streamline certain activities. “In an effort to reduce the complexity of accounting literature,” the statement noted, “the FASB will seek to determine if it can issue standards that are less detailed and have few, if any, exceptions or alternatives.”

Hold your applause.

St2ep Founder Accused of Forging Audit Opinion

The bad news for Andersen is that its name has been dragged into yet another legal controversy. The good news is that it didn’t do anything wrong.

You see, the SEC filed a complaint alleging that Michael Porter, the founder and majority shareholder of St2ep LLC, forged an audit opinion and related cover letter of Arthur Andersen LLP in an unsuccessful attempt to sell his privately-held company to publicly-traded MPM Technologies, Inc.

“The merger was partly contingent upon St2ep’s providing MPM with certified audited statements for calendar year 1999,” according to the complaint. It alleges that in an attempt to consummate the merger between MPM and St2ep, Porter prepared St2ep’s 1999 financial statements. He then allegedly drafted and attached to the financial statements an unqualified audit opinion and cover letter on Arthur Andersen letterhead.

“The financial statements, together with the audit opinion and forged cover letter were then provided to MPM, and MPM’s independent auditor contacted Arthur Andersen, which denied having prepared or audited St2ep’s financial statements,” says the complaint.

Even the British Overstate Earnings

It appears U.S. companies aren’t the only ones that end up restating results.

It appears that Schroders Plc, Europe’s third largest money manager, overstated its earnings for 2000 by about $15.8 million. As a result of the rejigging, Schroders cut its pretax earnings estimate for last year by as much as 10 percent, according to Bloomberg.

The wire service reported that Schroders’ fund-management earnings were inflated by 7 percent because the accrual of fees was miscalculated in 2000, citing as its source Michael Dobson, who became Schroders’ chief executive officer about three months ago.

Schroders also cut its 2001 pretax profit estimate by as much as 10 percent below analysts’ estimates. This revision excludes adjustments or provisions the company will make as a result of the accounting errors in 2000, the company told the wire service.

Said Dobson of the restatement: “It’s not a great way to start the year.” Or a new job.

Accenture Calls, Verizon Notes, Swedish Meatballs

  • AT&T management said it will pay Accenture up to $2.6 billion over five years to transform AT&T Consumer’s long distance sales and customer care operation. Under the agreement, AT&T Consumer will continue to be responsible for establishing strategic business direction, defining marketing strategies and designing product offerings. Accenture will be responsible for providing new technology development and ongoing management direction for the transformation of AT&T Consumer’s long distance sales and customer care operation.
  • Verizon New Jersey Inc., a unit of Verizon Communications, issued $1 billion in 10-year notes, led by Morgan Stanley. The paper was priced to yield 5.957 percent, or 114 basis points over comparable Treasurys and was rated Aa2 by Moody’s and A-plus by S&P.
  • The U.S. District Court in New York entered a Final Judgment against David Drescher, a former manager at PricewaterhouseCoopers’ New York office. The court also ordered Drescher to pay a fine of nearly $16,000 for his role in an insider trading case. Drescher was accused of providing material, nonpublic information to two Swedish friends about the upcoming acquisition of Pinkerton’s, Inc. by Securitas AB. The Commission’s complaint alleged that at the time he tipped off his two friends, he was working on the PwC team advising Securitas, a Swedish security specialist.

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