IFRS Course Map Word template - NavigatingAccounting.com

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1


COURSE
MAP



I
NTERNATIONAL
F
INANCIAL
R
EPORTING
S
TANDARDS



T
HERE IS AN ASSIGNMEN
T FOR THE FIRST
CLASS
!


S
EE THE
S
ESSION
1

ASSIGNMENT




2


Course Schedule

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................................
.

3

Goals

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4

Assessment

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5

Group Work

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.......

5

Registering Groups & Submitting Reports
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.........................
6

Declining an Opportunity to Participate
................................
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............................
6

Tips for Group Work
................................
................................
................................
........................
7

No Sharing Work
Across Groups

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......
8

Preparing for Group Class Discussions

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..............................
8

Group Grading

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8

Graded Written Assignments

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.......
8

Graded Group Participation

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.........
9

Reasons for Group Policies

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10

Course Participation Scores

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...........

10

Session Participation Points

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.......

11

Breadth
-
of
-
Involvement Points

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................................
................................
..

11

Determining Course Participation Scores

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................................
....................

12

Course Projects

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................................
................................
................................

13

Gauging Read
ing Intensity
................................
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................................
.................

14

Additional Optional Content
................................
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................................
..............

14

Will this be a Challenging Course?

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................................
.....

14

Session 1

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15

Session 2

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19

Session 3

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24

Session 4

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29

Session 5

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34

Session 6

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38

Session 7

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44

Session 8

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46

Session 9

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49

Session 10

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53

Session 11

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55

Sessions 12
-
14
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................................
..

60

3



Course Schedule



4


This
Course Map

describes the course goals, policies, and assignments. We hope it will give you
a sense for our commitment to our collective effort to make the course a rewarding experience.


Goals



H
elp you learn differences between US GAAP and IASB GAAP for events and

circumstances where these differences and their financial
-
statement consequences are
particularly pronounced.



H
elp you make informed judgments while preparing, auditing, or using IFRS financial
statements.



H
elp you learn to think critically about issues that are of paramount importance to
accounting thought leaders. Hopefully, you will increasingly influence them as you
continue to hone your skills and perhaps ultimately join their ranks.

Y
our rate of career

advancement will likely be greatly influenced by the extent

to which you
master all three
goal
s
. Applying IFRS generally requires considerably more judgment than
applying US GAAP, meaning there is much more room for objective experts to reasonably
disagre
e on the appropriate accounting under IFRS. This is a consequence of IFRS providing less
implementation guidance than US GAAP.

If you become a preparer of accounting reports under IFRS, your role will be to make these
judgments and to convince those who a
udit and use the related numbers that they comply with
GAAP and faithfully represent the underlying business events and circumstances. This will
require a much more sophisticated understanding of the business context and relevant IFRS
authoritative guidanc
e than is needed under US GAAP. In particular, as you transition from US
GAAP to IFRS, you will encounter many situations where there is not a clear answer and where
you will need to do much more than simply apply a rule to determine whether the accounting

complies with GAAP.

You will also make more judgments if you plan to audit or use IFRS financial statements; in these
roles, you will need to assess the level of confidence you have that preparers appropriately
exercised judgment permitted under IFRS and

more generally, that the related numbers
faithfully represent the underlying events and circumstances.



5


Assessment

Your course grade will be based on: (a) your total course score (out of 100 points) and (b) the
way grades are assigned to course scores t
o form the grade distribution.

Three factors will determine your course score:


Class participation



35%


Written reports for sessions 2
-
11

35%


Course project



30%

We have not yet determined the cut
-
offs for the various grades


how grades will be assig
ned to
scores. However, they will likely fall within the ranges you encountered in other accounting
courses.

Group Work

The weekly assignments are generally far too demanding for one individual and typically for
groups smaller than
4

members. As discussed below, your course score will likely be based
entirely on group work, including class participation as discussed.

Considering the way group work will be graded (discussed later), differences in students’
learning styles, course and w
ork experiences, aptitudes, and ambitions, and the coordination
and free
-
rider problems that can occur within large groups, we decided that once you get to
know each other, you will be in the best position to determine the group size and membership
that ar
e most effective for your learning. The following guidance is consistent with this
objective.



Group size
: Generally, groups must have 4
-
6 members and we recommend 4
-
5. This
said, we will consider requests to form smaller or larger groups after Session 2. S
pecial
consideration will be given to groups that split up, as discussed later.



Groups for Session 2 assignment
: Students who wish to be in the same initial group can
do so by informing us of the names of the members in their preferred group prior to the
start of the first session (preferably by email, prior to 3:00 PM). If your preferred group
has fewer than f
our

members, we will randomly select additional members or merge
6


your group with another small group. Students who do not specify group preferences
prior to the start of class will be randomly selected to groups.



Groups for subsequent assignments
:

Subject to the size restrictions stated earlier,
students have the option to form new groups throughout the course.

Registering Groups & Submitting Report
s



Notify us of group members names via email
before noon on the assignment due date
.
If we do not hear from you by this deadline, we will assume your group has not changed
from the prior session.

Declining an Opportunity to Participate



To allow for absen
ces, tardiness, and unusual circumstances that would make it difficult
for individuals to prepare adequately for the assigned questions or otherwise hinder
their performance, each group member has one opportunity during the course to elect
not to be includ
ed in the random selection procedure (described shortly) without any
negative consequences on the participation scores he or she and others in his or her
group receives.



However, students must inform us they will be absent or otherwise not participating i
n
the random selection via email no later than noon on the day the assignment is
scheduled to be discussed in class.
The participation scores of students who do not
notify us by this time and the scores of others in their group will be reduced
significantl
y if these students are subsequently selected to answer an assigned
question and they are late for class, absent, or not prepared to give a respectable
performance.




Students can elect not to participate in the random selection more than once but they
must

still notify us no later than noon the day the assignment is scheduled. If they notify
us in time, their participation scores (but not those of others in their group) will be
reduced but this penalty will be considerably smaller than the one they and othe
rs in
their group will receive if they are subsequently randomly selected to participate, and
are late for class, absent, or not prepared to give a respectable performance.

7


Tips for Group Work



In the past, groups have found it beneficial to meet at least
twice for each assignment
(or otherwise communicate as a group via email or phone):

o

During the first meeting, divide the assignment into parts and assign these to
various group members or subgroups. In this way, everyone does not need to
complete all of
the assignment on their own.

o

During the second meeting, check the quality of each others’ work, combine and
integrate your answers into a cohesive report, and teach each other what you
learned. The primary reason we randomly draw a student to represent the

group is
to give groups an incentive to participate in this sharing of knowledge.



Understanding group members’ strengths and weaknesses, coordinating work
effectively to ensure the group capitalizes on members' strengths and helping each
other mitigate we
aknesses is essential for success. This requires clear and honest
communication of strengths and weaknesses and a strong commitment to meeting
deadlines and building a highly effective group. Here are some critical areas where
group members can contribute:

writing skills, analytical skills, computer skills,
organizational skills, research skills, and, of course, accounting skills and general
business knowledge.



If your group is not working effectively as a team, such as a member is repeatedly not
doing th
eir share of the work, discuss this as a team to decide how best to address the
problem. If the team has difficulty resolving the problem, set up an office appointment
as soon as appropriate to discuss. We can meet with all or part of the group.
Alternativ
ely, select a new group for the next assignment: generally we have found that
everyone is better off if they are on a team that has shared aspirations. If you decide to
form a new group, be sure to notify everyone in the old group in time to permit
members

to form or join new groups. If you need help with this process, let us know as
soon as possible.



Warning
:
In prior years, a few students, who were essentially thrown off teams because
they repeatedly did not do their fair share of the work, or failed to
meet deadlines,
couldn’t find other groups who wanted to work with them. As a result, they ended up
8


doing all the reports on their own. This rarely happens and need not happen, but it can
happen.



It is quite acceptable for members to occasionally carry mor
e than their fair share on
one assignment to compensate for working less on others. However, the group must be
aware of this arrangement in plenty of time to reorder work assignments and
communication is essential!

No Sharing Work Across Groups



As indicate
d earlier,
while we prefer groups with 4
-
5 members,
you can form groups of
any size (after the first assignment) and thus work with as many classmates as you like
without breaching the honor code. However, you can’t share information across groups
and subm
it separate written reports. Doing so, will be considered cheating.



Any violation of this policy will b
e considered a violation of the

honor code and to
ensure fairness to students who comply with the policy, we will do everything possible
to ensure such
actions have grave consequences.

Preparing for Group Class Discussions

Generally, students find they need electronic or hard copies of the following to participate
effectively in the class discussions, with most students preferring hard copies:



The questi
ons and your group’s solutions.



Source documents that support your solutions. For example, hard copies of companies’
balance sheets and referenced footnotes.

Group Grading

Graded Written Assignments



Written group reports are to be submitted at the beginnin
g of Sessions 2
-
11. Guidance
for these reports will be included with the assignments.



Everyone in the group will receive the same grade for these reports. Each report can
earn a maximum of 100 points or 1000 points total for the ten written reports for
Se
ssions 2
-
11. These assignments account for 35% of your course score so the
9


assignment points are converted to course points by multiplying your total written
assignment points times 35/1000.

Graded Group Participation

Except as indicated in the “Declining

to Participate” section, everyone in the group will receive
the same grade for participation when the assignments are discussed. See the general
discussion on determining class participation scores described later.

Here is the process we will follow for p
articipation:



Numbers on Bingo balls will be assigned to groups prior to class, with more numbers
assigned to groups that have been selected fewer times in the past (or where a majority
of the group members have not been on teams selected often in the past, if new group
s
are formed). For session 2, this procedure guarantees that every group has the same
probability of being selected. Thereafter, the probability of being selected decreases the
more a group has been selected previously.



For each question to be discussed d
uring the class, a group will be randomly selected by
drawing a bingo ball. No group can be selected twice during the same class unless all
groups have been selected at least once.



Within the selected group, a student will then be randomly selected to rep
resent the
group by the toss of a die. Everyone in the group gets this student’s participation score.
No one else in this group can address this question thereafter.



This student will have 5
-
10 minutes (depending on the question) to respond to the
questio
n. Prior to class, groups should prioritize the points they wish to make and
organize supporting arguments and analyses succinctly to ensure the selected students
makes the most of the allotted time.



When there is enough time, other groups can volunteer to

correct or elaborate on
answers provided by the selected group representative. By doing so, they can earn
group participation points without foregoing the opportunity to be selected randomly
for another part of the assignment. However, groups must rotate
their representatives
10


such that a specific student can’t represent the group again until all group members
have had a turn. (This restriction carries forward to future assignments.)

The individual who will represent his or her group for the first question
will be selected 5
-
10
minutes before class. This will give this person an opportunity to discuss the group’s answer to
this part of the question.

T
h
is

procedure for selecting the group representative aims to ensure that everyone in the group
understands t
he underlying concepts, procedures, and analyses and can communicate the
group’s position on these issues. There is nothing wrong with splitting work into tasks that can
be addressed by individual group members. However, to ensure that the course goal is m
et it is
essential that the output from these tasks be integrated into a unified whole and that every
member understands and can communicate the analyses proposed by the group.

Doesn’t the selected group member feel extremely pressured?

Actually, the selec
ted students generally feel considerably less pressure than they would in
courses where students are cold called: they ha
ve

advance notice of most of the questions they
will address and they ha
ve

opportunities to discuss the answers with their groups prior

to
presenting them to the class. Additionally, because most groups will get opportunities to
participate every week, the participation score for one question has a relatively small effect on
the course participation score.

Reasons for Group Policies

Thes
e group polices are designed: (a) to allow students to form partnerships with others who
they expect will have similar commitments to the course goal and will bring diverse experience
and expertise to the group and (b) to subsequently permit groups to diss
olve or restructure if
situations emerge where one or more members are not satisfied with the group or they believe
they can meet their expectations better elsewhere.

Course Participation Scores

The total participation points for the course are scaled at
the end of the term so they fall in a
range from 1
-
35. There are two types of points: (1) session participation points that are based
on the quality of the group’s combined contributions to the class discussion during the session,
11


regardless of how many gr
oup members contribute (as described below) and (2) breadth
-
of
-
involvement points that are based on the extent to which (over the entire course) everyone in
the group contributes to the class discussions. The points assigned and the course scores out of
35

are largely subjective but we will take several steps to ensure that judgments are fair and
informed.

Session Participation Points

For each class session, groups will be classified into one of five categories according to their
combined discussion contrib
utions during the session, and points will be assigned to each
category:



Exceptional contributions

that will give us and your classmates a whole new perspective
on an important issue (these are rare but rewarded highly and greatly appreciated). 12
-
16 poi
nts



Excellent contributions

that: (a) offer compelling substantiated arguments, hypotheses,
analyses, or perspectives or (b) identify and further develop connections among others’
contributions or (c) offer clear and correct answers to challenging assign
ed questions. 6
-
11 points



Solid contributions that advance the discussions



these can include basic facts,
correct answers to relatively straightforward assigned questions, clarifying questions,
solid but not compelling arguments, or other contributions

that provide the essential
mortar for excellent discussions (most students fall into this category). 2
-
5 points



No contributions
. 0 points.

Breadth
-
of
-
Involvement Points

While some group members may contribute more than others during a given session, ev
eryone
should be ready to represent the group at all times if called upon to do so. Additionally, over the
entire course the group should share participation involvement as evenly as possible (given the
constraint associated with random selections discusse
d earlier). There will be several occasions
where groups will have opportunities to select spokespersons and thus to spread participation
involvement. To the extent groups share involvement
,

they will earn 1
-
20 additional
participation points.


12


Your
group’s breadth
-
of
-
involvement points can significantly impact your overall participation
score for the course.

For example, at the end of last year’s course, there was only a 30
-
point
spread across groups in the total participation points awarded for all
sessions, which didn’t
include breadth
-
of
-
involvement points.

Determining Course Participation Scores

At
the end of the course, the participation points for all sessions

and the breadth
-
of
-
involvement points

will be summed. These totals will then be ranked and participation scores
out of 35 awarded. The precise distribution of these scores will depend on several factors
including the distributions of the written assignments and our overall sense of how well t
he
combined points awarded to the sessions reliably measure differences in contributions to the
learning environment.



13


Course Projects

The course projects are similar to the weekly assignments. Here are a few differences:



Groups will be randomly assigned

to one of the following topics: fair value
measurements, share
-
based payments, or foreign currencies. (We reserve the right to
add or drop topics.). These assignments will be made no later than
Session 10
. At the
same time, you will also be notified of th
e dates the assigned topics will be discussed in
class.



Groups must submit PowerPoint presentations via email no later than 3:00 PM on the
date their assigned topic is discussed in class.

1.

For your assigned topic, your group should prepare a PowerPoint p
resentation with
the following three components:

2.

A big picture overview of current (and possibly proposed) accounting for the topic
under IFRS and US GAAP.

3.

An example of the accounting that would enable someone versed in basic
accounting to appreciate the

implications of the accounting on the major financial
statements (under both IFRS and US GAAP, if they differ).

4.

An illustration of the related disclosures for at least one company following US
GAAP and one company following IFRS.



The groups assigned to
a topic will share responsibility for presenting these
components. Groups will be notified of the component(s) they are to present a few
minutes before the class their topic is discussed.



Groups that are not assigned to a topic should listen carefully to
the presentations and
ask clarifying questions. The faculty will ask these groups big
-
picture questions after the
presentations.



In addition to the PowerPoint presentations discussed above, your group is to submit a
written report that identifies the top
-
5 things you learned in the course that you expect
will help you make the transition from US GAAP to IFRS or, more generally, help you in
your careers. You should briefly explain the reasons you selected your top 5. This
written report is due on the la
st d
ay of the course
.



14


Gauging Reading Intensity

We have included more readings, webcasts, and other resources in this
Course Map

than we
expect you and your classmates to use to satisfy the course requirements. Still, considering the
importance of Internatio
nal Financial Reporting Standards to your careers, we expect some of
you will want to go beyond the course requirements either this spring or at a later date. The
reading passages designated as optional aim to facilitate such further inquiry. More generall
y,
the
Course Map

classifies the recommended level of intensity of assigned reading passages and
exercises as follows:



Skim
: indicating you should try to see the big picture
-

pick up the essential vocabulary and
understand the basic issues,



Grasp
:
indicating you should try to understand the computations and concepts underlying
the issues,



Master
: indicating this material is extremely important so you should try to comprehend it
as fully as possible before moving on to the next task,



Optional
: in
dicating you should only read this material if you want to go beyond the course
requirements.


Additional Optional Content

In addition to designating some passages in the assigned readings optional, we have also
designated some entire readings and
videos

(
at the end of sessions) as additional optional
content. These discuss important issues. The only reason they are not assigned is we wish to
keep your workload manageable. If we have time after discussing the assigned readings and
exercises, we may give bri
ef overviews of these issues. Regardless, we will gladly discuss them
with you after class or during office visits.

Will this be a Challenging Course?

Probably, but we will do our very best to ensure that you are more than compensated for taking
on this c
hallenge: you will have the opportunity to gain highly valued knowledge and skills that
will help you jump start your career.





15



Session 1

Rapidly Changing Landscape and Enhancing Judgments

Rapidly Changing Landscape

Read

I.

E&Y Foundation Academic
Resource Center: Introduction to IFRS

II.

E&Y Foundation Academic Resource Center: IFRS in Global Practice

These documents and others provided by the E&Y Foundation Academic Resource Center
are

posted to the course Blackboard Vista

(BBV) site
, with their
permission
. (The ones above
are posted to the Session 1 section of the site.)


These

slides

provide an excellent overview of IFRS, the various approaches countries have
taken when adopting IFRS, and the challenges and alternatives the SEC confronts as it
c
onsiders whether and how the US should adopt IFRS. Your goal in studying these slides is to
gain a big
-
picture perspective. This will help you frame the issues in the readings below and,
more generally, those throughout the course.

III.

PWC: IFRS and US GAAP: S
imilarities and Differences, October 2011:

http://www.pwc.com/us/en/issues/ifrs
-
reporting/publications/ifrs
-
and
-
us
-
gaap
-
similari
ties
-
and
-
di fferences.jhtml



Grasp page 3



Skim pages 4
-
9

IV.

Office of the Chief Accountant, Division of Corporation Finance, United States Securities and
Exchange Commission: Work Plan for the Consideration of Incorporating International
Financial Reporting St
andards into the Financial Reporting System for U.S. Issuers: Exploring
a Possible Method of Incorporation, May 26, 2011,

http://www.sec.gov/spotlight/gl
obalaccountingstandards/ifrs
-
work
-
plan
-
paper
-
052611.pdf

Skim through this reading before addressing the questions and then come back to specific
passages as needed when responding to them.

16


V.

The SEC requested “comment letters” regarding the proposed method
of incorporation
discussed in the above reading. Sample a few of the submissions before addressing the
questions and perhaps a few more as needed when responding to them:

http://www.sec.gov/comm
ents/4
-
600/4
-
600.shtml



17


Do

1.

Identify comment letters you sampled related to the SEC approach to incorporating IFRS and
arguments therein that you found particularly compelling. Why were they compelling? To
what extent, if at all, were they self
-
serving? If

they were self
-
serving, to what extent did
they conflict with the public’s interest?

2.

Identify comment letters you sampled and arguments therein that you found particularly
shallow. Why were they shallow? To what extent, if at all, were they self
-
serving?
If they
were self
-
serving, to what extent did they conflict with the public’s interest?

3.

Do you favor the proposed approach? What changes if any would you recommend?

Accounting Judgments


Part 1

View

VI.

Accounting Judgments: Basics Express Route (14
minutes video)

http://www.navigatingaccounting.com/video/express
-
accounting
-
judgment
-
basics

Choose a connection speed (for a personal computer) or choose another d
evice such as an iPad.
Alternatively, you can read the transcript (at the bottom of the web page)


Read

VII.

Final Report of the Advisory Committee on Improvements to Financial Reporting to the
United States Securities and Exchange Commission (CIFR Committee),


http://www.sec.gov/about/offices/oca/acifr/acifr
-
finalreport.pdf

Optional:
pages 1
-
87

Grasp:

pages 88
-
94

M
aster
: pages 95
-
96

Optional
: pages 97
-
119

Do

4.

Judgment is a two
-
edged sword: Generally, the more latitude preparers have to exercise
judgment when preparing accounting reports, the more opportunities honest and
competent managers have to faithfully reflect their financial performance and the more
18


oppo
rtunities others have to make honest mistakes or report opportunistically. Identify
ways the CIFR Committee’s suggestions regarding judgments can help users of financial
reports identify managers who exercise judgment appropriately and thus improve the
ove
rall quality of accounting information.


Additional Optional Video

and Reading


I.

Remarks by Leslie F. Seidman,
Chairman of the Financial Accounting Standards Board
,

To the
National Association

of State Boards of Accountancy,
Monday, October 24, 2011

http://www.fasb.org/cs/ContentServer?site=FASB&c=Document_C&pagename=FASB%2FDo
cument_C%2FDocumentPage&cid=1176159080366

II.

KP
MG Webcast: Live Interview with IASB Chairman, Sir David Tweedie, May 5, 2009

www.kpmginstitutes.com/ifrs
-
institute/events/live
-
interview
-
with
-
sir
-
davi d
-
tweedie.aspx

Click Play Webscast near the bottom of the page.

Sir David Tweedie is one of the most influential accountants in the world.

III.

United Nations Conference on Trade and Devel
opment: Practical Implementation of
International Financial Reporting Standards: Lessons Learned, 2008

http://www.unctad.org/en/docs/diaeed20081_en.pdf




19


Session 2

Revenue Recognition

Intro
duction

The amount of current and proposed authoritative guidance associated with revenue
recognition is staggering: Currently, over 175 US GAAP standards and 2 IFRS standards contain
revenue recognition guidance and the IASB and FASB recently released a 175 page
exposure
draft (including implementation guidance and basis of conclusions) that departs significantly
from current practice under US GAAP and IFRS. One of our objectives for this session is to make
certain we don’t totally overwhelm you with this content
. To this end, we plan to focus on a few
key issues that we believe will best serve your careers.

Your immediate challenge is to learn enough current GAAP to perform well on the job during
the next few years (as companies transition to a proposed new stan
dard) and on the CPA exam
if you choose to take it during this time period. This assignment will help you begin to meet this
challenge. However, to keep the workload manageable, you will not be asked to analyze existing
standards. Instead, you will be work
ing with E&Y Foundation slides that summarize key
differences in US GAAP and IFRS.

You will also complete two assigned problems from an E&Y problem set. After we have
discussed these problems during class, we will post the solutions to the entire problem
set to
BBV. You can use these during the course as a reference or later to study for the CPA exam. E&Y
agreed to our request to post the solutions for these purposes
under the condition you don’t
share them with anyone outside the course.

Please honor thi
s agreement.

Our highest priority

is to prepare you for proposed changes in revenue recognition (for both
IFRS and US GAAP) you will likely encounter in the near future. To this end, most of our class
time and your preparation time will be devoted to rela
ted postings at the FASB website.

Current Authoritative Guidance

READ

I.

E&Y Foundation ARC: Revenue Recognition Including Construction Contracts slides

20


(See the Session 0
2

section of the course BBV site.)



Skim: slides 1
-
2



Grasp: slides 3
-
5



Skim: slides
6
-
13



Grasp: slides 14
-
23



Optional: slides 24
-
64



Grasp: slides 65
-
80



Optional: slides 81
-
87



Skim: slides 88
-
90

Consider having 1
-
2 group members prepare solutions for the two assigned problems for
this section. If you do so, we suggest these members follow

the above reading intensity
recommendations and the rest of the group skim the “grasp” and “skim” sections. This
should allow group members
not

preparing the solutions to follow the explanations of those
preparing them, which will ensure whoever is select
ed to present the group’s solution is
ready to do so.

DO

1.

E&Y Foundation ARC: Revenue Recognition Including Construction Contracts: Homework
Problems

(See the Session 0
2

section of the course BBV site.)

a)

Problem 18 on page 6: Traditions Home Furnishings

b)

Problem 19 on page 7: Legal firm receives fee from new client
, PPI


We will not discuss them during class but solutions will be posted to BBV for both problem
sets after Session 4. They are straightforward and should not take much time to complete.

Proposed

Authoritative Guidance

READ

II.

PWC: IFRS and US GAAP: Similarities and Differences, October 2011:

21


http://www.pwc.com/us/e
n/issues/ifrs
-
reporting/publications/ifrs
-
and
-
us
-
gaap
-
similarities
-
and
-
di fferences.jhtml



Grasp pages 37
-
40

III.

You will find the most recent FASB documents related to the joint revenue recognition
project with the IFRS to at the following URL:

http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FProject
UpdatePage&cid=900000011146

This project i
s expected to be completed in 2012. The Boards issued nearly identical
exposure drafts for feedback on June 24, 2010 and the FASB received nearly 1,000 related
comment letters. In response, the Boards proposed several tentative modifications to the
exposur
e draft, which you will find at the above URL under “Summary of Decisions to Date.”

On November 14, 2011, the Boards released

a revi
sed exposure draft for comment.

http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&
blobwhere=1175823318057&blobheader=application%2Fpdf



Skim the most recent documents (the revised exposure
draft
)
prior to addressing the
assigned questions and then return to them as needed.

DO

2.

Write a comment letter to the FASB in response to the Board’s revision of the reve
nue
recognition exposure draft:


a)

Identify (no more than 3) features of the proposed standard you most favor and your
reasons for doing so.

b)

Identify (no more than 3) features of the proposed standard you most oppose and your
reasons for doing so.

c)

If you have recommendations not included
in the proposed standard, include them
along with supporting arguments.

Written Assignment

There are two parts to the written assignment:



Your solutions to the two assigned problems from the E&Y homework problems set



parts
(a) and (b) of question 1
.

22




Your
comment letter to the FASB


parts (a)
-
(c) of question
2
.

The

report
s

should be
no longer than 5

pages
. They should be clear, concise, organized, and
focused on the most significant issues; you should cite authoritative guidance (standard and
paragrap
h) and other sources where appropriate and connect these sources to your analyses;
you can occasionally use quotes to bolster your analyses but you will be significantly penalized
for “cutting and pasting” sans analyses.

To submit your report:
(1) Email a

Word or PDF version prior to the start of class on the due
date

and

(2)
s
ubmit a hard copy at the start of class on the due date.

Additional Optional Videos


Conceptual Primacy of Assets and Liabilities

Income Statements derive from Balance Sheets

The p
roposed revenue recognition standard highlights the conceptual primacy of assets and
liabilities in both the FASB’s and IASB’s conceptual frameworks. In particular, the new standard
underscores that: (1) the definitions of revenues and other income
-
stateme
nt elements are
based on the definitions of assets and liabilities and (2) the measurement and recognition of
income
-
statement elements depends entirely on the measurement and recognition of assets
and liabilities.

While the Boards’ frameworks have reflec
ted the conceptual primacy of assets and liabilities
and thus balance sheets since the 1970s, most of us were not taught to think this way. Rather,
we were taught that while income was ultimately closed into balance sheets (through retained
earnings), reve
nue was recognized when it was earned and realized or realizable and expense
recognition was based mostly on matching or conservatism. There were balance
-
sheet
implications to this approach, but they were the consequences of applying income
-
statement
conce
pts (e.g., earned, collectible, matching or conservatism) rather than the other way around.

Notwithstanding the Boards’ commitment to this approach, there is a long
-
standing controversy
about the relative primacy of balance sheets and income statements. I
n fact, there is a school of
thought that supports the income statement having conceptual primacy over the balance sheet.

When accounting measures were largely based on adjusted historical costs rather than fair
values, the relative primacy of the two statements was far less pertinent to standard setting
than it is today: there were few places where the approaches suggested d
ifferent accounting
23


treatments. This gets us to the reason you should consider watching the videos below to get this
balance
-
sheet
-
primacy mind set: This is the way standard setters tend to debate issues and
write standards, especially those you will be st
udying throughout the course.

I.

How do companies perform for owners? (11 minute video)

http://www.navigatingaccounting.com/video/scenic
-
how
-
do
-
companies
-
perfor
m
-
owners

Choose a connection speed (for a personal computer) or another device such as an iPad.

II.

Revenues (select menu items indicated below)

http://www.navigatingaccounting.c
om/video/scenic
-
revenues
-
bse
-
je

Suggested menu items from the list on the left side of the video:



Introduction (7 minutes)



Basic revenue recognition

o

Ex 1


cash sale (8 minutes)



Challenging revenue recognition

o

Challenges (8 minutes)

o

Authoritative guidance
(9 minutes)


24


Session 3

Long
-
Lived Assets:

Recognition, Depreciation & Amortization and Revaluations

Current
Authoritative
Guidance

READ

I.

Broad overviews

(The E&Y slides are posted to the Session
3

section of BBV and the pocket guides to the Session 1 section)



E&Y Foundation ARC
PP&E slides



Skim 1
-
41 and 53
-
70 (return as needed to complete assignment)



Ignore all references to impairments, which will be covered in Session 4



E&Y Foundation ARC
intangibles slides



Skim 1
-
20 and 45
-

60 (return as needed to complete assignment)



Ignore all references to impairments



Deloitte: IFRS in Your Pocket

2011

http://www.iasplus.com/dttpubs/pocket201
1.pdf



Optional:
IAS
16
, pages
68
-
69; IAS 23, pages 80
-
81; IAS 38, pages 99
-
101



E&Y: US GAAP versus IFRS

http://www.ey.com
/Publication/vwLUAssets/IFRS_vs_US_GAAP_Basics_March_2010/$FILE/IFRS_vs_US_GA
AP_Basics_March_2010.pdf



Optional: pages 14
-
17



KPMG: IFRS Compared to US GAAP

http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/IFRS
-
GAAP
-
comparisons/Documents/IFRS
-
US
-
G
AAP
-
2010
-
Overview.pdf



Optional: pages 44
-
51



PWC: IFRS and US GAAP Similarities and Difference

2011

25


http://www.pwc.com/us/en/issu
es/ifrs
-
reporting/publications/ifrs
-
and
-
us
-
gaap
-
similarities
-
and
-
di fferences.jhtml



Optional: pages 74, 80, 82
-
84

II.

IFRS Standards

The following standards are posted to the Session 3 section of BBV. You should reference
them as needed to complete the assignme
nt.



IAS 1
6



Property, Plant and Equipment



IAS
23



Borrowing Costs



IAS
38



Intangible Assets

III.

US GAAP

Access the following
standards

using

the directions
below
.

You should reference them as
needed to complete the assignment.



ASC 360
-
10



Property, Plant
and Equipment (ignore references to impairments)



ASC

350
-
10

through ASC 350
-
30


Intangibles (ignore references to impairments)

Directions for Accessing the FASB Accounting Standards Codification site (ASC)

will be
provided prior to this assignment.



View

t
he tutorials to learn how to use the site.

Company Disclosures

Reference the following reports as needed to respond to the assigned questions.

IV.

Daimler 2010

Annual Report

http://www.daimler.com/Projects/c2c/channel/documents/1985489_Daimler_Annual_Report_2010.pdf



The financial statements and footnotes start on page 172

V.

Ford

20
10

Annual Report

http://corporate.ford.com/doc/ir_2010_annual_report.pdf



The financial statements and footnotes start on page 72

VI.

GlaxoSmithKline

20
10

Annual Report

26


http://www.gsk.com/investors/reps10/GSK
-
Annual
-
Report
-
2010.pdf



The financial statements and footnotes start on page 104

Accounting Judgments: Part 2

View

VII.

Accounting Judgments: Basics: Reco
gnition Scenic Route (Select menu item)

http://www.navigatingaccounting.com/video/scenic
-
recognition
-
decisions

Choose the “low” speed connection

to avoid waiting for this video to load before you can
access the following menu item on the left side of the video:



Examples: Faithful representation (time stamp 0:00


6:25 only)

VIII.

Accounting Judgments: Basics: Measurement Scenic Route (Select menu items
)

http://www.navigatingaccounting.com/video/scenic
-
measurement
-
decisions

Suggested menu items:



Introduction


Adjusted historical cost: Useful life (0:00
-
16:30)



Adjusted historical cost: Measurement uncertainty (22:30


24:10)



Adjusted historical cost: Relevance to investors (34:48
-
39:25)



Take
-
aways (54:17


57:32)

DO

1.

E&Y Foundation: PP&E and Intangibles Homework Problems

(See Session 0
3

section of
BBV site)

a)

Probl
em 6 in the PP&E homework problem set


b)

Problem

8 in the intangibles homework problem set

I
nclude your solutions to these problems in
your group’s

written assignment
. We will not
discuss them during class but solutions will be posted to BBV after we discuss

impairments
in Session 4.

2.

General Features of US GAAP and IFRS
:

27


a)

Identify

what your group considers to be the three most significant differences between
US GAAP and IFRS with regards to accounting for property, plant, and equipment and
intangibles (other

than accounting for impairments, which we will consider in Session 4):



Assume GAAP/IFRS differences are more significant to the extent the information
companies would report about similar events or circumstances would differ and, as
a result, investors’ p
erceptions about the companies’ financial position or
performance would differ. You can use other criteria for determining when
GAAP/IFRS differences are significant but, if you do so, state them.



Cite the related IFRS guidance (standard and paragraph).



Rank the three differences

you identify based on the above criteria.



Briefly explain your ranking in terms of these criteria. For example, state the reasons
you would expect your first ranked difference to result in companies reporting
significantly diffe
rent information for similar events or circumstances.

b)

Identify
the three situations your group concludes will generally require the most
judgment when applying IAS 16 or IAS 38.



Assume the amount of judgment required depends on the extent to which objecti
ve
experts would reasonably disagree and, as a result, the extent to which the
information companies report about similar events and circumstances could differ.



Rank the three situations you identify according to the required judgment.



Briefly explain the

reasons for your ranking.

c)

As a preparer of IFRS financial statements, what types of evidence, arguments, or other
support could you document to enhance the credibility of the judgments
you identified
in part (b)?

Preparing for class discussion:

We will randomly select a student to discuss his or her
group’s responses to (a)
-
(c) for
the US GAAP/IFRS difference the group ranks first using the
criteria in 1(a).
However, you should also be prepared to discuss the other two
ranked
differences
.

28


3.

Comp
are and contrast
companies’
accounting policies and disclosures related to property,
plant, and equipment and intangible assets.

a)

Identify and discuss
the three most significant differences
in accounting policies and
disclosures between Daimler and Ford tha
t are attributable to IAS 16, IAS 23, or IAS 38.
If you conclude there are fewer than three differences, work with the ones you identify.



Use criteria in part 1(a) to rank the significance of accounting differences. The three
most important differences yo
u identify for Daimler and Ford can differ from the
ones you identified in part 1(a) (if differences you identified in 1(a) are not relevant
to Daimler and Ford).



Cite the related IFRS guidance (standard and paragraph).



Rank the three differences.



Briefly
explain the reasons for your ranking.

b)

Compare and contrast the usefulness for investors’ decisions of information provided by
the two companies under IFRS and US GAAP for property, pla
nt, and equipment and
intangible

assets.

c)

Compare and contrast GlaxoSmit
hKline’s and Daimler’s policies regarding internal
development costs. Explain why they differ?

Preparing for class discussion:

We will randomly select a student to discuss his or her
group’s responses to (a)
-
(
b
) for the US GAAP/IFRS difference the group r
anks first using the
criteria in 1(a). However, you should also be prepared to discuss the other two ranked
differences

for parts (a)
-
(b) and your response to part (c)

Written Assignment

Your written report should include your responses to all parts of
questions 1
-
3.



29


Session 4

Long
-
Lived Assets:

Impairments

Current
Authoritative
Guidance

READ

I.

Broad overviews

(The E&Y slides are posted to the
Session
3

section

of BBV)



E&Y Foundation ARC
PP&E slides

o

Skim 42
-
52 (return as needed to complete assignment)



E&Y Foundation ARC
intangibles slides

o

Skim 21
-
44 (return as needed to complete assignment)



Deloitte: IFRS in Your Pocket

2011

http://www.iasplus.com/dttpubs/pocket2011.pdf

o

Optional:
IAS
36
, pages
95
-
97



E&Y: US GAAP versus IFRS

http://www.ey.com/Publication/vwLUAssets/IFRS_vs_US_GAAP_Basics_March_2010/$FILE/I
FRS_vs_US_GA
AP_Basics_March_2010.pdf

o

Optional: pages 18
-
19



KPMG: IFRS Compared to US GAAP

http://www.kpmg.co
m/Global/en/IssuesAndInsights/ArticlesPublications/IFRS
-
GAAP
-
comparisons/Documents/IFRS
-
US
-
GAAP
-
2010
-
Overview.pdf

o

Optional: pages 78
-
81



PWC: IFRS and US GAAP Similarities and Difference

2011

http://www.pwc.com/us/en/issues/ifrs
-
reporting/publications/ifrs
-
and
-
us
-
gaap
-
similarities
-
and
-
di fferences.jhtml

o

Optional: pages 75
-
79, 81
-
82

30


II.

IFRS Standards

The following standard is posted to t
he Session 4 section of BBV.
R
eference it as needed to
complete the assignment.



IAS
36



Impairment of Assets

III.

US GAAP

Access the following guidance
using

the directions
in the Session 3 section of this document
.



ASC 360
-
10



Property, Plant and Equipment (
parts pertaining to impairments)



ASC

350
-
10

through ASC 350
-
30


Intangibles (parts pertaining to impairments)



ASU 2011
-
08: Intangibles


Goodwill and Other (topic 350): Goodwill impairments

http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=117
5822937733&b
l obheader=application%2Fpdf



Impairment of Inde
finite
-
Lived Intangible Assets P
roject

http://www.fasb.org/cs/ContentServer?site=FASB&c=FASBContent_C&pagename=FASB%2FFASBContent_C
%2FProjectUpdatePage&ci d=1176158917333

Company Disclosures

The following are posted to the Session 4 section of BBV. Reference them as needed to
complete the assign
ment.


IV.

Motorola 2009

Annual Report



The financial statements and footnotes start on page 78

V.

Alcatel
-
Lucent 2009

Annual Report

(Form 20F)



The financial statements and footnotes start on page 155

Accounting Judgments: Part 3

View

VI.

Accounting Judgments:
Basics: Measurement Scenic Route (Select menu items)

http://www.navigatingaccounting.com/video/scenic
-
measurement
-
decisions

31


Suggested menu items:



Adjusted historical co
st: Impairment losses (29:06


33:17)



US GAAP (50:06
-
52:55 only)

VII.

Connecting Users’ and Preparers’ Decisions: Express Route (12 minutes)

http://www.navigatingaccounting.com/video/express
-
connecting
-
preparers
-
and
-
users
-
decisions

DO

1.

E&Y Foundation: PP&E and Intangibles Homework Problems

(See
Session 03

section of
BBV site)

a)

Problem 11 in the PP&E homework problem set


b)

Problem

12 in the intangibles homework problem set

I
nclude your solutions to these problems in
your group’s

written assignment
. We will not
discuss them during class but solutions will be posted to BBV for both problem sets. These
problems are straightforward an
d should not take much time to complete.

2.

General Features of US GAAP and IFRS
:

a)

Identify

what your group considers to be the two most significant differences between
US GAAP and IFRS with regards to impairments associated with long
-
lived assets:



Assume GAA
P/IFRS differences are more significant to the extent the information
companies would report about similar events or circumstances would differ and, as
a result, investors’ perceptions about the companies’ financial position or
performance would differ. Yo
u can use other criteria for determining when
GAAP/IFRS differences are significant but, if you do so, state them.



Cite the related IFRS guidance (standard and paragraph).



Rank the
two

differences

you identify based on the above criteria.



Briefly explain

your ranking in terms of these criteria. For example, state the reasons
you would expect your first ranked difference to result in companies reporting
significantly different information for similar events or circumstances.

32


b)

Identify
the two situations you
r group concludes will generally require the most
judgment when applying IAS 36.



Assume the amount of judgment required depends on the extent to which objective
experts would reasonably disagree and, as a result, the extent to which the
information compan
ies report about similar events and circumstances could differ.



Rank the two situations you identify according to the required judgment.



Briefly explain the reasons for your ranking.

Preparing for class discussion:

We will randomly select a student to discuss his or her
group’s responses to (a)
-
(
b
) for
the US GAAP/IFRS difference the group ranks first using the
criteria in 1(a).
However, you should also be prepared to discuss the other two
ranked
differences
.

3.

Comp
are and contrast
companies’
accounting policies and disclosures related to property,
plant, and equipment and intangible assets.

a)

Identify and discuss
the two most significant differences
in accounting policies and
disclosures between
Motorola

and
Alcatel
-
L
ucent

that are attributable to IAS
3
6.
If you
conclude there are fewer than two differences, work with the one you identify.



Use criteria in part 1(a) to rank the significance of accounting differences. The two
most important differences you identify for
Motorola and Alcatel
-
Lucent can differ
from the ones you identified in part 1(a) (if differences you identified in 1(a) are not
relevant to Daimler and Ford).



Cite the related IFRS guidance (standard and paragraph).



Rank the two differences.



Briefly explai
n the reasons for your ranking.

Preparing for class discussion:

We will randomly select a student to discuss his o
r her
group’s responses to 3(a)

for the US GAAP/IFRS difference the group ranks first using the
33


criteria in 1(a). However, you should also be

prepared to discuss the other
ranked difference
for 3(a).


Written Assignment

Your written report should include your responses to all parts of questions 1
-
3.




34


Session 5

Provisions and Contingencies

Current Authoritative Guidance

READ

I.

Broad overviews

The E&Y slides are posted to the Session 5 section of BBV.



E&Y Foundation ARC: Current Liabilities and Contingencies slides

o

Skim: slides 1
-
3

o

Grasp: slides 4
-
11 (return as needed to complete exercises)

o

Optional: slides 12
-
21

o

Grasp: slides 22
-
38 (return as
needed to complete exercises)

o

Optional: slides 39
-
59

o

Grasp: slides 60
-
61



Deloitte: IFRS in Your Pocket

2011

http://www.iasplus.com/dttpubs/pocket2011.pdf

o

Optional:
IAS
37
, pages
97
-
99



E&Y: US GA
AP versus IFRS

http://www.ey.com/Publication/vwLUAssets/IFRS_vs_US_GAAP_Basics_March_2010/$FILE/IFRS_vs_US_GA
AP_Basics_Ma
rch_2010.pdf

o

Optional: pages 33
-
34



KPMG: IFRS Compared to US GAAP

http://www.kpmg.com/Global/en/IssuesAndIns
ights/ArticlesPublications/IFRS
-
GAAP
-
comparisons/Documents/IFRS
-
US
-
GAAP
-
2010
-
Overview.pdf

o

Optional: pages 88
-
91



35


II.

IFRS Standards

The following standard is posted to the Session
5

section of BBV.
R
eference it as needed to
complete the assignment.



IAS 37


Provisions, Contingent Liabilities and Contingent Assets

III.

US GAAP

Access the following guidance
using

the directions
in the Session 3 section of this document
.



FASB: ASC 450
-
20


Loss Contingencies

Proposed

Authoritative Guidance

READ

All of t
he following
documents are

posted to the Session 5 section of BBV. Reference as needed
to complete the assignment.

IV.

FASB




FASB:
Proposed Accounting Standard Update: Contingencies



Comment Letters Regarding Contingencies Accounting Standards Update

o

Comment le
tter: Contingencies ASU: ABA (legal profession feedback)

o

Comment letter: Contingencies ASU: CalPERS (user feedback)

o


Comment letter: Contingencies ASU: KPMG (Auditor feedback)

o

Comment letter: Contingencies ASU: Pfizer (Preparer feedback)

To view more comment letters, go to:

http://www.fasb.org/jsp/FASB/CommentLetter_C/CommentLetterPage&cid=1218220137090&project_id=1840
-
100

V.

IASB



IASB: Working Draft: Liabilities



IASB: Recognizing Liabilities Arising from Lawsuits



Comment Letters Regarding Measurement of Liabilities in IAS 37

36


o

Comment letter: Measuring Liabilities Arising from IAS 37: ASC
-
UK
(standard setter
feedback)

o

Comment l
etter: Measuring Liabilities Arising from IAS 37: Deloitte (Auditor
feedback)

Accounting Judgments: Part
4


View

VI.

Asset Risks and Expected Returns Scenic Route (Select menu items)

http://www.navigatingaccounting.com/video/scenic
-
asset
-
risks
-
and
-
expected
-
returns

Suggested menu items:



Introduction (0:00


0:44)



Intel analysis (0:00
-
10:30 o
nly)



Take
-
aways (0:00


5:05)

VII.

Factors Affecting Dispersion
of Measures Express Route (13 minutes)

http://www.navigatingaccounting.com/video/express
-
factors
-
drivi ng
-
dispersion
-
measures

DO

1.

E&Y Foundation ARC: Current Liabilities and Contingencies: Homework Problems

(See the Session 0
5

section of the course BBV site.)

a)

Problem 9 (Slim Drug Company)


Include your solution

to th
is problem

in
your group’s

written assignment
.

2.

General Features of
Current

US GAAP and IFRS
:

a)

Identify

what your group considers to be the most significant difference between US
GAAP and IFRS with regards to loss contingencies:



A
ssume GAAP/IFRS differences are more significant to the extent the information
companies would report about similar events or circumstances would differ and, as
a result, investors’ perceptions about the companies’ financial position or
37


performance would d
iffer. You can use other criteria for determining when
GAAP/IFRS differences are significant but, if you do so, state them.



Cite the related IFRS guidance (standard and paragraph).



Briefly explain your ranking in terms of these criteria. For example, stat
e the reasons
you would expect your first ranked difference to result in companies reporting
significantly different information for similar events or circumstances.

b)

Identify
the situation your group concludes will generally require the most judgment
when applying IAS 37.



Briefly explain the reasons for ranking this situation first.

3.

I
dentify

what your group considers to be the most significant difference between US GAAP
and I
FRS with regards to
proposed

changes in accounting for loss contingencies. Discuss the
strengths and weaknesses of both approaches. Take and defend your position on the issue.

Written Assignment

Provide your solutions to questions 1
-
3.



38


Session 6

Financi
al Instruments: Classification, Measurement and Impairment

Introduction

This session will center on a discussion lead by representatives from
the New York office of
PWCs’ Financial Instruments, Structure
d

Products, and Real Estate Group

(FSR)
. They will be
sharing insights
regarding

measuring
the fair values of
securities
associated with securitizations
and related classification and disclosure issues. These securities have been center stage during
the recent financial crisis. They are often r
eferred to as toxic assets by the media.

One of the primary goals of this session is to raise your awareness to the measurement
challenges that can arise in practice and the expertise that is needed to meet them. To this end,
we want you to get your hands

dirty in the
finance, accounting, and regulatory
complexities
associated with one of these securitizations: Mortgage Pass
-
Through Certificates, Series 2006
-
NC5, which was
sponsored

by Morgan Stanley
Capital Inc. in 2006.
We are hoping this will be a
treme
ndously valuable learning experience for all of us.

The primary goal of the
written
assignment is to ensure that you are prepared as best as
possible to participate in
the
class discussion. Our guests have prepared a PowerPoint
presentation but they are p
lanning to pose questions to you throughout
the class and to
entertain your questions. The assigned readings and questions should prepare you for this role.

As you are considering how to divide the workload, keep in mind that question 3 is by far the
most

challenging and will receive most of the weight in the grading.

Current Authoritative Guidance

READ

I.

E&Y Foundation ARC: Financial Assets slides

(See the Session 06 section of the course BBV site.

This should mostly be a review of topics covered in other
courses.
)




Skim: slides 1
-
2



Grasp: slides 3
-
33



Optional: slides
34
-
46

39




Grasp 47
-
56



Optional: slides 57
-
58



Grasp: slides 60


62



Master: slide 63



Grasp: slide 64

II.

ASC 320 and ASC 820
(
Refer to
as
ins
tructed

i n

assigned questions)

Proposed

Authoritative Guidance

READ

or VIEW

III.

E&Y: Joint Project Watch: FASB/IASB joint projects from a US GAAP perspective
:
December
201
0

http://www.ey.com/Publication/vwLUAssets/JointProjectWatch_BB2254_December2011/$FILE/JointProjec
tWatch_BB2254_Decem
ber2011.pdf



Master p
ages 2
-
4

o

This
is an excellent overview of the FASB’s and IASB’s deliberations prior to
2012.
It should

give

you the necessary background to participate in the class
discussion with our PWC guests.

IV.

KPMG: Webcast: Financial Instruments
Update, September 27, 2011:

http://www.visualwebcaster.com/VWP/P
layer/advplayer.html?id=82328&uid=5266755&g={FFE8067D
-
AEE0
-
4988
-
8B0A
-
B0DFC7594C06}&ti me=GEFFFFELFLIIFL&digest=Pp5UpVJR1YVIr7yij20bJA&ls
=



Optional

o

This is an excellent overview of the FASB’s deliberations prior to September 27,
2011 and how they compare to
related IFRS decisions in IFRS 09:



Classification and measurement (0:00


20:00 minutes)



Impairments (20:00


37:45 minutes)

V.

FASB

You will find the most recent FASB documents related to the financial instruments project at
the following URL:

40


http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FProject
UpdatePage&cid=1175801889654



Optional

VI.

IASB

IFRS 09

is posted to the Session 6 section of BBV:



Optional

PWC Presentation
on Securitizations

READ

VII.

A Securitization Primer for First Time Issuers, by Joel Telpner, Greenberg Traurig

(See the Session 06 section of the course BBV site.)



Skim
pages 1
-
4 through the “Trustee” section on page 4



Skip the accounting discussion that starts on page 4 with “How does a company remove
assets from its balance sheet for securitization purposes?” through to the start of “What
are the factors that go into ra
ting a securitization?”
For the most part, the accounting
discussed in this section
is no longer allowed

under US GAAP.



Skim the remainder of the document

Return to this document as needed when addressing the assigned questions.

VIII.

Prospectus Supplement

(See

the Session 06 section of the course BBV site.)



Master pages

S
-
1 through S
-
47



Grasp pages S
-
48 through S
-
83

Return to this document as needed when addressing the assigned questions.

DO

1.

E&Y Foundation ARC: Financial Instruments: Homework Problems

(See the

Session 06 section of the course BBV site.)

a)

Problem 2 (brief explanation)

b)

Problem 3 (no explanation needed)

c)

Problem 4 (brief explanation)

d)

Problem 5 (no explanation needed)

41


e)

Problem 6 (no explanation needed)

f)

Problem
11

(no explanation needed)

g)

Problem 16

Include your solution to th
ese

problem
s

in your group’s written assignment.

2.

The purpose of this question is to ensure you understand the key concepts discussed in

A
Securitization Primer for First Time Issuers


prior to the class discussion with our
PWC
guests.

a)

For the purpose of this question assume you are a junior member of the corporate
finance department at Bryan Health and Fitness (BHF) who has been asked to prepare a

brief

executive summary
for BHF’s executives
of

A Securitization Primer for Firs
t Time
Issuers


(not to exceed
two

page
s
, 1.5 spacing, 11 point font)
.



You should assume BHF is considering investing in collateralized debt obligations
issued by a special purpose entity (SPE) and that you are to briefly explain the
parties associated with the
SPE, the asset risks associated with the SPE, and the way
these r
isks are shared by the investors in the SPE.



You may reference Figure 1 in

A Securitization Primer for First Time Issuers


in your
memo as if it was included, but you should not include it in your executive
summary.

3.

The purpose of this question is to en
sure you are prepared to participate in the discussion
lead by the PWC guests regarding the
“P
rospectus
S
upplement


in the assigned reading.
Most of the class will center on this supplement.

A
ssume you are a junior member of the corporate finance departme
nt
at
Eagle Company
who is responsible for writing executive summaries at various dates related to the A
-
1
tranche of the securitization discussed in the supplement.

a)

For this question, you are to write an executive summary dated
December 1, 2006,
when

Eag
le Company
is considering investing in the A
-
1 tranche of the securitization.

Your memo should not exceed four pages.
You are to address the following issues in
language an intelligent executive whose understanding of securitizations is limited to
the mem
o you wrote in 2(a):

I.

Describe the deal type, structure, and risks by answering the following questions:

42




Who are the parties in the transaction?



Which parties have an economic interest in the transaction and describe their
interest?



Describe the nature of
the collateral in this transaction. What may be some of the
key characteristics of the collateral?



What are the risk factors in the structure?



What are the key differences in terms of risk between holding the A
-
1 and A
-
2
tranches?



Assume you are a holder o
f the A
-
1 tranche, what are the some of the risk
mitigating factors in this deal?

II.

Describe how
Eagle will account for an investment in the A
-
1 tranche

under US
GAAP
. For the purpose of this questio
n, assume fair values are known. B
riefly
explain
the struct
ure of
related entries at the acquisition date and at subsequent
balance sheet dates.
(See ASC 320
)

b)

For this question, you are to write an
executive summary dated December 20, 2006,
when Eagle’s executives are preparing for a meeting with
PWCs’ Financial

Instruments,
Structure
d

Products, and Real Estate
(FSR)
Group

to discuss fair
-
value measurement and
disclosure issues related to Eagle’s investment in the A
-
1 tranche
. These issues

must be
addressed to prepare the fin
ancial statements and footnotes

for the year ended
December 31, 2006.
Eagle has hired the FSR Group to help

Eagle determine the fair
value

that will be reported at this date and related disclosures. Your memo should:

I.

Briefly explain the valuation techniques permissible under US GAAP (A
SC 820
-
10
-
35:2
4
-
35
). Identify the technique you expect the FSR Group will recommend.
Identify related issues that you don’t fully understand and suggest questions the

Eagle executives might pose to the
FSR Group to
explain

these issues.

II.

Briefly explain the

valuation inputs you expect the FSR Group to recommend
and
the level in the fair value hierarchy where Eagle will likely disclose its investment in
the A
-
1 tranche

(ASC 820
-
10
-
3
6
:
55
). Identify related issues that you don’t fully
understand and suggest que
stions the Eagle executives might pose to the FSR Group
to
explain

these issues.


43


Written Assignment

Include your respo
nses to all parts of questions 1
-
3
.




44



Session 7

Leases

Introduction

Similar to revenue recognition, the FASB and IFRS have been working on a joint leasing project
that will have profound consequences for many lessors and lessees financial statements. Also
similar to revenue recognition, the Boards were considering re
-
expos
ing proposed guidance as
we were creating this assignment (in November, 2011).

Given these similarities, this assignment is very similar to the one for revenue recognition. In
particular, to keep the workload manageable, you will not be asked to analyze e
xisting leasing
standards. Still, to help you prepare for the CPA exam, we have posted E&Y Foundation leasing
slides to the Session 7 section of the course BBV site, along with related problems and solutions.

Proposed

Authoritative Guidance

READ

I.

You will

find the most recent FASB documents related to the joint leasing project with the
IFRS to at the following URL:

http:
//www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FProjectUpda
tePage&cid=900000011123

This project is expected to be completed in 2012. The Boards issued nearly identical
exposure drafts for feedback on August 17, 2010 and the
FASB received nearly 800 related
comment letters. In response, the Boards proposed several tentative modifications to the
exposure draft, which you will find at the above URL under “Summary of Decisions to Date.”

At the time we were preparing this assignm
ent, the Boards were planning to re
-
expose a
revised exposure draft for comment in the first quarter of 2012. Thus, this document may be
posted at the FASB website by the time you prepare the assignment.



Skim the most recent documents (either the revised e
xposure draft or the original
exposure draft and the Summary of Decisions to Date) prior to addressing the assigned
questions and then return to them as needed.

45


DO

1.

Write a comment letter to the FASB in response to the Board’s revision of the leasing
expos
ure draft (or to the modifications posted under Summary of Decisions to Date if the
Board has not yet posted a revision to the original exposure draft).

a)

Identify (no more than 3) features of the proposed standard you most favor and your
reasons for doing so.

b)

Identify (no more than 3) features of the proposed standard you most oppose and your
reasons for doing so.

c)

If you have recommendations not included
in the proposed standard, include them
along with supporting arguments.



46


Session 8

Income
Taxes
:

U.S. GAAP

Read

I.

FASB

Access the following guidance using the directions sent to you in a separate email.
Reference as needed to complete the assignment.



FASB: ASC 740
-
10

Income taxes


overall



As well, note ¶29 from FAS 95 immediately below



29. The reconciliation of net income of a business enterprise or change in net assets of a
not
-
for
-
profit organization to net cash flow from operating activities described in
paragraph 28 shall be provided regardless of whether the direct or indirect metho
d of
reporting net cash flow from operating activities is used. That reconciliation shall
separately report all major classes of reconciling items. For example, major classes of
deferrals of past operating cash receipts and payments and accruals of expecte
d future
operating cash receipts and payments, including at a minimum changes during the
period in receivables pertaining to operating activities, in inventory, and in payables
pertaining to operating activities, shall be separately reported. Enterprises a
re
encouraged to provide further breakdowns of those categories that they consider
meaningful. For example, changes in receivables from customers for an enterprise’s sale
of goods or services might be reported separately from changes in other operating
rec
eivables.
In addition, if the indirect method is used, amounts of interest paid (net of
amounts capitalized) and income taxes paid during the period shall be provided in
related disclosures.

DO


Answer the following questions regarding the Intel corporatio
n based on information available
in Intel’s 2010 financial statements and related notes as well as what you can glean from above
referenced authoritative sources.

a. What did Intel report as its provision for taxes on its 2010 Statement of income?

47


b. In
Note 28 Intel provides information regarding its reported provision for taxes. Specifically,
how much of the provision is referred to as current…and what does that mean in the
authoritative literature? How much of the provision is referred to as deferred…a
nd what does
that mean in the authoritative literature?

c. The current portion of the provision for taxes is not the same as cash paid for income taxes
identified as supplemental information at the bottom of Intel’s statement of cash flows. What
are some
of the reasons you think this might be true. Try to avoid casual speculation; make
affirmative, grounded arguments.

d. On page 96 of the Intel 2010 10
-
k data is provided that indicates that deferred tax assets net
of deferred tax liabilities (the net defe
rred tax position) was reduced from $939 million as of the
beginning of 2010 fiscal to $851 as of the end of the fiscal year. Yet, the deferred tax component
of the provision for taxes reported in the income statement and discussed in note 28 indicates
tha
t the deferred portion of the provision was $122…and this does not fully explain the change
in the net deferred tax position. Identify elements that could explain the unexplained change in