Preparers of financial statements for nongovernmental entities are rquired to follow the accounting guidance contained in FASB Accounting Standards Codification 855, Subsequent Events (FASB ASC 855) and the accounting guidance contained in AU section 560 would no longer be applicable to audits of nongovernmental or state and local governmental entities. 

FASB ASC 855 requires that the auditor’s report date should not be earlier than the date on which the auditor obtained sufficient appropriate audit evidence to support their opinion (i.e. the date to which subsequent events were evaluated). Therefore, the auditor’s report date cannot be earlier than management’s subsequent event footnote date.

In summation: the specific management representations relating to information concerning subsequent events should be made as of the date of the auditor’s report.

Has your company considered using IFRS?  The IASB has now issued IFRS for Small and Medium Sized Entities (“IFRS for SMEs”) which is a modification and simplification of full IFRS and private companies now have the option of preparing their financial statements in accordance with US GAAP, OCBOA, full IFRS or IFRS for SMEs.  IFRS and IFRS for SMEs are not OCBOA; rather, they are GAAP.  The final version of IFRS for SMEs, in total, is a mere 230 pages in length!

IFRS for SMEs applies to private companies or those that do have public accountability (i.e. companies that file, or are in the process of filing, with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market; or it holds assets in a fiduciary capacity for a broad group of outsiders such as banks, insurance companies, brokers and dealers in securities, pension and mutual funds).

For private companies that are owned by a foreign parent, have a significant foreign investor, supplier or venture partner, IFRS for SMEs is an alternative to the more complicated and voluminous US GAAP.  For such companies using a consistent global financial accounting and reporting standard will increase comparability and improve efficiencies of conducting business with their foreign counterpart.

The key differences in IFRS versus US GAAP:

• Disclosures are simplified in a number of areas including pensions, leases and financial instruments
• LIFO is prohibited
• Goodwill and indefinite life intangible assets are amortized over a period not exceeding ten years
• Depreciation is based on a components approach
• A simplified temporary difference approach to income tax accounting
• Reversal of impairment charges, if certain criteria are met, is allowed
• Accounting for financial assets and liabilities makes greater use of cost

 Key challenges if your company decides to use IFRS for SMEs:

• Understanding the differences between IFRS for SMEs and US GAAP
• The willingness of financial statement users to accept financial statements prepared under IFRS for SMEs
• Working with and accepting a more principles-based set of accounting standards compared to the more rules-based US GAAP
• The impact on taxes and tax planning strategies
• The impact on financial reporting metrics

 The final IFRS for SMEs can be obtained free, after registering, from the IASB website: http://www.iasb.org/IFRS+for+SMEs/IFRS+for+SMEs.htm

 Additional information about IFRS for SMEs and about activities of IASB can be found at www.ifrs.com