Accounting Disclosure Checklist Annual (12/12)

(1)

©2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

(12/12)

Prepared by Year End Date.

Purpose

The Accounting Disclosure Checklist -Annual is designed to serve as a “memory jogger” and as a means to document consideration of financial statement disclosures. As a memory jogger, this disclosure checklist does not replace the preparer’s judgment in determining necessary disclosures. Refer to applicable literature for detailed disclosure requirements.

Applicability

This disclosure checklist is useful when preparing financial statements in conformity with generally accepted accounting principles (GAAP) in the United States of America, except compiled financial statements that omit substantially all disclosures and the financial statements of the following plans/entities:

The financial statements of employee benefit plans.

The financial statements of state and local governmental entities. The financial statements of certain U.S. Government entities.

The disclosure checklist is designed to address current-year disclosure requirements. In situations where new standards or other literature replace previous literature, year disclosures made pursuant to prior-year requirements should not be changed or deleted unless explicitly required in the new standard or literature.

The disclosure checklist is designed to follow the topical structure of the FASB Accounting Standard Codification and contains much of the original Codification language to provide the user with the most relevant information available and limit the need to refer back to the actual Codification.

Certain disclosures included in the checklist are required to be disclosed, if applicable, in the financial statements of entities subject to SEC reporting requirements (including SEC Observer comments relating to EITF issues) that are prepared in conformity with GAAP pursuant to the Securities and Exchange Commission’s Proxy Rules (Regulation 14A). The Proxy Rules incorporate Regulation S-X and certain sections of Regulation S-K. Therefore, items under sections labeled “SEC Guidance” cover the applicable sections of Regulation S-X, Regulation S-K, SEC Staff Accounting Bulletins, and other SEC staff guidance. Additionally, certain content from the Financial Accounting Standards Board (FASB) is applicable only to public entities (see definition below). Items that are identified as “SEC Guidance” or as applicable to public entities are not required to be disclosed by non-SEC registrants. All other

disclosures included in the checklist (unless otherwise specifically indicated) are required to be disclosed, if applicable, in financial statements prepared in conformity with GAAP.

(2)

holders, such as when directors are to be elected, and not when shareholders are voting on a business acquisition or other transaction requiring additional financial information). The Proxy Rules do not require separate financial statements of subsidiaries not consolidated and 50 percent-or-less-owned persons (S-X, Rule 3-09), financial statements of guarantors and issuers of guaranteed securities

registered or being registered (S-X, Rule 10), financial statements of an inactive registrant (S-X, Rule 3-11), financial statements of affiliates whose securities collateralize an issue registered or being registered (S-X, Rule 3-16), or financial statement schedules (S-X, Article 12). Neither the Proxy Rules nor Form 10-K require separate financial statements of businesses acquired or to be acquired (S-X, Rule 3-05), or the pro forma financial information required by S-X, Article 11.

A public entity, for the purpose of this checklist, unless otherwise noted, is a business entity or a not-for-profit entity that meets any of the following conditions:

a. It has issued debt or equity securities or is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets).

b. It is required to file financial statements with a stock exchange.

c. It provides financial statements for the purpose of issuing any class of securities in a public market.

(3)

Section I—Literature

The checklist includes coded references to certain accounting literature. All literature listed below is available electronically in Accounting Research Online (ARO). This version of the Accounting Disclosure Checklist considers relevant information (as described in the “Purpose” on page 1) through December 12, 2012.

For interim and annual periods ending after September 15, 2009, entities should refer to applicable Accounting Standards Codification (ASC or Codification) sections when citing specific guidance in U.S. GAAP in financial statements. References to legacy standards may continue to be used when there is no Codification reference (for example, “grandfathered” guidance). (CKI 105-10-65-1)

When citing specific SEC guidance in financial statements, entities should refer to the applicable SEC rule or regulation. Codification references should not be used for SEC guidance, even in periods ending after the Codification is effective. (CKI 105-10-65-1)

The Accounting Disclosure Checklist (12/12) includes only the references to the new Codification references, where applicable.

Code Issuer Literature Considered in Checklist ASC FASB FASB Accounting Standards Codification

Portions of the FASB Accounting Standards Codification®, is copyrighted by Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and is reproduced with permission.

Note: The FASB Accounting Standards Codification includes selected SEC and SEC Staff content for reference purposes by public companies. The Codification does not replace or affect how the SEC or SEC Staff issues or updates SEC content. The FASB ASC references that follow the SEC references in this document are included for information purposes only. ASU FASB FASB Accounting Standards Update

EITF EITF EITF Abstracts (or draft ASUs) through December 12, 2012; in addition, minutes of meetings through December 12, 2012

SOP AcSEC AICPA Statements of Position PB AcSEC AICPA Practice Bulletins

AU AICPA U.S. Auditing Standards, Volume I of AICPA Professional Standards and/or the Auditing Standards of the PCAOB, where applicable

AR AICPA Statements on Standards for Accounting and Review Services, Volume II of AICPA Professional Standards

CKI KPMG Codification with KPMG Interpretation SFAS FASB Statement of Financial Accounting Standards

FRR SEC Codified Financial Reporting Releases, as contained in the 2011 SEC Rules and Regulations handbook

FIN FASB FASB Interpretations

FTB FASB FASB Technical Bulletins

(4)

SEC SEC Financial Reporting Manual; Speeches; Current Accounting and Disclosure Issues in the Division of Corporation Finance

S-X SEC Regulation S-X, as contained in the 2012 SEC Handbook: Rules and Forms for Financial Statements and Related Disclosures

S-K SEC Regulation S-K, as contained in the 2012 SEC Handbook: Rules and Forms for Financial Statements and Related Disclosures

SAB SEC Staff Accounting Bulletins ARB FASB Accounting Research Bulletin

APB FASB Accounting Principles Board Opinions TPA AICPA Technical Practice Aid

PB AcSEC AICPA Practice Bulletins

Financial statement preparers should consider disclosure requirements contained in literature issued subsequent to the most recent literature considered in the checklist.

Additional information regarding financial statement disclosures is available in the following KPMG guides on Accounting Research Online (ARO).:

KPMG Accounting and Reporting Guide – US (KARG)

Accounting for Business Combinations and Noncontrolling Interests SEC Financial Statement Requirements for Business Combinations

Business Combinations Handbook Volume III: Other Issues Related to Business Combinations Derivatives and Hedging Accounting Handbook (ASC Topic 815)

FASB Derivatives Implementation Group: Final Resolutions, Including KPMG’s Observations Auditing Fair Value Measurements Manual

FAS 157 Q&A in KARG 70, Fair Value (ASC Subtopic 820-10) (Prior to adoption of ASU 2011-04) Issues in-Depth 12-2, Questions and Interpretive Responses for Fair Value Measurement (Upon adoption

of ASU 2011-04) Current Quarterly Outlook

Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity: An Analysis of Statement No. 150 (ASC Subtopic 480-10), Distinguishing Liabilities from Equity Accounting for Income Taxes

SEC Staff Accounting Bulletin No. 104 (ASC Subtopic 605-10), Revenue Recognition

Accounting for Revenue Arrangements with Multiple Deliverables: An Analysis of Accounting Standards Codification Subtopic 605-25

Software Revenue Recognition: An Analysis of SOP 97-2 (ASC Subtopic 985-605) and Related Guidance Share-Based Payment

Guide to Accounting for Foreign Currency (ASC Topic 830)

(5)

Section II—Index to the Accounting Disclosure Checklist

A. Index to Checklist Page

Ref. Category of Financial Reporting Considerations

14 1. Subtopic 205-10: Presentation of Financial Statements—

Overall

17 2. Subtopic 205-10: Presentation of Financial Statements—

Overall—SEC Guidance

18 3. Subtopic 210-10: Balance Sheet—Overall – SEC

Guidance

23 4. Subtopic 210-20: Balance Sheet—Offsetting

25 5. Subtopic 215-10: Statement of Shareholder Equity—

25 6. Subtopic 220-10: Comprehensive Income—Overall, prior

to adoption of ASU 2011-05 and ASU 2011-12 (Note: For entities with a December 31st_{year-end, this} section is not applicable because ASU 2011-05 and ASU 2011-12 would be effective. See Section 7 below.) (Note: An entity that has no items of other comprehensive income in any period presented is not required to report comprehensive income.)

28 7. Subtopic 220-10: Comprehensive Income—Overall, after

adoption of ASU 2011-05 and ASU 2011-12

(Note: This section is applicable for an entity with a December 31st_year-end.)

(Note: An entity that has no items of other comprehensive income in any period presented is not required to report comprehensive income.)

31 8. Subtopic 225-10: Income Statement—Overall

32 9. Subtopic 225-10: Income Statement—Overall—SEC

Guidance

34 10. Subtopic 225-20: Income Statement—Extraordinary and

Unusual Items

36 11. Subtopic 225-30: Income Statement—Business

Interruption Insurance

(6)

Page

46 13. Subtopic 235-10: Notes to the Financial Statements—

Overall

48 14. Going Concern

49 15. Subtopic 250-10: Accounting Changes and Error

Corrections—Overall

54 16. Subtopic 255-10: Changing Prices—Overall

55 17. Subtopic 260-10: Earnings per Share—Overall (required

for public entities only)

58 18. Subtopic 270-10: Interim Reporting—Overall (4th

Quarter) (required for public entities only)

58 19. Subtopic 272-10: Limited Liability Companies—Overall

59 20. Subtopic 275-10: Risks and Uncertainties—Overall

63 21. Subtopic 280-10: Segment Reporting—Overall (required

for public entities only)

68 22. Subtopic 310-10: Receivables—Overall

77 23. Acquisitions, Development, and Construction (ADC)

Arrangements Subsection of Subtopic 310-10: Receivables—Overall

77 24. Subtopic 310-20: Receivables—Nonrefundable Fees and

Other Costs

78 25. Subtopic 310-30: Receivables—Loans and Debt Securities

Acquired with Deteriorated Credit Quality

79 26. Subtopic 310-40: Receivables—Troubled Debt

Restructurings by Creditors

80 27. Subtopic 320-10: Investments—Debt and Equity

Securities—Overall

88 28. Subtopic 323-10: Investments—Equity Method and Joint

Ventures—Overall

Subtopic 323-740: Investments—Equity Method and Joint Ventures—Income Taxes

91 29. Qualified Affordable Housing Project Investments

Subsection of Subtopic 323-740: Investments—Equity

Method and Joint Ventures—Income Taxes

91 30. Subtopic 325-20: Investments—Other—Cost Method

(7)

Page

92 31. Subtopic 325-30: Investments—Other—Investments in

Insurance Contracts

92 32. Life Settlement Contracts Subsection of Subtopic 325-30:

Investments—Other—Investments in Insurance Contracts

94 33. Subtopic 330-10: Inventory—Overall

96 34. Subtopic 340-10: Deferred Costs and Other Assets—

Overall — SEC Guidance

Capitalized Advertising Costs

Insurance Contracts that Do Not Transfer Insurance Risks

98 37. Subtopic 350-20: Intangibles—Goodwill and Other—

Goodwill

102 38. Subtopic 350-30: Intangibles—Goodwill and Other—

General Intangibles Other Than Goodwill

104 39. Subtopic 360-10: Property, Plant, and Equipment—

Overall

105 40. Impairment or Disposal of Long-Lived Assets Subsection

of Subtopic 360-10: Property, Plant, and Equipment— Overall

106 41. Subtopic 360-20: Property, Plant, and Equipment—Real

Estate Sales

106 42. Subtopic 205-20: Presentation of Financial Statements—

Discontinued Operations

109 43. Subtopic 405-20: Liabilities—Extinguishments of

Liabilities

109 44. Subtopic 405-30: Liabilities—Insurance-Related

Assessments

109 45. Subtopic 410-20: Asset Retirement and Environmental

Obligations—Asset Retirement Obligations

110 46. Subtopic 410-30: Asset Retirement and Environmental

Obligations—Environmental Obligations

113 47. Subtopic 420-10: Exit or Disposal Cost Obligations—

(8)

Page

115 48. Subtopic 420-10: Exit or Disposal Cost Obligations—

Overall (Restructuring)—SEC Guidance

116 49. Subtopic 440-10: Commitments—Overall

116 50. Unconditional Purchase Obligations Subsection of

Subtopic 440-10: Commitments—Overall

117 51. Subtopic 450-20: Contingencies—Loss Contingencies

120 52. Subtopic 450-30: Contingencies—Gain Contingencies

120 53. Subtopic 460-10: Guarantees—Overall

122 54. Product Warranties Subsection of Subtopic 460-10:

Guarantees—Overall

123 55. Subtopic 470-10: Debt—Overall

126 56. Subtopic 470-20: Debt—Debt with Conversion and Other

Options

127 57. Cash Conversion Subsection of Subtopic 470-20: Debt—

Debt with Conversion and Other Options

129 58. Subtopic 470-30: Debt—Participating Mortgage Loans

129 59. Subtopic 470-50: Debt—Modifications and

Extinguishments

130 60. Subtopic 470-60: Debt—Troubled Debt Restructurings by

Debtors

130 61. Subtopic 480-10: Distinguishing Liabilities from Equity—

Overall (Statement 150 and related interpretations)

134 62. Subtopic 480-10: Distinguishing Liabilities from Equity—

Overall—SEC Guidance (ASR 268, EITF D-98)

139 63. Subtopic 505-10: Equity—Overall

142 64. Subtopic 505-10: Equity—Overall—SEC Guidance

144 65. Subtopic 505-20: Equity—Stock Dividends and Stock

Splits—SEC Guidance

145 66. Subtopic 505-30: Equity—Treasury Stock

145 67. Subtopic 505-50: Equity—Equity-Based Payments to

Non-Employees

(9)

Page

147 69. Subtopic 605-15: Revenue Recognition—Products

148 70. Subtopic 605-20: Revenue Recognition—Services

149 71. Subtopic 605-25: Revenue Recognition—Multiple

Element Arrangements

150 72. Subtopic 605-28: Revenue Recognition—Milestone

Method

150 73. Subtopic 605-35: Revenue

Recognition—Construction-Type and Production-Recognition—Construction-Type Contracts

152 74. Subtopic 605-40: Revenue Recognition—Gains and

Losses

152 75. Subtopic 605-45: Revenue Recognition—Principal Agent

Considerations

154 76. Subtopic 605-50: Revenue Recognition—Customer

Payments and Incentives

154 77. Subtopic 710-10: Compensation—General—Overall

154 78. Subtopic 712-10: Compensation—Nonretirement

Postemployment Benefits—Overall

155 79. Pension and Other Postretirement Benefits Guidance

(Subtopics 715-20, 715-30, and 715-60) That Applies to

Both Public and Nonpublic Entities

Public Entities Only

Nonpublic Entities Only

166 82. Medicare Prescription Drug, Improvement, and

Modernization Act Subsection of Subtopic 715-60: Compensation—Retirement Benefits—Defined Benefit Plans—Other Postretirement

167 83. Subtopic 715-70: Compensation—Retirement Benefits—

Defined Contribution Plans

167 84. Subtopic 715-80: Compensation—Retirement Benefits—

(10)

Page

171 85. Subtopic 718-10: Compensation—Stock Compensation—

Overall

Employee Stock Ownership Plans

179 88. Claims-Made Contracts Subsection of Subtopic 720-20:

Other Expenses—Insurance Costs

180 89. Subtopic 720-35: Other Expenses—Advertising Costs

180 90. Subtopic 720-50: Other Expenses—Fees Paid to the

Federal Government by Pharmaceutical Manufacturers

180 91. Subtopic 730-10: Research and Development—Overall

180 92. Subtopic 730-20: Research and Development—Research

and Development Arrangements

181 93. Income Taxes (Subtopics 740-10, 740-20, and 740-30)

189 94. Business Combinations (Subtopics 805-10, 805-20, and

805-30)

197 95. Transactions Between Entities Under Common Control

Subsection of Subtopic 805-50: Business Combinations— Related Issues

198 96. New Basis of Accounting (Pushdown) Subsection of

Subtopic 805-50: Business Combinations—Related

Issues—SEC Guidance

198 97. Subtopic 808-10: Collaborative Arrangements—Overall

199 98. Subtopic 810-10: Consolidation—Overall

205 99. Variable Interest Entities Subsection of Subtopic 810-10:

Consolidation—Overall

209 100. Subtopic 815-10: Derivatives and Hedging—Overall 218 101. Subtopic 815-15: Derivatives and Hedging—Embedded

Derivatives

219 102. Subtopic 815-25: Derivatives and Hedging—Fair Value

Hedging

220 103. Subtopic 815-30: Derivatives and Hedging—Cash Flow

(11)

Page

221 104. Subtopic 815-35: Derivatives and Hedging—Net

Investment Hedges

221 105. Subtopic 815-40: Derivatives and Hedging—Contracts in

Entity’s Own Equity

223 106. Subtopic 820-10: Fair Value Measurements and

Disclosures—Overall prior to the adoption of ASU 04

(Note: For entities with a December 31st_{year-end, this} section is not applicable because ASU 2011-04 would be effective. See Section 107 below.)

231 107. Subtopic 820-10: Fair Value Measurements and Disclosures—Overall, after the adoption of ASU 04

(Note: This section is applicable for an entity with a December 31st_year-end.)

237 108. Subtopic 825-10: Financial Instruments—Overall (Note: The disclosure guidance in this Subsection applies to all entities but is optional for an entity that meets all of the following criteria: (a) the entity is a nonpublic entity, (b) the entity’s total assets are less than $100 million on the date of the financial statements, and (c) the entity has no instrument that, in whole or in part, is accounted for as a derivative instrument under Topic 815 other than commitments related to the origination of mortgage loans to be held for sale during the reporting period.)

242 109. Fair Value Option Subsection of Subtopic 825-10:

Financial Instruments—Overall

246 110. Subtopic 825-20: Financial Instruments—Registration

Payment Arrangements

247 111. Subtopic 830-20: Foreign Currency Matters—Foreign Currency Transactions; Subtopic 830-740: Foreign Currency Matters—Income Taxes

248 112. Subtopic 830-30: Foreign Currency Matters—Translation

of Financial Statements

249 113. Subtopic 835-20: Interest—Capitalization of Interest 249 114. Lessees and Real Estate Subsections of Topic 840:

(12)

Page

252 115. Lessors Subsections of Topic 840: Leases 255 116. Subtopic 845-10: Nonmonetary Transactions—Overall 255 117. Purchase and Sales of Inventory Subsection of Subtopic

845-10: Nonmonetary Transactions—Overall

255 118. Subtopic 850-10: Related Party Disclosures—Overall 257 119. Subtopic 852-10: Reorganizations—Overall 260 120. Subtopic 852-20:

Reorganizations

260 121. Subtopic 855-10: Subsequent Events—Overall 262 122. Subtopic 860-10: Transfers and Servicing—Overall 264 123. Subtopic 860-20: Transfers and Servicing—Sales of

Financial Assets

268 124. Subtopic 860-30: Transfers and Servicing—Secured

Borrowing and Collateral

268 125. Subtopic 860-50: Transfers and Servicing—Servicing

(13)

B. Index to Specialized Checklists

The following specialized checklists address certain additional disclosures for selected specialized industries and supplement this Accounting Disclosure Checklist (except for Accounting Disclosure Checklist – Employee Benefit Plans, which substitutes for this checklist)..

Form

Accounting Disclosure Checklist – Broker/Dealer Accounting Disclosure Checklist – Depository and Lending

Institutions

Accounting Disclosure Checklist – Health Care

Note: ASU 2012-01 clarifies for continuing care retirement communities amends the accounting and reporting for refundable advance fees. Although the ASU does not contain additional disclosure requirements,the transition disclosures in paragraph

250-10-50-1 (in this checklist) are required.

Accounting Disclosure Checklist – Higher Education, Research, and

Other Not-for-Profits (HERON)

Accounting Disclosure Checklist – Insurance Companies Accounting Disclosure Checklist – Investment Companies Accounting Disclosure Checklist – Management’s Discussion &

Analysis

Accounting Disclosure Checklist – Public Utilities Accounting Disclosure Checklist – Entities with Oil and Gas

Producing Activities

For other specialized industries, refer to Section IV of this disclosure checklist.

(14)

Section III—Accounting Disclosure Checklist

1 Subtopic 205-10: Presentation of Financial Statements–Overall

Note: Natural disasters such as Hurricane Sandy may create a number of issues for affected entities related to:

• Involuntary conversions; • Impairment of long-lived assets;

• Impairment of intangible assets and goodwill; • Subsequent events;

• Receivables, loans, and other financial instruments; • Recognition of non-impairment losses and costs; • Insurance policies;

• Financial statement classification of losses and insurance recoveries; and • Other disclosures

For disclosure guidance related to natural disasters, refer to the “KPMG and Other Guidance” subsection of ASC Subtopics 205-10 and 225-20 (in this checklist). Additionally, see FASB ASC Subtopic 410-30 for more information about the disclosure implications of natural disasters.

Presentation

Note: See paragraphs 210-10-45-1 through 210-10-45-12 for guidance on classifying assets and liabilities as current and non-current in a classified balance sheet. > Comparative Financial Statements

205-10-45-2. In any one year it is ordinarily desirable that the statement of financial position, the income statement, and the statement of changes in equity be presented for one or more preceding years, as well as for the current year. 205-10-45-3. Prior-year figures shown for comparative purposes shall in fact be

comparable with those shown for the most recent period. Any exceptions to comparability shall be clearly brought out as described in Topic 250. 205-10-45-4. Notes to financial statements, explanations, and accountants’ reports

containing qualifications that appeared on the statements for the preceding years shall be repeated, or at least referred to, in the comparative statements to the extent that they continue to be of significance.

Disclosure

215-10-50-1. For disclosure guidance on items that comprise shareholder’s equity, see Topic 505, Equity.

(15)

205-10-50-1. If, because of reclassifications or for other reasons, changes have occurred in the manner of or basis for presenting corresponding items for two or more periods, information shall be furnished that will explain the change.

KPMG and Other Guidance

_{1 Each page of the financial statements should be captioned, “See accompanying} notes to (consolidated) financial statements.”

_{2 AU 504.06; AU 551.13; AU 558.02–.03. Each page of unaudited financial} statements and/or unaudited supplementary information should be captioned, “Unaudited—see accompanying accountants’ report”.

_{3 AR 100.40. For non-public entities, each page of compiled or reviewed financial} statements and supplementary information should be captioned, “See accompanying review (or compilation) report of ABC LLP” or “See accompanying accountants’ review (or compilation) report”.

FASB ASC Subtopic 225-20, Income Statement—Extraordinary and Unusual Items, defines an extraordinary event as an event that is both unusual in nature and nonrecurring. The magnitude of loss from the event is not a factor for determining whether it is extraordinary. A natural disaster that is reasonably expected to re-occur would not meet both conditions and would not be classified as an extraordinary event. For example, a hurricane in an area that is susceptible to hurricanes is not an extraordinary event.

4 Disclosure Implications of Natural Disasters: Accounting implications of natural disasters could include, among other things, involuntary conversions of

nonmonetary assets; impairments of long-lived assets, intangible assets, and/or goodwill; valuation of receivables, loans, and other financial instruments; and recognition of insurance recoveries.

ASC paragraph 225-20-45-16 provides presentation and disclosure requirements for events that are considered to be unusual or infrequent. ASC paragraph 225-30-50-1 requires entities to disclose (a) the nature of the event resulting in the business interruption losses, (b) the aggregate amount of business interruption insurance recoveries recognized during the period, and (c) the line item(s) in the statement of operations in which those recoveries are classified. Additionally, entities should consider the disclosure requirements of the applicable literature.

(16)

SEC registrants also should consider the disclosure requirements of Item 303 (Management's Discussion and Analysis) of Regulations S-K. This includes discussion of events that impact or create uncertainties in liquidity, material commitments for capital resources, material changes in capital resources, impact to results of operations including material changes to amount of reported income from continuing operations (specific components of revenue and expense), material changes in the relationship between costs and revenues (including known future increases). For example, entities may have uninsured losses that impact capital resources, plant shut-downs that impact results of operations, and uncertainties regarding plant operations due to limitations in the power supply. To the extent that an entity has significant operations that were impacted, it may be appropriate to summarize information about operations in Japan.

5 Staff Audit Practice Alert No. 9, Assessing and Responding to Risk in the Current Economic Environment, updates Practice Alert No. 3, Audit Considerations in the Current Economic Environment, released in December 2008. Practice Alert No. 9 highlights critical matters related to the current economic environment that might affect the risk of material misstatement and, therefore, require additional audit attention. Many of the risks in Practice Alert No. 3 continue to be relevant. Practice Alert No. 9 updates references to the PCAOB standards about the auditor’s assessment of, and response to, risk, that were superseded when the PCAOB adopted eight new risk assessment standards (PCAOB Auditing Standards Nos. 8-15) in 2010.

The Practice Alert addresses considering the effect of economic conditions on the audit, auditing fair value measurements and estimates, the auditor’s consideration of a company’s ability to continue as a going concern, and auditing financial statement disclosures.

The PCAOB chairman stated, “today’s volatile economic environment may affect companies’ operations and financial reporting, which has implications for audits. The alert reminds auditors of their responsibilities under these conditions.” 6 Many regions and entities around the world continue to be affected by the slow

economic recovery and volatile markets. The economic environment also contributes to sovereign debt issues in Europe, including related government austerity programs. These issues may affect accounting and disclosures related to investments, foreign operations, and other areas.

As the crisis in the eurozone continues to evolve, there is uncertainty about whether one or more countries will discontinue using the euro as their currency. There is speculation that a withdrawal from the eurozone could be sudden and without warning. Financial statement preparers should understand the

implications of one or more countries exiting the eurozone. Some of the items that may have accounting and/or disclosure implications include:

• Accounting for a change in functional currency • Potential bank holiday

(17)

• Impairment of assets • Disclosure implications

• Disposals of foreign operations and CTA considerations

Note: Subtopic 205-20: Presentation of Financial Statements—Discontinued

Operations appears immediately after Subtopic 360-20. See Section 42 (in this checklist).

2 Subtopic 205-10: Presentation of Financial Statements–Overall—SEC Guidance > Form and Order of Financial Statements

> > Presentation of Amounts

_{1 Regulation S-X, Rule 3-01. Present balance sheets as of the end of the two most} recent fiscal years.

_{2 Regulation S-X, Rule 3-02. Present statements of income and cash flows for each of} the three most recent fiscal years.

_{3 Regulation S-X, Rule 3-04. Present statements of stockholders’ equity for each} period an income statement is required to be filed (alternatively, as a note to the financial statements).

4 Regulation S-X Rule 4-01(b).

a. All money amounts required to be shown in financial statements may be expressed in whole dollars or multiples thereof, as appropriate: provided, that, when stated in other than whole dollars, an indication to that effect is inserted immediately beneath the caption of the statement or schedule, at the top of the money columns, or at an appropriate point in narrative material.

b. Negative amounts (red figures) shall be shown in a manner which clearly distinguishes the negative attribute.

5 SAB Topic 11.E. Financial statements and other data read consistently from left to right in same chronological order.

> Supplemental Schedules

6 Regulation S-X Rule 5-04(c), for requirements for Supplemental Schedules I – V. _{a. Schedule I—Condensed Financial Information of Registrant as of the date and}

for the periods specified by S-X, Rules 3-01 and 3-02, when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recent fiscal year.

_{b. Schedule II—Valuation and Qualifying Accounts for each period for which an} audited income statement is required.

(18)

_{d. Schedule IV—Mortgage Loans on Real Estate as of the date and for the periods} specified in the schedule.

_{e. Schedule V—Supplemental Information Concerning Property-Casualty} Insurance Operations Registrant as of the date and for the periods specified by S-X, Rules 3-01 and 3-02 when a registrant, its subsidiaries, or 50 percent-or-less-owned equity-basis investees have liabilities for property-casualty insurance claims.

_{f. The information required in the above schedules may be furnished in a single} schedule, the financial statements, or a footnote. If the registrant information is shown separately, the information is properly summarized, and the statements are not unclear or confusing.

3 Subtopic 210-10: Balance Sheet—Overall—SEC Guidance Regulation S-X Rule 5-02, Balance Sheets. ASSETS AND OTHER DEBITS

Current Assets, when appropriate 1 Cash and cash items.

_{a. Pledges or restrictions, including contractual compensating balances.}

1 FRR 203.02.c.iv. In general, compensating balance arrangements should only be disclosed for the latest fiscal year and later interim period for which financial statements are presented. If the terms of arrangements require balance sheet segregation, however, this should be reflected in all balance sheets presented. In addition, if the change in the arrangements from one period to the next is so great as to constitute a fact of unusual significance to the investor in appraising the company, the change should be disclosed. _{b. Separate disclosure of cash or cash items restricted as to withdrawal or use.} _{c. Describe provisions of restrictions in the notes to financial statements.} _{d. Describe in the notes to financial statements arrangements and amounts, if}

determinable, of compensating balance arrangements that exist but are not agreements that legally restrict the use of cash amounts.

_{e. Describe in the notes to financial statements compensating balances maintained} under an agreement to ensure future credit availability, including amount and terms.

2 Marketable securities. The accounting and disclosure requirements for current marketable equity securities are specified by generally accepted accounting principles. With respect to all other current marketable securities, state,

parenthetically or otherwise, the basis of determining the aggregate amount shown in the balance sheet, along with the alternatives of the aggregate cost or the aggregate market value at the balance sheet date.

(19)

a. State separately amounts receivable from 1 customers (trade);

2 related parties;

3 underwriters, promoters, and employees (other than related parties) which arose in other than the ordinary course of business; and

4 others

b. If the aggregate amount of notes receivable exceeds 10 percent of the aggregate amount of receivables, the above information shall be set forth separately, in the balance sheet or in a note thereto, for accounts receivable and notes receivable. c. If receivables include amounts due under long-term contracts, state separately in

the balance sheet or in a note to the financial statements the following amounts: 1 Balances billed but not paid by customers under retainage provisions in

contracts.

2 Amounts representing the recognized sales value of performance and such amounts that had not been billed and were not billable to customers at the date of the balance sheet.

Include a general description of the prerequisites for billing.

3 Billed or unbilled amounts representing claims or other similar items

subject to uncertainty concerning their determination or ultimate realization. Include a description of the nature and status of the principal items

comprising such amount.

4 With respect to (1) through (3) above, also state the amounts included in each item which are expected to be collected after one year. Also state, by year, if practicable, when the amounts of retainage (see (1) above) are expected to be collected.

4 Allowances for doubtful accounts and notes receivable. The amount is to be set forth separately in the balance sheet or in a note thereto.

5 Unearned income. 6 Inventories.

a. State separately in the balance sheet or in a note thereto, if practicable, the amounts of major classes of inventory such as:

1 Finished goods;

2 inventoried costs relating to long-term contracts or programs; 3 work in process (see § 210.4–05);

4 raw materials; and 5 supplies.

(20)

the excess of such total amount over the aggregate LIFO amount shown as a deduction to arrive at the amount of the LIFO inventory.

b. The basis of determining the amounts shall be stated.

If cost is used to determine any portion of the inventory amounts, the

description of this method shall include the nature of the cost elements included in inventory. Elements of cost include, among other items, retained costs representing the excess of manufacturing or production costs over the amounts charged to cost of sales or delivered or in-process units, initial tooling or other deferred startup costs, or general and administrative costs.

The method by which amounts are removed from inventory (e. g., average cost, first-in, first-out, last-in, first-out, estimated average cost per unit) shall be described. If the estimated average cost per unit is used as a basis to determine amounts removed from inventory under a total program or similar basis of accounting, the principal assumptions (including, where meaningful, the aggregate number of units expected to be delivered under the program, the number of units delivered to date and the number of units on order) shall be disclosed.

If any general and administrative costs are charged to inventory, state in a note to the financial statements the aggregate amount of the general and

administrative costs incurred in each period and the actual or estimated amount remaining in inventory at the date of each balance sheet.

c. If the LIFO inventory method is used, the excess of replacement or current cost over stated LIFO value shall, if material, be stated parenthetically or in a note to the financial statements.

d. For all long-term contracts or programs, the following information, if applicable, shall be stated in a note to the financial statements:

1. The aggregate amount of manufacturing or production costs and any related deferred costs (e. g., initial tooling costs) which exceeds the aggregate estimated cost of all in-process and delivered units on the basis of the estimated average cost of all units expected to be produced under long-term contracts and programs not yet complete, as well as that portion of such amount which would not be absorbed in cost of sales based on existing firm orders at the latest balance sheet date. In addition, if practicable, disclose the amount of deferred costs by type of cost (e. g., initial tooling, deferred production, etc.)

2. The aggregate amount representing claims or other similar items subject to uncertainty concerning their determination or ultimate realization, and include a description of the nature and status of the principal items comprising such aggregate amount.

3. The amount of progress payments netted against inventory at the date of the balance sheet.

7 Prepaid expenses.

(21)

9 Total current assets, when appropriate. 10 Securities of related parties.

11 Indebtedness of related parties—not current.

12 Other investments. The accounting and disclosure requirements for non-current marketable equity securities are specified by generally accepted accounting principles. With respect to other security investments and any other investment, state, parenthetically or otherwise, the basis of determining the aggregate amounts shown in the balance sheet, along with the alternate of the aggregate cost or aggregate market value at the balance sheet date.

13 Property, plant and equipment.

a. State the basis of determining the amounts.

b. Tangible and intangible utility plant of a public utility company shall be segregated so as to show separately the original cost, plant acquisition adjustments, and plant adjustments, as required by the system of accounts prescribed by the applicable regulatory authorities. This rule shall not be applicable in respect to companies which are not required to make such a classification.

14 Accumulated depreciation, depletion, and amortization of property, plant and equipment. The amount is to be set forth separately in the balance sheet or in a note thereto.

15 Intangible assets. State separately each class of such assets which is in excess of five percent of the total assets, along with the basis of determining the respective

amounts. Any significant addition or deletion shall be explained in a note.

16 Accumulated depreciation and amortization of intangible assets. The amount is to be set forth separately in the balance sheet or in a note thereto.

17 Other assets. State separately, in the balance sheet or in a note thereto, any other item not properly classed in one of the preceding asset captions which is in excess of five percent to total assets. Any significant addition or deletion should be explained in a note. With respect to any significant deferred charge, state the policy for deferral and amortization.

18 Total assets. LIABILITIES

Current Liabilities, when appropriate 19 Accounts and notes payable.

a. State separately amounts payable to: 1 banks for borrowings;

2 factors or other financial institutions for borrowings; 3 holders of commercial paper;

(22)

5 related parties;

6 underwriters, promoters, and employees (other than related parties); and

7 others.

Amounts applicable to (1), (2) and (3) may be stated separately in the balance sheet or in a note thereto.

b. The amount and terms of unused lines of credit for short-term financing shall be disclosed, if significant, in the notes to the financial statements.

1 Disclose commitment fees and conditions under which lines of credit may be withdrawn.

2 Disclose weighted-average interest rate on short-term borrowings outstanding as of the date of each balance sheet.

3 Separately identify the amounts that support a commercial paper or similar borrowing arrangement.

20 Other current liabilities. State separately, in the balance sheet or in a note thereto, any item in excess of 5 percent of total current liabilities.

21 Total current liabilities, when appropriate. Long-Term Debt.

22 Bonds, mortgages and other long-term debt, including capitalized leases.

a. State separately, in the balance sheet or in a note thereto, each issue or type of obligation and such information as will indicate:

1 The general character of each type of debt including the rate of interest; 2 The date of maturity, or, if maturing serially, a brief indication of the serial

maturities, such as “maturing serially from 2000 to 2015”;

3 if the payment of principal or interest is contingent, an appropriate indication of such contingency;

4 a brief indication of priority; and 5 if convertible, the basis.

For amounts owed to related parties see Topic 850 (in this checklist). b. The amount and terms (including commitment fees and the conditions under

which commitments may be withdrawn) of unused commitments for long-term financing arrangements that would be disclosed under this rule if used shall be disclosed in the notes to the financial statements if significant.

23 Indebtedness to related parties—noncurrent.

24 Other liabilities. State separately, in the balance sheet or in a note thereto, any item not properly classified in one of the preceding liability captions which is in excess of 5 percent of total liabilities.

25 Commitments and contingent liabilities.

(23)

> Current Liabilities Other Than Income Taxes

_{27 SEC-2003 AICPA National Conference on Current SEC Developments. If an} enterprise structures an arrangement in which another party, typically a financial institution or one of its affiliates, pays its accounts payable in return for a promise to pay the other party at a future date, the liability should be recorded as a borrowing on which interest is recognized, not as accounts payable.

4 Subtopic 210-20: Balance Sheet--Offsetting

Note: On December 16, 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities. For more information, see the pending content later in this section.

Presentation >Right of Setoff

210-20-45-1. A right of setoff exists when all of the following conditions are met: a. Each of two parties owes the other determinable amounts.

b. The reporting party has the right to set off the amount owed with the amount owed by the other party.

c. The reporting party intends to set off. d. The right of setoff is enforceable at law.

210-20-45-2. A debtor having a valid right of setoff may offset the related asset and liability and report the net amount.

> Offsetting Securities Against Taxes Payable

_{210-20-45-6. The offset of cash or other assets against the tax liability or other amounts} owing to governmental bodies shall not be acceptable except in the circumstances described in paragraph 210-20-45-7.

> Assurance that Right of Setoff Is Enforceable in a Bankruptcy

210-20-45-8. State laws about the right of setoff may provide results different from those normally provided by contract or as a matter of common law. Similarly, the U.S. Bankruptcy Code imposes restrictions on or prohibitions against the right of setoff in bankruptcy under certain circumstances. Legal constraints should be considered to determine whether the right of setoff is enforceable.

210-20-45-9. The phrase enforceable at law encompasses the idea that the right of setoff should be upheld in bankruptcy. The nature of support required for an assertion in financial statements that a right of setoff is enforceable at law is subject to a cost-benefit constraint and depends on facts and circumstances. All of the information that is available, either supporting or questioning enforceability, should be considered. Offsetting is appropriate only if the available evidence, both positive and negative, indicates that there is reasonable assurance that the right of setoff would be upheld in bankruptcy.

(24)

Note: On December 16, 2011 the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities, in conjunction with the IASB’s issuance of amendments to Disclosures—Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7). While the Boards retained the existing offsetting models under U.S. GAAP and IFRS, the new standards require disclosures to allow investors to better compare financial statements prepared under U.S. GAAP with financial statements prepared under IFRS. The new standards are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. Retrospective application is required. An ASU to amend the scope of ASU No. 2011-11 to clarify that the disclosure requirements of the ASU are limited to derivatives, repurchase and reverse purchase agreements, and securities borrowing and lending agreements that are either offset in the statement of financial position or subject to master netting arrangements or similar agreements is expected in early 2013.

Disclosure General

> Offsetting of Derivatives, Financial Assets, and Financial Liabilities

210-20-50-1. The disclosure requirements in paragraphs 210-20-50-2 through 50-5 apply to both of the following:

a. Recognized financial instruments and derivative instruments that are offset in accordance with either Section 210-20-45 or Section 815-10-45.

b. Recognized financial instruments and derivative instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45.

210-20-50-2. An entity shall disclose information to enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on its financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities that are in the scope of the preceding paragraph.

210-20-50-3. To meet the objective in the preceding paragraph, an entity shall disclose at the end of the reporting period the following quantitative information

separately for assets and liabilities that are within the scope of paragraph 210-20-50-1:

a. The gross amounts of those recognized assets and those recognized liabilities

b. The amounts offset in accordance with the guidance in Sections 210-20-45 and 815-10-45 to determine the net amounts presented in the statement of financial position

c. The net amounts presented in the statement of financial position d. The amounts subject to an enforceable master netting arrangement or

similar agreement not otherwise included in (b):

(25)

i. Management makes an accounting policy election not to offset. ii. Do not meet some or all of the guidance in either Section

210-20-45 or Section 815-10-45.

2. The amounts related to financial collateral (including cash collateral).

e. The net amount after deducting the amounts in (d) from the amounts in (c). 210-20-50-4. The information required by the preceding paragraph shall be presented in

a tabular format, separately for assets and liabilities, unless another format is more appropriate. The total amount disclosed in accordance with paragraph 210-20-50-3(d) for an instrument shall not exceed the amount disclosed in accordance with paragraph 210-20-50-3(c) for that instrument.

210-20-50-5. An entity shall provide a description of the rights of setoff associated with an entity’s recognized assets and recognized liabilities subject to an enforceable master netting arrangement or similar agreement disclosed in accordance with paragraph 210-20-50-3(d), including the nature of those rights.

_{210-20-50-6. If the information required by paragraphs 210-20-50-1 through 50-5 is} disclosed in more than a single note to the financial statements, an entity shall cross-reference between those notes.

5 Subtopic 215-10: Statement of Shareholder Equity—Overall—SEC Guidance > Changes in Each Caption of Other Stockholders' Equity

1 Regulation S-X Rule 3-04. The information in items (a) – (c) below may be presented in the balance sheet, as a separate statement, or in the footnotes: a. Present an analysis of the changes in each caption of stockholders’ equity and

noncontrolling interests presented in the balance sheet that reconciles the beginning balance to the ending balance for each period that an income statement is required with all significant reconciling items described by appropriate captions with contributions from and distribution to owners shown separately.

b. State separately the adjustments to the balance at the beginning of the earliest period presented for items which were retroactively applied to periods prior to that period.

c. State the amount of dividends per share and in the aggregate for each class of shares.

6 Subtopic 220-10: Comprehensive Income—Overall, prior to adoption of ASU 2011-05 and ASU 2011-12 (Note: An entity that has no items of other comprehensive income in any period

presented is not required to report comprehensive income.)

Note: For entities with a December 31st year-end, this section is not applicable because ASU 2011-05 and ASU 2011-12 would be effective. See Section 7 below. Note: The content in this Subtopic has not been updated for ASU No. 2011-05,

(26)

GAAP to present other comprehensive income in the statement of changes in equity.

ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other

Comprehensive Income in Accounting Standards Update No. 2011-05, defers the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income. ASU 2011-12 does not change the other requirements of ASU 2011-05. Entities are still required to present

reclassification adjustments within other comprehensive income either on the face of the statement that reports other comprehensive income or in the notes to the financial statements. The requirement to present comprehensive income in either a single continuous statement or two consecutive statements remains for both annual and interim reporting. The deferral is intended to be temporary until the Board reconsiders the operational concerns and needs of financial statement users. A final ASU on presentation and disclosure of reclassification adjustments is expected in early 2013.

For a public entity, these ASUs are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For a nonpublic entity, the ASUs are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted.

See the next section for entities that have adopted ASU 05 and ASU 2011-12.

Presentation

> Reporting Comprehensive Income

220-10-45-4. This Subtopic does not require that an entity use the terms comprehensive income or other comprehensive income in its financial statements, even though those terms are used throughout this Subtopic.

220-10-45-5. All components of comprehensive income shall be reported in the

financial statements in the period in which they are recognized. A total amount for comprehensive income shall be displayed in the financial statement where the components of other comprehensive income are reported. Paragraph

810-10-50-1A(a)H (in this checklist) states that, if an entity has an outstanding noncontrolling

interest (minority interest), amounts for both comprehensive income attributable to the parent and comprehensive income attributable to the noncontrolling interest in a less-than-wholly-owned subsidiary are reported on the face of the financial statement in which comprehensive income is presented in addition to presenting consolidated comprehensive income.

>> Alternative Formats for Reporting Comprehensive Income

(27)

comprehensive income being reported below the total for net income in a statement that reports results of operations, in a separate statement of

comprehensive income that begins with net income, and in a statement of changes in equity.

_{220-10-45-9. Although this Subtopic does not require a specific format for displaying} comprehensive income and its components, an entity is encouraged to display the components of other comprehensive income and total comprehensive income below the total for net income in a statement that reports results of operations or in a separate statement of comprehensive income that begins with net income. 220-10-45-10. Displaying comprehensive income in an income-statement-type format is

superior to displaying it in a statement of changes in equity.

220-10-45-11. An entity may display components of other comprehensive income either net of related tax effects or before related tax effects with one amount shown for the aggregate income tax expense or benefit related to the total of other

comprehensive income items.

220-10-45-12. An entity shall disclose the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, either on the face of the statement in which those components are displayed or in notes to the financial statements.

>> Reporting Other Comprehensive Income in the Equity Section of a Statement of Financial Position

220-10-45-14. The total of other comprehensive income for a period shall be transferred to a component of equity that is displayed separately from retained earnings and additional paid-in capital in a statement of financial position at the end of an accounting period. A descriptive title such as accumulated other comprehensive income shall be used for that component of equity.

An entity shall disclose accumulated balances for each classification in that separate component of equity on the face of a statement of financial position, in a statement of changes in equity, or in notes to the financial statements. The

classifications shall correspond to classifications used elsewhere in the same set of financial statements for components of other comprehensive income.

> Reclassification Adjustments

220-10-45-17. An entity may display reclassification adjustments (See ASC paragraphs 220-10-45-15 and 45-16) on the face of the financial statement in which

(28)

of the calculation of reclassification adjustments for available-for-sale securities is included in Example 2 (see paragraph 220-10-55-18HHH).

7 Subtopic 220-10: Comprehensive Income—Overall, after adoption of ASU 2011-05 and ASU 2011-12 (Note: An entity that has no items of other comprehensive income in any period presented is not required to report comprehensive income.)

Note: This section is applicable for an entity with a December 31st year-end. Note: The content in this Subtopic has been updated for ASU No. 2011-05,

Presentation of Comprehensive Income. Under this ASU, an entity may present the components of net income and comprehensive income in either one or two consecutive financial statements. The ASU eliminates the option in U.S. GAAP to present other comprehensive income in the statement of changes in equity.

ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in

Accounting Standards Update No. 2011-05, defers the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income. ASU 2011-12 does not change the other requirements of ASU 2011-05. Entities are still required to present reclassification adjustments within other comprehensive income either on the face of the statement that reports other comprehensive income or in the notes to the financial statements. The requirement to present comprehensive income in either a single continuous statement or two consecutive statements remains for both annual and interim reporting. The deferral is intended to be temporary until the Board reconsiders the operational concerns and needs of financial statement users. A final ASU on presentation and disclosure of reclassification adjustments is expected in early 2013. An entity should apply the ASUs retrospectively. For a public entity, the ASUs are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For a nonpublic entity, the ASUs are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted.

Note: Although there are no specific transition disclosures, we would expect entities to disclose that they have changed their presentation of comprehensive income.

The following guidance applies for entities that have adopted ASU 2011-05 and ASU 2011-12.

Presentation

> Reporting Comprehensive Income

_{220-10-45-1. This Subtopic requires an entity to report comprehensive income either in} a single continuous financial statement or in two separate but consecutive

financial statements.