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The Corp Fin accounting Staff has posted an illustrative “Dear CFO” letter regarding the accounting and disclosure for repurchase agreements, securities lending transactions or other transactions involving the transfer of financial assets with an obligation to repurchase the transferred assets.

The Staff is asking whether any of these sorts of transactions have been accounted for as sales as opposed to collateralized financings. In this regard, the Staff is looking for three years of historical data regarding these agreements, and additional detail supporting the sale accounting determination. The Staff is also seeking a justification as to why more disclosure was not provided in MD&A when these transactions were accounted for as sales.

As this Dow Jones Newswires story notes, the letter is being sent to nearly two dozen large financial and insurance companies, apparently reflecting concerns driven by recent revelations that Lehman may have used repurchase agreements to mask $50 billion in debt.

PCAOB Proposes Standard for Auditor Communications with the Audit Committee

Yesterday, the PCAOB proposed for comment a new standard on communications with audit committees, as well as some related amendments to interim standards. The new standard would replace interim standards AU sec. 380, Communication with Audit Committees and AU sec. 310, Appointment of the Independent Auditor. Comments are due on the proposal on May 28, 2009.

As noted in the press release announcing the proposal, the proposed standard would establish requirements relating to:

1. Communication of an overview of the audit strategy, including a discussion of significant risks, the use of the internal audit function, and the roles, responsibilities, and location of firms participating in the audit;

2. Communication regarding critical accounting polices, practices, and estimates;

3. Communication regarding the auditor’s evaluation of a company’s ability to continue as a going concern; and

4. Evaluation by the auditor of the adequacy of the two-way communications.

The proposed standard also includes requirements for engagement letters with auditors which seek to ensure that the engagement letter records the terms of the audit engagement.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Restatements: Nine-Year Study
– Study: Link Between Withhold Votes and CEO Turnover
– Adjusted EBITDA Is Out of the Shadows as Staff Updates Non-GAAP Interpretations
– The IRS’ Corrections Program to Cure Section 409A Defects
– US Banks: Are Audit Committees Going “Overboard”?

– Dave Lynn