Financial Reporting Alert 07-5: CAQ Update — Key Accounting Issues and the Credit Environment
October 3, 2007
Today the Center for Audit Quality (CAQ) issued three white papers addressing key accounting issues resulting from the current turbulent conditions in the credit markets. The white papers are identical to those summarized in Financial Reporting Alert 07-4. As discussed in that Alert, the papers focus on three issues:
- Fair value measurements in illiquid (or less liquid) markets.
- Consolidation of commercial paper conduits.
- Accounting for underwriting and loan commitments.
- The CAQ has shared the papers with staffs of the SEC, FASB, PCAOB, and various banking regulators.
In Alert #2007-51 announcing the release of the white papers, the CAQ stated:
These white papers address accounting issues arising from or related to the current illiquid market conditions from the perspective of existing generally accepted accounting principles (GAAP). The white papers articulate certain existing accounting practices and requirements of GAAP literature related to the specific issues addressed, with the intention of helping auditors understand the application of existing GAAP in the context of illiquid market conditions. The issues addressed in the white papers should be considered in the light of an entity’s particular facts and circumstances, and auditors will need to exercise professional judgment in addressing specific fact patterns.