Recently, the Financial Accounting Standards Board released proposed FASB Staff Position No. FAS 154-a, Considering the Effects of Prior-Year Misstatements when Quantifying Misstatements in Current-Year Financial Statements. This proposed FSP describes the consideration of the effects of prior-year uncorrected misstatements when quantifying misstatements in current-year financial statements of privately held entities and not-for-profit organizations. Though the FASB Statement No. 154, Accounting Changes and Error Corrections, provides guidance for reporting the correction of an error in previously issued financial statements, it does not specify the appropriate method to quantify the misstatement as a basis for evaluating materiality.
The proposed FSP also extends the guidance in Securities Exchange Commission Staff Accounting Bulletin No. 108 to all other nongovernmental entities that are not subject to the requirements of SAB 108. If finalized, the FSP would be effective for financial statements issued for fiscal years ending after June 15, 2007. Earlier application also would be permitted. The proposed FSP is available for comment until April 30, 2007.
