Academic journal article Journal of Accountancy

Comments Sought on EDs concerning Environmental Remediation, Mortgage Loans and Ethics

Academic journal article Journal of Accountancy

Comments Sought on EDs concerning Environmental Remediation, Mortgage Loans and Ethics

Article excerpt

The AICPA has issued exposure drafts on environmental remediation liabilities, mortgage loans and ethics and is calling for comments on each.

Environmental remediation liabilities

The accounting standards executive committee (AcSEC) has issued an exposure draft of a proposed statement of position, Environmental Remediation Liabilities (including auditing guidance). For more information about this subject, see "Environmental Remediation Liabilities," by Frederick R. Gill, page 81.

Mortgage loan borrowers

The task force on participating mortgages has issued an exposure draft of a proposed statement of position, Accounting by Participating Mortgage Loan Borrowers.

The SOP would establish the borrower's accounting for a participating mortgage loan if the lender participates in any market value increases of the mortgaged real estate project, the results of operations of that project or in both.

The proposed statement, which would be effective for fiscal years beginning after June 15, 1996, requires that

* At origination, the borrower should record the participating mortgage loan without allocating any of the proceeds to a liability related to the participation feature.

* At each month's end, a participation liability should be reported equal to the amount that would be required to extinguish that liability if certain criteria were met.

* As estimates of the participation liability change because of new estimates of the property's market value, the borrower should recalculate the effective interest rate to reflect differences in expected future payments.

* Certain disclosures must be included in the financial statements.

Ethics division interpretations and rulings

The ED, Omnibus Proposal of Professional Ethics Division Interpretations and Rulings, prepared by the professional ethics executive committee, would revise the following definition and three rulings:

* Proposed revision of definition under ET section 92. …

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