The Financial Accounting Standards Board by its own accounts had a very productive 2008, and it looks like its output will be even higher in 2009.Though much of 2008 was dedicated to issuing discussion papers that may eventually lead to standards and documents in 2009, the past year saw new standards on accounting for financial guarantee insurance contracts, the hierarchy of generally accepted accounting principles, and disclosures about derivative instruments and hedging activities.
The progress in 2008 was tempered by the removal of several projects from FASB's agenda, among them the second phase of the project on fair value options, recognition and measurement of non-financial liabilities, insurance risk transfer, measuring assets held for sale, and an implementation issue regarding Statement 133.
An increasing number of projects are being pursued in conjunction with the International Accounting Standards Board, as the two boards intensify their plan to converge U.S. and international standards.
"FASB remains committed to meeting the milestones stated within the Memorandum of Understanding with the IASB," said FASB technical director Russell G. Golden. "The MOU calls for documents related to liability and leases to be issued in 2009."
Among the boards' most important projects is their joint effort to revise and expand the conceptual framework. FASB research director Ron Lott said that the boards expect to conclude the first phase of the project in 2009, calling it "the culmination of years of work between [them] to create a solid base upon which to build future accounting standards."
The most advanced part of the project is a proposal on the objectives and qualitative characteristics of financial reporting. If the redeliberations proceed smoothly, a final document may be issued in the second quarter.
Once that document has been completed, the boards hope to issue an exposure draft defining what constitutes a reporting entity for reporting purposes. At around the same time, the boards may issue a preliminary document exploring the best ways to provide guidance for selecting the bases of measuring assets and liabilities. In November of 2008, the boards began discussing an approach that would address both the theoretical merits and practical limitations of different types of measurements.
By the end of the year, FASB and the IASB may also issue a preliminary framework document that redefines and converges their separate concept statements on elements and derecognition in financial reporting. The definitions of asset and liability will be revised, and differences regarding other elements and recognition criteria will be resolved.
Back in October, FASB and the IASB issued a discussion paper suggesting radically new principles for statement presentation, with comments due in April.
The suggested principles would produce disaggregated information that facilitates predictions of cash flow. They would also help investors assess liquidity and financial flexibility.
Once comments are in, the boards will redeliberate for the rest of the year without expectation of a subsequent document before 2010, and a final document only in 2011.
The project on leases is already wide-reaching, and it may reach even wider. The initial scope looks at lease arrangements covered in existing lease-related standards, but prior to issuing a discussion paper in the first quarter of 2009, the boards will consider broadening the scope to cover other kinds of transactions that convey a right to use another entity's asset.
EARNINGS AND EMISSIONS
FASB also intends to spend the year discussing comments made on an exposure draft on earnings per share. It was the board's second ED on the issue, the first having led to so many changes that the board felt obliged to expose the redeliberated proposal.
The two boards are ready to move quickly on converging their definitions of and disclosure requirements for discontinued operations. Comments on an ED are due by January 23 and a final statement is expected in mid-2009.
Under environmental, economic and political pressures, the boards are moving ahead on a joint project to provide comprehensive guidance on the financial reporting of emissions schemes. The scope embraces asset and liability recognition, measurement, impairment, timing of profit and loss recognition, accounting for vintage year swaps, presentation, and disclosure. An ED may hit the streets in the third quarter.
CHARACTERISTICS OF EQUITY
The boards are currently deliberating a project on improving and simplifying the reporting for financial instruments with characteristics of equity, a project previously known as "liabilities and equity." By the end of 2009, the boards hope to issue a proposal that would converge their standards, while eliminating 60 pieces of U.S. literature and providing investors with more useful information.
A final statement is projected tentatively for 2011.
In October, FASB decided to join the IASB's project to address recognition measurement, presentation and disclosures in insurance contracts. They hope to issue a proposed standard by year-end 2009 and a final statement by 2011.
The boards plan to continue deliberations on a project that aims to eliminate differences between their standards on income taxes. The standards have similar principles but differences in application. The IASB plans to issue a proposed standard, and FASB will issue an invitation to comment that includes that proposal. Deliberations are suspended until comments on both documents have been received. No other documents on this project are expected this year.
The standard-setter is also moving ahead on various projects without direct IASB involvement. The board is closing in on a final statement on mergers of not-for-profits, under guidelines resembling those applied to business entities. FASB is working on a separate but related standard on accounting for goodwill and other intangibles acquired in NFP mergers. Final statements should be out in the first quarter.
In the first quarter of 2009, the board should complete redeliberation of FASB Interpretation 46, on consolidation of variable-interest entities. One thing the board must decide is how the expected new standard on transfers of assets, which is also due in the first quarter, will impact FIN 46.
FASB issued an exposure draft in October of a standard on the reporting of whether an entity expects to continue being a going concern. With the comment period closing in December, redeliberations are expected to be quick, concluding early this year.
The board also is in the process of final redeliberations on a project on subsequent events - that is, transactions occurring after a balance sheet date but before the issuance of financial statements. A final standard should be out in the first quarter of 2008.
Other FASB projects expected to see final documents in 2009 include corrections to Statement 133 on hedging, loan loss disclosures, and disclosures of certain loss contingencies; Statement 2 on acquisition of research and development assets; and Statement 141-R on assets and liabilities arising from contingencies in a business combination.
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