| 1/31/12 - FASB and IASB Move Closer to Deal on Classification and
Measurement
As discussed in the article entitled "Standard-Setters Move Closer to
Deal on Classification and Measurement" in the January 30, 2012, issue
of Accounting & Compliance Alert, the FASB and IASB agreed to move
closer together on the classification and measurement portion of the financial
instruments project.
Meeting via videoconference on January 27, the boards agreed to focus
on three areas: financial instruments measured at amortized cost; whether
there should be separate measurement, or bifurcation, for financial assets
that have been hedged with derivative contracts; and whether there should
be a model that shows the changes in the fair value of a debt security
in other comprehensive income and not net income.
The boards may then consider related issues that would be affected by
their progress, such as disclosure requirements or the guidance for financial
liabilities, according to a staff memo.
The boards unanimously supported the plan.
"I think it's a very, very good opportunity for us to try and narrow
the differences between where we've landed in our decisions so far," FASB
Chairman Leslie Seidman said.
1/19/12 -- FASB and IASB Set to Move Forward on Convergence Projects
As discussed in the article entitled "Standards Boards Set to Move Forward
on Convergence Projects" in the January 17, 2012, issue of Accounting
& Compliance Alert, the FASB and IASB plan to meet via videoconference
on January 25 and 27 to discuss the insurance project and the impairment
portion of the financial instruments project.
The accounting boards last took up the insurance project in December,
when they debated the definition of a portfolio of insurance contracts.
The boards indicated that a portfolio would be defined as a group of contracts
with similar risks and similar durations but asked their research staffs
to come back with a proposal for a future meeting.
The insurance project aims to give investors and creditors a clearer
picture about the assets and liabilities in insurance contracts, but the
boards' efforts to converge their work has been hampered by the different
schedules on which they are working.
The accounting standard-setters have done a better job aligning their
work with the impairment portion of the financial instruments project.
The boards want to categorize loans and other debt securities by expected
credit losses into three categories, or buckets.
The accounting boards have yet to release a detailed agenda for the joint
meetings, but during the most recent discussion they held in December,
the boards said they wanted to progress quickly with the project in the
New Year.
12/12/11 -- FASB and IASB Continue to Refine Asset Impairment Model
As discussed in the article entitled "Impairment Model Debate Begins to
Focus on Cash Flow Forecasts" in the December 9, 2011, issue of Accounting
& Compliance Alert, the FASB and the IASB are slated to refine the
"three-bucket" expected loss approach for the impairment of financial
assets during their next joint meeting December 14-16.
The expected-loss model for asset impairments is among the most important
pieces of the financial instrument standard the boards are trying to write
together, said IASB member John Smith December 7 at the AICPA's National
Conference on Current SEC and PCAOB Developments in Washington.
With the other two portions of the project-classification and measurement
and hedging-the boards have made less progress. But with the impairment
model, the boards agree on the general outline of an approach that deals
with the general pattern of deterioration in the credit quality of financial
assets.
In June, the accounting standard-setters laid out an approach that uses
three buckets, or stages, for monitoring deterioration in credit quality.
Now the boards want to add details to the method for recognizing losses
caused by deterioration in credit quality and determine how the deterioration
in quality should be recorded in the financial statements.
12/08/11 -- FASB, IASB Leaders Say International Convergence Is Winding
Down
As discussed in the article entitled "Seidman, Hoogervorst See an End
to Convergence" in the December 7, 2011, issue of Accounting & Compliance
Alert, the FASB and IASB are ready to end the international convergence
effort they pursued for the past decade.
The decision to bow to the inevitable comes six months after a self-imposed
deadline expired without the boards completing the projects in their Memorandum
of Understanding, the document that outlined the standards in U.S. GAAP
and IFRS that would be merged into a single set of accounting principles.
By 2010, the boards jettisoned most of the MOU projects to focus on three-financial
instruments, revenue recognition, and lease contracts. A fourth project
on insurance accounting that had been begun by the IASB was rolled into
the convergence effort after the FASB signed on.
The U.S. board is committed to finishing the four remaining projects,
but going beyond them is not viable, "politically or practically," said
FASB Chairman Leslie Seidman, who added she was speaking for herself,
not the board.
IASB Chairman Hans Hoogervorst, who took the helm of the international
board saying convergence was his number one priority, backtracked from
that position in November and reiterated those sentiments with Seidman.
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