Project Update: Fair Value Measurement and Disclosure (as of Feb. 2, 2010)
Project Update: Accounting for Financial Instruments (as of Feb. 12, 2010). Includes links to:
- Summary of Decisions Reached to Date (as of February 5, 2010)
- FASB Project Plan (as of February 5, 2010)
- FASB Outreach Summary (as of November 2009)
- Comparison of FASB and IASB models (as of November 2009)
- IASB Workplan: IFRS 9 Financial Instruments
The FASB is participating with the IASB in an Expert Advisory Panel (EAP) that will advise the Boards on the operational issues surrounding the IASB’s Expected Cash Flow approach and the FASB’s approach for determining credit impairments.
In light of the FASB’s goal to publish a comprehensive exposure draft on financial instruments in March 2010 and the IASB’s goal to publish an exposure draft on the remaining main phases of the project to replace IAS 39, Financial Instruments: Recognition and Measurement, in the first quarter of 2010, the Boards will first jointly consider hedge accounting issues relating to financial hedged items and issues that are more directly related to the Boards’ respective decisions to date on the classification and measurement models for financial instruments. The Boards will subsequently discuss other hedge accounting issues, including hedge accounting for nonfinancial hedged items and portfolio hedge accounting. The Boards expect to address all hedge accounting issues in the first half of 2010.
Regarding outreach to constituents during development of the project, FASB states:
The FASB has posted to its website a detailed description of its tentative approach to classification and measurement of financial instruments (see Summary of Decisions Reached to Date) as a way of informing interested constituents and obtaining early input from them.Results of the joint FASB-IASB board meetings this week will be posted in FASB's News Center.
The FASB will continuously update that description as the Board makes additional decisions.As another way of obtaining early input on tentative decisions reached and issues relevant to the Accounting for Financial Instruments project, the Board and staff have held informal discussions in addition to public roundtables with constituents. The Board and staff obtained input from various investors, preparers, auditors, regulators, and valuation specialists. The summary below is provided for the information and convenience of constituents who are following the project.The FASB will consider input received on its tentative model as well as feedback received on the IASB’s Exposure Draft and IASB redeliberations as it develops its proposed Accounting Standards Update.
My two cents (I remind you of the Disclaimer on the right side of this blog)
Maybe it's the sense of professional skepticism instilled in me as an auditor back-in-the-day (or in more recent years, in my forensic accounting classes at NYU's School of Continuing and Professional Studies), but whenever I see a document labeled "Reducing Complexity..." (such as: Reducing Complexity Discussion Paper; Reducing Complexity Comment Letters; Reducing Complexity Comment Letter Summary), in which 'reducing complexity' rests on a fundamental precept of 'simplifying' recognition and measurement by carrying all (or a substantial portion) of financial instruments at 'fair value' ... I think to myself ... there is 'complexity' (e.g., in the longstanding 'mixed attribute' model, in which some items are measured at historical cost, some at fair value, some at lower of cost or market, etc.), and then there's 'complexity' (i.e., that which is inherent to varying degrees in particular models of fair value, including models driven at determining the 'exit price' for financial instruments, a notion that hinges on liquid, orderly markets, in instances when the market is disfunctional, disorderly, or there is thin or nonexistent trading.)
So, just as they say, "Don't judge a book by its cover," I would say, read between the covers (if not between the lines) to reach your own informed judgment on matters such as the relative reduction (or addition) to complexity, and the related usefulness of the proposed standards, and share your views (whatever they may be) with the FASB and IASB since public comment is at the heart of due process, on which standards are supposed to be set.
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