Friday, October 17, 2008

FASB, IASB Get Together

U.S., International Boards Abandon Plan to Drop Net Income Item
U.S. and international accounting rulemakers abandoned a proposal to eliminate the reporting of net income on financial statements, saying investors rely on the calculation to assess a company's health.

The International Accounting Standards Board and the U.S. Financial Accounting Standards Board ``have chosen to proceed with proposals that build on established practice,'' IASB Chairman
David Tweedie said in a statement today. A staff proposal last year had included an option to replace net income with a line called total comprehensive income.

``Net income is clearly a starting point for many users of financial statements and therefore it was decided to leave it in,'' Mark Byatt, a spokesman for the London-based IASB, said in an e-mail.

The London-based IASB, which sets accounting standards followed in more than 100 countries, and FASB, the U.S. board based in Norwalk, Connecticut, are seeking to make financial statements clear and help investors identify potential risks. The groups today released a 126-page
``discussion paper'' and will seek public comment until April 14.

``This idea of eliminating net income was basically taking away the one key measure of performance that investors hang their hats on,''
Charles Mulford, an accounting professor at the Georgia Institute of Technology in Atlanta, said in an interview. ``You can't just take away net income and expect everyone to grab onto something else right away.''

The joint project on financial reports is part of a broader effort by the IASB and FASB to adopt a single set of standards. The U.S. Securities and Exchange Commission in August approved a ``road map'' that might require some U.S. companies to switch from U.S. accounting standards to international rules by 2014.

Separately, the IASB and FASB today said they will create a ``global advisory group'' of regulators, company executives, auditors and investors to discuss issues related to the current economic crisis. Members of the panel have not been named.
Ian Katz at Bloomberg

IASB and FASB create advisory group to review reporting issues related to credit crisis

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) today announced that they will create a global advisory group comprising regulators, preparers, auditors, investors and other users of financial statements. The advisory group will help to ensure that reporting issues arising from the global economic crisis are considered in an internationally co-ordinated manner.

At their forthcoming joint meeting on 20 and 21 October, the boards will discuss the initial topics for the advisory group to consider. They will also discuss how they can appoint the group and schedule its first meeting expeditiously. The boards will report on the first meeting and will consider the group’s discussions immediately thereafter. In developing their approaches on issues resulting from the discussions the boards will follow appropriate due process. In the interest of transparency, the advisory group will meet in public session with Webcasting facilities available to all interested parties.

Sir David Tweedie, chairman of the IASB, said: “Recent statements from the G7 and other world leaders highlight the need for an internationally co-ordinated policy response to the credit crisis. The IASB has acted quickly to issue amendments on reclassifications, fair value measurement guidance for illiquid markets, and disclosures. We are pleased that the European Union has acted quickly to accept our amendments on reclassifications. The new advisory group will help the boards to develop rapidly a co-ordinated response to the economic crisis, and will provide additional global perspective to both standard-setting organisations as we address the increasingly complex issues that investors are facing.”

Robert Herz, chairman of the FASB, said: “Ongoing developments in the global financial crisis and actions by governments and regulators are reshaping the financial markets here and around the world. All of this is likely to raise important issues in financial reporting, both here in the US and across the international capital markets. The advisory group that we and the IASB are establishing is aimed at helping both boards identify reporting issues arising from ongoing developments in the global financial markets so that we can develop common solutions that promote sound reporting and enhance transparency.”

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