Last week, the Financial Accounting Standards Board (FASB) issued a proposed staff position seeking to “amend the disclosure requirements in FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to increase the comparability of information about certain financial assets that have related economic characteristics but have different reporting measurement attributes.” The proposed amendments will relate specifically to the following types of financial assets:
- Debt securities classified as held-to-maturity;
- Debt securities classified as available-for-sale; and
- Loans and long-term receivables except those measured at fair value with changes in fair value recognized through earnings.
The International Accounting Standards Board (IASB), the independent accounting standard setter that issues international financial reporting standards (IFRS), has also published for public comment amendments to IFRS 7 Financial Instruments: Disclosures that are in line with the FASB’s proposed staff position.
The FASB has acknowledged that under its present accounting framework the various sources of standards that exist to determine “the recognition and measurement of financial assets, including the accounting for impairments” are overly complex. Current accounting standards as applied to financial assets “result in financial assets that have related economic characteristics being measured differently depending on the type and classification of the financial asset.” Further in many cases, “the impairment models applied to financial assets vary based on when the impairment is required to be recognized and how the impairment is measured.”
The FASB will address issues related to recognition and measurement of financial instruments (including impairment) with the IASB as part of its ongoing comprehensive joint project relating to the convergence of U.S. GAAP and IFRS. In the interim, however, the FASB has issued its proposed staff position in efforts to enhance disclosures about certain financial assets and to “improve the transparency and quality of information provided to users of financial statements.” The FASB will accept comments from the public to the proposed amendments no later than January 15, 2009.