FASB, IASB Set to Conclude Major Rules in 2016

By Steve Burkholder

April 7 — The second half of 2016 promises to be busy for the Financial Accounting Standards Board and its international counterpart as they conclude major, once-a-decade rulemaking projects that promise big impacts on the financial statements of certain business sectors.

At the top of FASB's list is a new set of rules on loan losses and other credit impairments, a topic of paramount importance for banks and credit unions.

The U.S. board plans a mid-year release of the new standard on impairment, which carries prospects of recognizing expected losses and the possibility of banks establishing bigger reserves and establishing them sooner than under current rules. The “mid-year” time peg probably means a July issuance date, according to signals transmitted by FASB on the rules, which will take effect in 2019.

FASB also plans a mid-year release of new rules on not-for-profit enterprises, capping the easier, first phase of a difficult project, as detailed April 5 at the biannual International Forum of Accounting Standard-Setters ). An effective date hasn't been set.

FASB also plans this summer to propose changes to rules on hedging activities—which typically involve derivatives—to streamline them.

IASB Plans

At the international forum in Toronto, the vice-chairman of the International Accounting Standards Board and an IASB senior staff accountant laid out that board's timetable for issuance of standards, both final and draft.

Highlights of the work plan described by Vice-Chairman Ian Mackintosh and Michelle Sansom at the two-day global forum in Toronto include:

  • final rules on insurance contracts, the product of a major effort that once was carried out with FASB, by the end of the year;
  • a new conceptual framework—the framework helps guide IASB in developing and revising international financial reporting standards—also planned for the end of 2016;
  • a final standard, probably in the fourth quarter, that couples application of IFRS 9, Financial Instruments, with the IFRS 4, Insurance Contracts, focusing on temporary accounting consequences stemming from different effective dates for the two sets of rules; and
  • publication in the second half of this year of a second discussion paper on rate-regulated activities.

    Various Topics Aired at Forum

    Over the two-day meeting in Toronto of the group of national and regional standard-setters, 31 delegations—plus contingents from IASB, the International Public Sector Accounting Standards Board and the European Financial Reporting Advisory Group, or EFRAG—discussed:

  • research by Australian and Korean standard-setters on professional judgment and the likelihood and probability of using the same and similar words in accounting standards, yet still getting very different results when recording assets and liabilities;
  • the future of corporate reporting, a presentation by the Accounting Standards Committee of Germany in cooperation with the European Federation of Accountants;
  • the use of financial information by investors, the final report of an academic study presented by EFRAG;
  • an update from IPSASB and its new chairman, Ian Carruthers, who also moderated some discussion on accounting by not-for-profit enterprises;
  • the reporting of cash flow information, with a backdrop of continued resistance to what investors generally favor, the direct method of cash flow reporting;
  • activities of regional groups, such as standard-setters from Africa, Latin America and Asia-Oceania; and
  • how IASB and national standard-setters might work together to promote consistent application of international financial reporting standards, an issue of concern to rulemakers and securities regulators around the world as some 115 countries have adopted IFRS.

    The next global forum of accounting rule makers is to be held in London in the fall.

    To contact the reporter on this story: Steve Burkholder in Toronto, Canada, at sburkholder@bna.com

    To contact the editor responsible for this story: Steven Marcy at smarcy@bna.com

    For More Information

    IASB's standard-setting program is detailed at http://www.ifrs.org/Pages/default.aspx.

    FASB's technical plan for standard-setting is available at http://www.fasb.org/home.