Bloomberg Law®, an integrated legal research and business intelligence solution, combines trusted news and analysis with cutting-edge technology to provide legal professionals tools to be...
By Steve Burkholder
NORWALK, Conn.-The Financial Accounting Standards Board issued a closely watched proposal Feb. 14 that is aimed at improving and simplifying how banks, insurers, and other enterprises account for a broad range of financial instruments, including loans.
“The proposed accounting standard would measure financial assets based on how a reporting entity would realize value from them as part of distinct business activities,” FASB Chairman Leslie Seidman said in a prepared statement. The gauging of financial liabilities would be consistent with how the enterprise plans to settle those liabilities, she added.
In that way, accounting under the proposal would differ markedly from current guidance and its hinging on instruments' legal form--“that is, whether an asset qualifies as a security or a loan,” according to the draft accounting standards update, Financial Instruments--Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
“The proposed guidance would improve not only the relevance of the information about financial assets in an entity's financial statements, but also the comparability of that information across entities because the legal form of the financial asset is not relevant in determining how to measure it, either initially or subsequently,” FASB states in the exposure draft.
The proposal, which represents a revision of earlier, comprehensive draft rules on instruments issued in May 2010 (101 DTR G-5, 5/27/10) is the product of a high-priority, difficult joint project on which FASB has been working with the International Accounting Standards Board.
FASB and IASB so far are aligned on main tenets of the proposal, which focuses on how to classify and measure financial assets and financial liabilities. However, the two boards remain relatively far apart on related draft rules for reporting credit losses, including loan losses, an issue of paramount importance for banks and for banking and securities regulators
The fresh FASB draft rules on classification and measurement have a comment deadline of May 15.
The proposal does not proffer an effective date for standards that would result from the proposal. However, board members generally have suggested that enterprises would have ample time to shift to new accounting policies.
New standards on financial instruments are not expected to be effective before 2015--roughly the same time that planned new FASB and IASB prescriptions on revenue recognition could be in use.
The proposed guidance on instruments' classification and measurement and the Feb. 14 edition of FASB in Focus are available at FASB's homepage at http://www.fasb.org.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)