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April 7 — The International Accounting Standards Board should move toward finalizing its revised conceptual framework while singling out some issues for further inquiry, several members of an IASB advisory group said April 7.
“It's not feasible to wait until every issue is resolved” before acting on the framework, a member of the Accounting Standards Advisory Forum said during an ASAF's meeting in London. Another participant agreed, saying IASB should reach final agreement on the overall framework and identify particular topics that need to be addressed separately.
No forum members called for delaying final action on the framework, and several recommended that IASB work to finalize it on a timely basis. However, some participants urged the board to approve a final framework after it sorts out some issues for further analysis.
ASAF offers a sounding board for national and regional standard setters but doesn't vote on recommendations to IASB.
The framework helps guide IASB in developing and revising international financial reporting standards.
It also assists preparers in implementing consistent accounting policies when no IFRS applies to a given transaction or event, or when a standard permits a choice in accounting policy.
The framework, however, isn't an accounting standard and won't supplant current standards.
The board published in May 2015 an exposure draft (ED) to rewrite the framework , and ASAF members broadly concurred during the meeting that the ED improves on measures in the existing framework, which was last revised in 2010.
IASB staff asked forum members whether, in its timetable to finalize the framework, IASB should:
Forum participants also were asked what strategy the board should adopt in the framework on handling the issue of measurement and on reporting financial performance—profit or loss (P&L) and other comprehensive income (OCI).
“The board should finalize the framework in a timely manner but should identify areas that need to be addressed separately,” an attendee said.
A forum member said that P&L and OCI in particular are issues suitable for additional research, and another suggested that IASB start a research project on measurement.“Generally, the board shouldn't finalize in areas where fundamental changes could be made in the near future.”ASAF member
“Generally, the board shouldn't finalize in areas where fundamental changes could be made in the near future,” a meeting participant recommended.
In addition, staff asked ASAF members whether the framework should be treated as a so-called living document—whether it should be updated if research highlights the need for improvements.
The forum split on this question.“We can have a stable document [conceptual framework] that's occasionally updated.”ASAF member
Several attendees said they support treating the framework as a living document, with one saying “We can have a stable document that's occasionally updated.”
Other members, though, warned that IASB shouldn't make frequent changes after the final framework is set.
“Once it's finalized, it should be stable,” though IASB should address any fundamental concerns that emerge, a meeting participant said.
Another forum member echoed this view and suggested that the board abandon the term “living document.”
“It's important to provide a stable platform for standard setting,” he said, and the board should “avoid amending it repeatedly.”
During its deliberations ASAF also reviewed a series of recommendations from the European Financial Reporting Advisory Group on how the ED's Chapter 6 covering measurement could be expanded to address EFRAG concerns.
The group offered suggestions in such areas as description of historical cost and description of current value—including the advantages and drawbacks of using fair value or, alternately, using an entity-specific value.
“EFRAG recommends that the ED should be amended to clarify that historical cost does not lead to restatement of any of the inputs into historical cost,” a staff paper drafted for the meeting noted.
The group called for a series of changes to the description of fair value as well.
Forum members generally agreed that EFRAG had raised some important concerns but questioned aspects of the group's proposals.
Several expressed doubts about EFRAG's proposals on historical costs and said EFRAG's recommendations on selecting a measurement basis are inconsistent. “Some of these ideas are premature” and might require a separate ED, an attendee said.
More broadly, the ED has generated confusion about what role the framework plays in board decision-making, a forum member reported.
“Some see it as a kind of constitution, an overriding document,” he said.
IASB staff said they would act to clarify the framework's purpose.“We need to make clear that it doesn't override standards.”
“We need to make clear that it doesn't override standards,” board chairman Hans Hoogervorst told meeting participants.
Staff members intend to provide the board with a verbal summary of ASAF's advice on a strategy for finalizing the framework at the next IASB meeting, which is scheduled for April 18-22 in London.
The board will be asked at the meeting to adopt a plan for making final changes to the framework.
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Papers drafted for the ASAF meeting are available athttp://www.ifrs.org/Meetings/Pages/ASAF-meeting-April-2016.aspx
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