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5-3-07 Baruch Financial Reporting Conference-(1). 2. Points for Discussion. The Joint Framework Project Potential Payoffs from the Project
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Monetary Accounting Standards Board Why Concepts? Robert H. Herz FASB Chairman 2007 Baruch Financial Reporting Conference May 3, 2007 The sees communicated in this presentation are my own and don\'t speak to places of the Financial Accounting Standards Board. Places of the FASB are touched base at simply after broad due process methodology and thoughts. 5-3-07 Baruch Financial Reporting Conference-(1)

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Topics for Discussion The Joint Framework Project Potential Payoffs from the Project "Cross-Cutting Issues" 5-3-07 Baruch Financial Reporting Conference-(1)

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Joint FASB-IASB Conceptual Framework Project Improve & refine existing ideas Reflect contemporary supposing Fill voids in existing system Converge FASB & IASB Frameworks Conduct extend in "stages" Focus on "cross-cutting issues" 5-3-07 Baruch Financial Reporting Conference-(1)

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Phases of the Project Objectives Qualitative Characteristics Reporting Entity Elements Definitions Recognition & Derecognition Measurement Financial Statement Presentation Disclosures (& limits of money related revealing) 5-3-07 Baruch Financial Reporting Conference-(1)

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What\'s the Payoff from Having a Framework? Gives a shared opinion to thinking the issues (rather than the individual systems of individual Board individuals or constituents) Consistent conclusions on comparative issues more probable in spite of changes in Board enrollment Standards = more standards based & more sturdy Financial reports = more practically identical, more predictable, less demanding to comprehend & more helpful 5-3-07 Baruch Financial Reporting Conference-(1)

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What\'s the Payoff from Improving the Framework? Will help lessen unpredictability by making more prominent consistency between principles that depend on it Will enhance measures by giving a sound establishment to thinking that better mirrors the basic financial matters By better mirroring the financial matters, the subsequent models ought to be more natural 5-3-07 Baruch Financial Reporting Conference-(1)

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What\'s the Payoff from Converging the Framework? Dispense with contrasts in the current FASB & IASB systems Guide the Boards toward reliable conclusions on issues in models Promote united and enhanced worldwide bookkeeping gauges 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving the Objective of Financial Reporting Broad scope of clients versus just existing normal shareholders? Choice convenience versus stewardship? Substance versus proprietor (or counterparty) viewpoint? Collaboration between money related detailing and administration\'s point of view? 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving the Objective of Financial Reporting (proceeded) Do client data needs vary for: Large, traded on an open market organizations? Littler, secretly held organizations? Not-revenue driven associations? 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving the Qualitative Characteristics Relevance versus Dependability Ex.- Assessing reasonable esteem versus chronicled cost Preparers & inspectors appear to underscore unwavering quality Investors appear to accentuate importance Confusion about significance of dependability Faithful representation of certifiable monetary wonders Verifiability adds to devoted representation 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving the Reporting Entity When is a lawful element or a financial unit a detailing element ? At the point when ought to total or disaggregation happen? At the point when ought to a lawful element be isolated into a few announcing units? At the point when ought to a few legitimate substances be joined into an announcing unit? Is there a contrast between control over a substance and control over resources? 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving the Definitions of Elements What is part of instability ("likely" or "anticipated")? Is there a part? Provided that this is true, where does it have a place? In the definitions? In acknowledgment? In estimation? 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving the Definitions of Elements (proceeded with) "Plausible" in resources and liabilities definitions Likely versus not certain Existence versus extreme result "Committing occasion" in liabilities definition Which in a progression of occasions is the committing occasion? Could "monetary impulse" make an obligation? 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving the Definitions of Elements (proceeded with) Liabilities versus Value How to recognize them? Will there be a splendid line qualification? Should there be a splendid line refinement? Completely executory contracts Can they offer ascent to resources & liabilities? Assuming this is the case, when would it be a good idea for them to be gotten? 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving Recognition & Derecognition Should the acknowledgment criteria vary for various estimation bases? Ex.- Is "likelihood" model essential for recorded cost premise yet not for reasonable esteem premise? What is the acknowledgment occasion? In the event that advantage or obligation does not meet acknowledgment criteria when acquired or brought about, what occasion causes it to be perceived at a later date? 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving Recognition & Derecognition (proceeded) Is de acknowledgment the inverse of acknowledgment? On the other hand does history make a difference? Not talked about in either FASB or IASB reasonable systems Ex.- Conflicting direction in benchmarks Both FAS 140 & IAS 39 require different things to happen for budgetary resources for be derecognized Standards require distinctive different things to happen before liabilities can be derecognized 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving Measurement How ought to an estimation premise be chosen? Minimal current direction on which premise to utilize & when to utilize it Result: blended pack of bases in monetary proclamations What do aggregates & subtotals truly mean? (Like including & subtracting apples & oranges) Should one premise or diverse bases be utilized? Introductory versus ensuing estimation Assets versus liabilities Different sorts of advantages and liabilities Unit of Account—Should estimation reflect cooperative energies, volume rebates, blockage, portfolio? 5-3-07 Baruch Financial Reporting Conference-(1)

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Some Cross-Cutting Issues Involving Financial Statement Presentation & Disclosure Little or no direction on issues like: What are goals of divulgence? How to characterize in explanation of monetary position? What level of detail & subtotals in salary articulation (working profit, net pay, OCI, and so on & what ought to be incorporated into them)? EPS or other outline markers 5-3-07 Baruch Financial Reporting Conference-(1)

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Summing Up The absence of answers to those cross-cutting issues has brought about problematic money related revealing Suboptimal for preparers & reviewers Suboptimal for speculators & lenders But envision a world where we have great, sound, calculated responses to those issues Those answers would go far toward giving every one of us the apparatuses we have to: Decrease unpredictability and Increase the straightforwardness and general value of budgetary detailing That is the reason a building up an enhanced & joined Conceptual Framework is a key to our having the capacity to push ahead 5-3-07 Baruch Financial Reporting Conference-(1)

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