Financial Reporting

  The SEC voted unanimously to propose measures that would require public companies to disclose additional information to investors about their short-term borrowing arrangements.


The SEC’s proposal would shed greater light on a company’s short-term borrowing practices, including what some refer to as balance sheet “window-dressing.” The proposed rules are aimed at enabling investors to better understand whether amounts of short-term borrowings reported at the end of reporting periods are consistent with amounts outstanding throughout the reporting periods.


Many financial institutions and other companies engage in short-term borrowing to fund operations. These financing arrangements include commercial paper, repurchase agreements, letters of credit, promissory notes and factoring. They generally mature in a year or less.


The additional short-term borrowing disclosure information required under the proposed rules would be presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) section of a company’s quarterly and annual reports.


The Commission also voted to issue an interpretive release that will provide guidance about existing requirements for MD&A disclosure about liquidity and funding.


Comments were due by the end of November. The proposal is available at



  FASB issued a discussion paper ( to solicit broad-based input on how to improve, simplify and converge the financial reporting requirements for insurance contracts. The discussion paper, Preliminary Views on Insurance Contracts, is part of FASB’s joint project with the IASB, which issued an exposure draft ( this summer of a proposed IFRS that would apply to all insurance contracts written byboth insurance companies and noninsurance companies.


FASB said it chose to issue the discussion paper instead of an ED because it would first like to receive stakeholder input on the following issues:


  • The extent of FASB’s and the IASB’s current accounting guidance for insurance contracts varies significantly. Existing U.S. GAAP comprehensively addresses accounting for insurance contracts by insurance entities, whereas IFRSs do not have comprehensive guidance;
  • The board has not determined whether one model or two models would result in more useful information about insurance contracts. Current U.S. GAAP has separate models for long- and short-duration contracts with derivations within the long-duration model based on policy type; and
  • The board is considering whether employer-provided health insurance should be included within the scope of the insurance contracts project and how recent U.S. health care reform may affect the application of the approaches described in this discussion paper and in the IASB’s ED.


The discussion paper also asks stakeholders to provide input about the following:


  • Whether the IASB’s proposal would be a sufficient improvement to U.S. GAAP to justify the cost of change;
  • Whether the project goals of improvement, convergence and simplification would be more effectively achieved by making targeted improvements to existing U.S. GAAP (rather than issuing comprehensive new guidance); and
  • Certain critical accounting issues for which FASB’s preliminary views differ from the IASB’s ED.


“The FASB believes it is important to gather as much information as possible at this stage of the project to help it decide the best way to improve the financial reporting for insurance contracts,” said FASB board member Marc Siegel in a press release. “This information will be helpful to both the FASB and the IASB in our deliberations.”


Comments on the discussion paper are due Dec. 15. FASB and the IASB plan to host a series of public round-table meetings in December to hear stakeholders’ views.



  The IASB and FASB announced the completion of the first phase of their joint project to develop an improved conceptual framework for IFRS and U.S. GAAP.


The objective of the conceptual framework project is to create a sound foundation for future accounting standards that are principles-based, internally consistent and internationally converged. The new framework builds on existing IASB and FASB frameworks. The IASB has revised portions of its framework; while FASB has issued “Concepts Statement 8” to replace “Concepts Statements 1 and 2.”


This first phase of the conceptual framework deals with the objective and qualitative characteristics of financial reporting. As part of the consultation process, the IASB and FASB jointly published a discussion paper and exposure draft that resulted in more than 320 responses.


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