IASB, FASB Focus on Impairment, Other Issues Raised by G-20

The International Accounting Standards Board (IASB) announced a series of actions it has taken to address recommendations made by the G-20 leaders last November in Washington. 

New disclosure requirements related to impairment. The IASB and FASB have proposed changes in disclosure requirements for impairments to arrive at a common outcome, the IASB said in its press release. The proposals will enable companies to disclose the profit or loss that would have been recorded if all financial assets (other than those categorized at fair value through profit or loss) had been measured using amortized cost or all had been measured using fair value. The boards published their exposure drafts in December. The comment period for proposed FASB Staff Position no. FAS 107-a, Disclosures about Certain Financial Assets: An Amendment of FASB Statement No. 107, closed Jan. 15. The comment period for the IASB exposure draft, Embedded Derivatives: Proposed Amendments to IFRIC 9 and IAS 39, closes today.

Acceleration of efforts to address broader issues of impairment on a globally consistent basis. Both the IASB and the FASB, whose respective standards have different impairment requirements, have asked their staffs to consider together how existing requirements relating to reversals of impairment losses might be changed. The boards will also address the question of impairment as part of an urgent broader project this year, and this will also be considered by the Financial Crisis Advisory Group (FCAG), which held its first meeting yesterday in London.  

Improved accounting for off-balance-sheet items. On Dec. 18, the IASB published proposals to strengthen and improve the requirements for identifying which entities a company controls. The IASB said in a Dec. 19 press release that further proposals on off-balance-sheet items, covering the derecognition of assets and liabilities, are expected to be published by the end of March, consistent with the G-20’s target date of March 31.

Ensuring consistent treatment of accounting for particular credit-linked investments between U.S. GAAP and IFRS. Some stakeholders have called for the need to clarify any possible difference in the accounting treatment between IFRS and U.S. GAAP. FASB plans to issue mandatory implementation guidance that will ensure consistency between IFRS and US GAAP—an objective supported by G-20 leaders.

Ensuring embedded derivatives are assessed and separated if financial assets are reclassified. Following requests from some stakeholders at the recently convened FASB-IASB round-table discussions, the IASB published on Dec. 22 an exposure draft that proposed clarifying that all embedded derivatives should be assessed and, if necessary, separately accounted for in financial statements. Participants in the round-table discussions asked the IASB to act in order to prevent any diversity in practice developing as a result of the amendments made to IAS 39, Financial Instruments, in October 2008 to permit the reclassification of particular financial assets

For a copy of the IASB press release, click here. Read the JofA’s article on the G-20 accounting-related actions here.