Preparing for an avalanche of changes in standards.

• Author: Kroll, Karen
• Position: FINANCIAL REPORTING

Members and staff of the Financial Accounting Standards Board have some busy months ahead as the board is scheduled to release several dozen exposure drafts and standards updates between now and the end of the third quarter, according to its Current Technical Plan and Project Update.

Driving the board's ambitious schedule is a desire to improve the transparency and usefulness of the financial data that results from the standards, says Lisa Filomia-Aktas, a partner with Ernst & Young. The ongoing efforts to reduce complexity in U.S. generally accepted accounting principles, as well as the potential to converge GAAP with International Financial Reporting Standards also are playing a role.

Terry lannaconi, an audit partner with KPMG and former deputy chief accountant in the U.S. Securities and Exchange Commission's Division of Corporate Finance, concurs that "FASB has an aggressive agenda."

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While all the projects are important, those likely to have a significant impact on companies' financial statements are financial instruments, leasing and revenue recognition. "These are the blockbusters," says lannaconi. The projects are being completed jointly with the International Accounting Standards Board.

Accounting for Financial instruments

One area of significant concern in accounting for financial instruments is impairment. In January, FASB and IASB proposed a common solution intended to address the charges that surfaced as the credit crisis wore on--namely, that financial institutions were not recognizing credit losses in a timely enough manner. "This project is a move to accelerate the recognition of credit losses," says Filomia-Aktas.

Under the proposal, holders of financial instruments would project and record estimated losses over the life of the instrument from the outset. Generally accepted accounting principles currently requires a trigger, such as a missed payment, before a loss is recognized. Implementation questions remain. For instance, although the joint proposal provides for recording losses over the life of the asset, the boards asked for comment on the proposal to recognize losses immediately. The comment period closed April 1.

In January, FASB also tentatively concluded that financial assets should be measured in the financial statements at amortized cost, rather than fair value, if the business strategy of the lender--typically a bank or other financial institution--is to hold the loans solely for the...