SEC Chief Accountant Welcomes Actions by FASB and IASB
FOR IMMEDIATE RELEASE
FASB Exposure Drafts
Washington, D.C., Dec. 19, 2003
The Chief Accountant of the Securities and Exchange Commission welcomed the publication by the Financial Accounting Standards Board (FASB) of proposals that would modify several aspects of U.S. accounting standards to be consistent with the guidance on those issues currently included in international accounting standards. The proposals would result in a change in the way voluntary accounting changes are reflected and make modifications to US generally accepted accounting principles in certain areas related to inventory costs, earnings per share calculations, and exchanges of non-monetary assets.
The proposals are part of multi-faceted efforts by the FASB and the International Accounting Standards Board (IASB) to improve and converge the two sets of accounting standards, with a goal of achieving a common set of high-quality accounting standards. "Seeing further progress made toward convergence of accounting standards is encouraging," Chief Accountant Donald T. Nicolaisen said
The FASB proposals are available on the FASB's internet site at www.fasb.org.
Release of Financial Instrument Standards
Mr. Nicolaisen also welcomed the release by the IASB of revised International Accounting Standards (IAS) No. 32 and 39. These two documents provide guidance related to financial instruments, including accounting for investments in and transfers of financial assets, distinguishing between liabilities and equity, and disclosures that provide financial statement users with information about financial assets and liabilities
IAS 39 also provides guidance on the accounting for derivatives, specifying that derivatives should be recorded at fair value, and that changes in fair value should be recorded through the income statement unless special hedge accounting requirements are met. The IASB has also previously issued an exposure draft that would permit hedge accounting to be used for portfolios of financial instruments in certain limited cases. The IASB is expected to finish its deliberations on this issue in early 2004
Regarding these two revised standards, Mr. Nicolaisen said "Given the importance of financial instruments in today's economy, high-quality guidance in this area is necessary to transparent financial reporting. Investors need, and have a right to demand, high quality information on which to base investment decisions." Mr. Nicolaisen cited plans of the European Union and a number of countries around the world to adopt international accounting standards in 2005, and said "the IASB's actions were a positive step in contributing to the type of convergence he supports."