November 23, 2021

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FASB Summarizes Investment Companies and Investment Property Entities Proposals

The FASB has issued its In Focus publication, “Proposed Improvements to Criteria for Investment Company Accounting and Proposed Accounting Guidance for Investment Property Entities.” This publication discusses the proposed changes to the accounting guidance for investment companies and proposed new guidance for investment property entities issued by the FASB on October 21, 2011. Comments on the proposals are due January 5, 2012.

The FASB issued a proposed Accounting Standards Update (ASU), Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, intended to improve and converge financial reporting by setting forth consistent criteria for determining whether an entity is an investment company.

The FASB has also issued a proposed ASU, Real Estate - Investment Property Entities (Topic 973), intended to develop accounting guidance for investment property entities. This proposed ASU would require an entity that meets certain criteria to measure its investment properties at fair value. The proposal would also introduce additional presentation and disclosure requirements for an investment property entity.

The FASB’s In Focus publication is available here.

The proposed Investment Companies ASU is available here.

The proposed Investment Property Entities ASU is available here.

FAF Appoints Trustees and Advisory Council Members

The Financial Accounting Foundation announced that Paul G. Camell, W. Daniel Ebersole, and Michelle R. Seitz have been appointed to the FAF Board of Trustees. The FAF is the independent, private-sector organization responsible for the oversight of the FASB and the GASB. All three trustees will serve five-year terms beginning January 1, 2012.

The Board of Trustees of the FAF also announced the appointment of thirteen new members to the Financial Accounting Standards Advisory Council (FASAC) effective January 1, 2012. The FASAC is responsible for advising the FASB on technical issues, project priorities, and other matters that affect accounting standard setting.

Members of the FASAC are chosen from a cross-section of the FASB’s constituents, including users, preparers, practitioners, associations, academics, and other parties interested or involved in financial reporting. FASAC members are chosen based on their professional expertise and their ability to broaden the base of constituent views on the Council.

In addition, the FAF Board of Trustees announced the appointment of five new members to the Governmental Accounting Standards Advisory Council (GASAC). The new members will serve two-year terms beginning January 1, 2012. The GASAC is responsible for advising the GASB on technical issues, project priorities, and other matters that affect standard setting for state and local governments’ accounting and financial reporting.

Members of the GASAC are chosen from a cross-section of the GASB’s state and local government constituencies, including users, preparers, and attestors of financial information. GASAC members are selected on the basis of their professional expertise and the depth and variety of experience they bring to their work on the GASAC.

The FAF News Release on the appointments to the Board of Trustees is available here.

The FAF News Release on the FASAC appointments is available here.

The FAF News Release on the GASAC appointments is available here.

FASB and IASB Discuss Leases and Other Matters

As reported in its "Summary of Board Decisions" publication, the Boards met on November 16, 2011, and discussed the following topics: (a) leases; and (b) insurance contracts. Regarding their project on leases, the Boards discussed consequential amendments to the business combinations guidance and the borrowing costs guidance in IFRS and U.S. GAAP and transition issues related to business combinations. During this meeting, the Boards reached a number of tentative decisions in relation to the measurement of lease assets and lease liabilities acquired in a business combination, including the following:

  • If the acquiree is a lessee, an acquirer should recognize a liability to make lease payments and a right-of-use asset;
  • If the acquiree is a lessor applying the receivable and residual approach, an acquirer should recognize a right to receive lease payments and a residual asset;
  • If the acquiree is a lessor of investment property, an acquirer should apply the guidance in IFRS 3, Business Combinations, or FASB Codification Topic 805, Business Combinations, that relates to acquired operating leases; and
  • If the acquiree has short-term leases, an acquirer should not recognize separate assets or liabilities related to the lease contract at the acquisition date.

The Boards also tentatively decided that, on transition, a lessor would continue to account for the securitization of lease receivables associated with current operating leases as secured borrowings in accordance with existing U.S. GAAP and IFRS.

The Summary of Board Decisions is available here.

Not-for-Profit Entities — FASB Chairman Adds Two Projects to FASB Agenda

As reported in its "Summary of Board Decisions" publication, the FASB met on November 9, 2011, to discuss whether to add one or more projects to its agenda to improve the existing standards for presentation of financial statements and related disclosures for not-for-profit entities. The FASB Chairman decided to add a standards-setting project and a research project on reporting by not-for-profit entities. The standards-setting project is expected to reexamine existing standards for financial statement presentation by not-for-profit entities and focus on improving: (a) net asset classification requirements; and (b) information provided in financial statements and notes about liquidity, financial performance, and cash flows. The research project is expected to study communications other than financial statements that not-for-profit entities use to tell their financial story.

The Summary of Board Decisions is available here.

SEC Work Plan — SEC Staff Publishes Reports on Incorporation of IFRS

The staff of the SEC has published the following reports:

These reports contribute to the SEC staff’s ongoing execution of a “Work Plan” included in the Commission Statement in Support of Convergence and Global Accounting Standards, issued in February 2010. The purpose of the Work Plan is to consider specific areas and factors relevant to a determination by the SEC as to whether, when, and how the current financial reporting system for U.S. issuers should be transitioned to a system incorporating IFRS.

The Comparison Report summarizes the SEC staff’s analysis of the text of IFRS as issued by the IASB as compared to the text of U.S. GAAP. The SEC staff reviewed U.S. GAAP accounting requirements and compared those requirements to equivalent or corresponding IFRS requirements, as applicable. The SEC staff omitted from its review any U.S. GAAP requirements and the IFRS equivalents that are subject to the ongoing joint standard-setting efforts of the Boards. This report summarizes the SEC staff’s observations at a principles level for each topic in the FASB Accounting Standards CodificationTM (Codification) evaluated. The SEC staff supplemented high-level observations on these Codification topics with more specific examples of differences between U.S. GAAP and IFRS.

The Analysis Report presents observations by the SEC staff regarding the application of IFRS in practice. The SEC staff analyzed the most recent annual consolidated financial statements of 183 companies, including both SEC registrants and companies that are not SEC registrants, which prepare financial statements in accordance with IFRS. The SEC staff determined that company financial statements generally appeared to comply with IFRS requirements, but not always, and indicated that the transparency and clarity of the financial statements could be enhanced. In addition, the SEC staff indicated that diversity in the application of IFRS, attributed to a variety of factors, presents challenges to the comparability of financial statements across countries and industries.


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