This website contains two categories of materials. The first category contains links to information relating to conference facilities and a preliminary conference schedule. The second category contains materials on the conference topics: liabilities/business risk and leases.

1.   GENERAL AND LOGISTICAL INFORMATION

• Directions for travel to the Dolce Norwalk Center for Leadership and Innovation in Norwalk, Connecticut.
  Please note that for some of the past conferences, transportation to the airport after the conference was arranged for you by the conference organizers. Given a change in billing arrangements, we are no longer able to do this. As s result, conference participants are responsible for arranging their own return transportation to the airport. The company that we have used in the past is U.S. Limousine located in Norwalk CT at (800) 637-3373. If you would like to use them, please contact them.

   

• Information about the conference center

• Preliminary conference schedule

2.   CONFERENCE INTRODUCTION AND OVERVIEW

The FASB and IASB have been engaged in a number of projects aimed at developing financial reporting standards that are convergent, with the goal of bringing US GAAP and International Financial Reporting Standards closer together. The FASB and IASB also share the goal of developing financial reporting standards that are principles-based rather than rules-based.

For day one of the conference, the focus will be the definition of a liability, with particular focus on distinguishing between liabilities and business risks. The IASB is in the process of revising its general liabilities standard (IAS 37) and both the IASB and FASB have started a joint project to update and converge their conceptual frameworks, including their definitions of liabilities. As part of these projects, the Boards are working to define the difference between liabilities and business risk.

Neither U.S. standards nor the IFRS literature define business risk. Business risk is an umbrella term that captures all risks faced by an entity as a result of its business activities that do not qualify as a present obligation. Constituent remarks in their comment letters to the IASB Exposure Draft, Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IAS 19 Employee Benefits and at the IAS 37 roundtables suggest the current description of a present obligation is not clear. Hence, the Boards are seeking to clarify this concept.

For the second day of the conference, the focus will be on leasing (primarily from the lessee’s perspective). The Boards added a joint leasing project to their agenda in July 2006. Although the Boards initially decided to produce a standard that covered both lessee and lessor accounting, they tentatively decided in July 2008 to focus solely on lessees (and to defer consideration of lessor accounting) for two reasons. Users have indicated that the most urgent lease accounting problems reside with the lessee and lessor accounting problems are so entangled with other unresolved Board projects (e.g., revenue recognition) that inclusion of lessor accounting in the current project would challenge the goal of having a new leasing standard by 2011 (the deadline proposed for this project in the most recent 2008 Memorandum of Understanding between the two Boards).

The Boards believe that it is not possible to significantly improve the accounting for lessees through minor amendments to the current leasing model (for example, by changing the criteria for determining whether a lease is a finance/capital lease).

The issues relating to lessee accounting that need to be addressed are much the same as those considered in the G4+1 papers of 1996 (Recognition by Lessees of Assets and Liabilities Arising under Lease Contracts) and 1999 (Leases: Implementation of a New Approach). The overall approach proposed is to develop a single model that generally applies to all leases, in place of the operating/financing split that is currently adopted. Rather than recognizing the physical asset on the balance sheet of the lessee, the ‘right of use’ of the physical asset for the period of the lease is recognized as an asset, with a liability recognized for the obligation to make payments for the lease period.

Consistent with the G4+1 papers, the Boards originally focused their efforts on separately identifying and reporting on each of the rights and obligations conveyed by lease contracts. However, this approach surfaced some reporting issues that have caused the Boards to pursue a modified approach that reports on the rights and obligations inherent in the lease contract as one unit. The Cover Note for Leases Conference Cases and the assigned readings describe and contrast these and other potential lease accounting approaches.

OBJECTIVE OF THIS CONFERENCE

The objective of the conference is twofold. First, one objective is to provide the FASB and IASB with early feedback on their joint project to update their conceptual frameworks, with particular focus on the definition of a liability (and its distinction from business risk). The second objective is to provide input to the FASB and IASB on their joint project regarding leasing. Academic participants are particularly urged to offer any insights they have based on research that they have seen or conducted.

PRIMARY READINGS

To prepare for the conference, participants will need to be familiar with the existing definitions of liabilities and how they can be distinguished from stand-ready liabilities, possible/uncertain liabilities, and business risks. They also will need to consider the new approach tentatively adopted by the Boards regarding financial reporting for leasing transactions. Accordingly, participants are asked to read the following prior to the conference.

1. FASB Memorandum B: Conceptual Framework: Distinguishing Between a Liability and a Business Risk from the May 7, 2008 FASB Board Meeting.

2. Preliminary Views on Leasing. [Current draft document that may form the basis of a Discussion Paper that will be issued after revision to constituents for public comment.]

BACKGROUND READINGS

In addition to the primary readings for the conference, participants are asked to review the following background readings relating to the leases conference topic.

1. The Conceptual Framework and Accounting for Leases by Dennis W. Monson, Accounting Horizons, 2001, Vol. 15, No. 3, pp. 275-287.

2. Agenda Paper 12D: Academic Research on Lease Accounting. From the March 22, 2007 IASB meeting in London.

CONFERENCE CASES

The primary focus of the conference will be on the analysis and discussion of a series of cases. Conference participants are expected to prepare complete responses to all of the cases before arriving at the conference and to actively participate in the conference discussions relating to the cases. The cases are available in two PDF files accessible by clicking on the following links: Conference Cases on Liabilities and Business Risk and Conference Cases on Leases.

Please contact Joe Vernuccio at jrvernuccio@fasb.org or at 203.847.0700 ext. 209 if you have difficulties downloading or accessing these materials.