FASB, Financial Accounting Standards Board.

Accounting for Financial Instruments—Joint Project of the FASB and IASB

Last updated on May 24, 2013. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the IASB and the FASB (Boards). It was prepared by the staff and is for the information and convenience of their constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process.

Overview
Project Objective
Project Set-Up/Next Steps
Due Process Documents
Summary of Decisions Reached to Date
Board/Other Public Meeting Dates—Current
Board/Other Public Meeting Dates—Prior to ED Issuance 
Background Information
Contact Information

Overview

Project Objective

The objective of this project is to significantly improve the decision usefulness of financial instrument reporting for users of financial statements. The project will replace the FASB’s and IASB’s respective financial instruments standards with a common standard. The Boards believe that simplification of the accounting requirements for financial instruments should be an outcome of this improvement. Although the project objective is comprehensive, it is also the Boards’ objective that the project should be completed expeditiously.

1. Reconsider the recognition and measurement of financial instruments
2. Address issues related to impairment of financial instruments and hedge accounting
3. Increase convergence in accounting for financial instruments.

1. Simplify and resolve practice issues in accounting for hedging activities
2. Improve the financial reporting of hedging activities to make the accounting model and associated disclosures easier to understand for users of financial statements
3. Address differences in the accounting for derivative instruments and hedged items or transactions.

Project Set-Up/Next Steps

Due Process Documents

• Download the April 12, 2013 proposed Accounting Standards Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities—Proposed Amendments to the FASB Accounting Standards Codification®.

• Download the February 14, 2013 proposed Accounting Standards Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
• Read the news release introducing the proposed Accounting Standards Update
• Read the FASB In Focus which summarizes the proposed Accounting Standards Update

• Download the Proposed Accounting for Financial Instruments Update
• Read comment letters on the proposed Accounting Standards Update
• Read the news release introducing the proposed Accounting Standards Update
• Read the FASB In Focus which summarizes the proposed Accounting Standards Update
• Listen to a podcast in which FASB Member Tom Linsmeier provides an overview of the FASB’s proposed Standard to improve accounting for credit losses on financial assets
• Listen to a podcast in which FASB Members Larry Smith and Hal Schroeder discuss key concepts underpinning the FASB’s proposed credit loss model
• Read Frequently Asked Questions about the proposed Accounting Standards Update

• Download the Proposed Accounting for Financial Instruments Update 
• Read the news release introducing the proposed Accounting Standards Update
• Read the FASB In Focus which summarizes the proposed Accounting Standards Update
• Listen to a podcast in which former FASB Chairman Robert Herz discusses the proposed Accounting Standards Update
• Listen to a webcast which provides an overview of the proposed Accounting Standards Update
• Read the Frequently Asked Questions document which clarifies the proposed guidance by answering common questions received through outreach efforts
• Read comment letters on the proposed Accounting Standards Update
• Read the summary of feedback received on the credit impairment and interest income recognition models in the proposed Accounting Standards Update
• Read the summary of feedback received on the classification and measurement model in the proposed Accounting Standards Update
• Read the Overview of Outreach Provided through Meetings and Teleconferences With Users of Financial Statements on the proposed Accounting Standards Update

• Reducing Complexity Discussion Paper 
• Reducing Complexity Comment Letters

Summary of Decisions Reached to Date (as of February 14, 2013) 

Board/Other Public Meeting Dates—Current

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

Background Information

At their joint meetings in April and October 2005, the FASB and the IASB discussed the future of reporting for financial instruments. The Boards established three long-term objectives to improve and simplify the reporting for financial instruments:

1. Develop a new standard for the derecognition of financial instruments
2. Require all financial instruments to be measured at fair value with realized and unrealized gains and losses recognized in the period in which they occur
3. Simplify or eliminate the need for special hedge accounting requirements.

In March 2006, the Boards further clarified their intentions to work together to improve and converge financial reporting standards by issuing a Memorandum of Understanding (MoU), A Roadmap for Convergence between IFRSs and US GAAP—2006 – 2008. As part of the MoU, the Boards worked jointly on a research project to reduce the complexity of the accounting for financial instruments. This joint effort resulted in the IASB’s issuance of the March 2008 Discussion Paper, Reducing Complexity in Reporting Financial Instruments, which the FASB also published for comment by its constituents. Focusing on the measurement of financial instruments and hedge accounting, the Discussion Paper identified several possible approaches for improving and simplifying the accounting for financial instruments.

At the joint meeting in October 2008, the FASB and IASB decided to create an advisory group that comprises senior leaders with broad international experience in financial markets. The Financial Crisis Advisory Group (FCAG) was asked to identify any accounting issues that require the Boards’ urgent and immediate attention as well as issues for longer-term consideration. On July 28, 2009, the FCAG issued their Final Report.

The Boards also organized three roundtables in 2008 – one each in London (November 14, 2008), Norwalk (November 25, 2008), and Tokyo (December 3, 2008). The purpose of these roundtables was to (a) allow members of the Boards to hear input from a wide range of stakeholders, including users, prepares, and auditors of financial statements, regulators, and others; and (b) help the Boards identify accounting issues that may require their urgent and immediate attention to improve financial reporting and help enhance investor confidence in financial markets.

Participants in the roundtables made general comments about the importance of (a) working toward convergence between IFRS and U.S. GAAP and (b) allowing sufficient due process before the IASB or the FASB make any changes to current accounting guidance. Participants raised the following issues at the roundtables: (a) impairment, (b) fair value option, (c) fair value measurement, (d) clarification of the interaction of conflicting accounting standards, and (e) clarification for investments in collateralized debt obligations.

In addition to considering the potential for short-term responses to the credit crisis, both Boards emphasized their commitment to developing common solutions aimed at providing greater transparency and reducing complexity in the accounting of financial instruments. As starting points for this longer term objective, the Boards considered the comments received in response to the Discussion Paper on reducing complexity and the Exposure Draft on hedging, the deliberations of the Financial Crisis Advisory Group, input received at the 2008 roundtables, input received from the IASB Financial Instruments Working Group, and numerous informal discussions with constituents. Please refer to the FASB Outreach Summary (as of May 2010) for a summary of feedback received prior to the issuance of the proposed Accounting Standards Update.

The FASB and the IASB continue to consider constituent feedback on necessary improvements to financial reporting for financial instruments. The Boards will continue to deliberate certain issues and determine the best path forward within the context of project objectives.

Contact Information