NEWS RELEASE 04/11/01

FASB Publishes Report, Business and Financial Reporting, Challenges from the New Economy

Norwalk, CT, April 11, 2001—Many observers maintain that there is a disconnect between the information provided in today's financial statements and the information needs of investors and creditors. In examining this issue, observers point to the widening gap that exists between information needs of "New Economy" companies and "Old Economy" financial reporting. The Financial Accounting Standards Board (FASB) has published a Special Report, Business and Financial Reporting, Challenges from the New Economy, that examines the intersection between the new economy and business and financial reporting.

The report reviews a range of studies and articles that compare accounting treatments for traditional assets and the challenges of new economy notions of intangible assets. The report concludes that the debate over "new" versus "old" is unhelpful. The more important question is whether business financial reporting should change and, if so, how.

The report also concludes that the perceived shortcomings of business and financial reporting do not easily lend themselves to a simplistic and single solution.

Wayne S. Upton, FASB Senior Project Manager, stated, "There is no simple financial reporting solution to the issues raised in the report. The best set of solutions will come from national and international standard setters working together. The issues are not limited to a specific country and probably don't lend themselves to an answer developed by one accounting standard setter acting in isolation."

The FASB report describes important contributions by groups in several nations, including the United States, the United Kingdom, Canada, Denmark, Sweden, the Netherlands, and the Organization for Economic Cooperation and Development.

The report concludes that standard setters should focus their attention on:

  • Examination of the conceptual and practical issues surrounding recognition of internally generated intangible assets and measurement of those assets,
  • Expanded and systematic use of nonfinancial performance metrics; and
  • Expanded use of forward-looking information.

An appendix of the report describes four projects that standard setters might consider in addressing the financial reporting challenges that are a part of the new economy.

As the Board begins to consider whether it should add new projects to its agenda, the FASB hopes constituents will view this report as an opportunity to offer their insights on the subjects covered. Comment letters would be most useful to the FASB if received by July 1, 2001.

Business and Financial Reporting, Challenges from the New Economy is available free of charge on the FASB's website www.fasb.org. Printed copies may be purchased by writing to the FASB Order Department, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116 or telephoning 800-748-0659. The order code is SRBRC.


About the Financial Accounting Standards Board

 

Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely heavily on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.