Project Update

Conceptual Framework—Objective and Qualitative Characteristics

Latest revisions:  As of 17, February 2009 (Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the IASB and FASB (the Boards). It was prepared by the staff and is for the information and convenience of the Boards’ 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.

Project Objective
Due Process Documents
Decisions Reached at the Last Meeting
Summary of Decisions Reached to Date
Next Steps
*Board/Other Public Meetings
Related FASB Articles
Contact Information

Objective of Objective and Qualitative Characteristics Phase

The aim of the Objectives and Qualitative Characteristics phase of Financial Reporting, is to consider:

• The objective of financial reporting

   

• The qualitative characteristics of financial reporting information

   

• The trade-offs among qualitative characteristics and how they relate to the concepts of materiality and cost-benefit relationships.

   

Due Process Documents

The Boards issued an Exposure Draft, Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics and Constraints of Decision-Useful Financial Reporting Information, on May 29, 2008. The comment period ends on September 29, 2008.

View the comment letter analysis for the Exposure Draft

View the comment letter analysis for the general issues arising from the Exposure Draft

On July 6, 2006, both Boards published for public comment an IASB Discussion Paper/FASB Preliminary Views, Preliminary Views on an Improved Conceptual Framework for Financial Reporting: Objective of Financial Reporting and Qualitative Characteristics of Decision-Useful Financial Reporting Information. The comment period ended November 3, 2006. The Boards discussed the comments received and are currently redeliberating the issues raised by respondents.

View the comment analysis.

Decisions Reached at the Last Meeting

See minutes below—January 14, 2009

Summary of Decisions Reached to Date (As of January 14, 2009)

The Board redeliberated some of the issues arising from the Exposure Draft.

The Board decided to:

1. Continue to use the term faithful representation to refer to the characteristic that had been labeled reliability in the existing framework.

    

2. Continue to classify relevance and faithful representation as fundamental characteristics.

    

3. Clarify that the components of faithful representation (neutrality, completeness, and freedom from error) are not absolutes. For example, the phrase freedom from error is not intended to imply that financial statements must be 100 percent accurate.

    

4. Continue to classify verifiability, comparability, timeliness, and understandability as enhancing characteristics.

    

5. Continue to describe materiality and cost as constraints on financial reporting.

    

Next Steps

The Boards will continue rediliberating issues raised in the comment letters.

*Board/Other Public Meetings

View the FASB and IASB meeting handouts, minutes, and updates.

Related FASB Articles

Relevance and Reliability—Article from The FASB Report (February 28, 2005)

Contact Information

Li Li Lian
IASB Project Manager
llian@iasb.org