Project Update

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

Last updated on June 13, 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

This page contains information pertinent to the Accounting for Financial Instruments project in its entirety. Please refer to the classification and measurement, impairment, and hedge accounting project pages for specific details on the Boards’ respective project plans for each component of the broader Accounting for Financial Instruments project. Please see the below links:

Topic Last Updated
Classification and Measurement  06/13/13
Credit Impairment  06/13/13
Hedge Accounting  02/20/13

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.

The Boards believe that this project will:
  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.
The Board decided to include redeliberations on the Accounting for Hedging Activities Project within this project. Therefore, this project will also:
  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.
To meet the project’s objective, the Board has implemented an extensive outreach plan to obtain feedback from all constituents, including investors, preparers, auditors, regulators, and others on issues relevant to this project.

Project Set-Up/Next Steps

Classification and Measurement

The FASB issued in April 2013 a separate exposure document that includes consequential amendments to the various FASB Accounting Standards Codification Topics that are impacted by the February 2013 proposed Accounting Standards Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The FASB will consider the comments received on its proposals, as well as the comments received by the IASB on its proposal, prior to finalizing the standard.

Impairment

The FASB will consider the comments received on its proposal, which was issued on December 20, 2012, as well as the comments received by the IASB on its proposal, which was issued on March 7, 2013.

Hedge Accounting

At the August 24, 2012 Board meeting, the FASB discussed the analysis of comment letters received on the February 9, 2011 FASB Invitation to Comment, Selected Issues about Hedge Accounting, which solicited input on the IASB’s Exposure Draft, Hedge Accounting. The meeting was educational and no decisions were reached. The FASB plans to consider hedge accounting after receiving feedback from stakeholders regarding its proposals on credit losses and classification and measurement.

Due Process Documents

On April 12, 2013, the Board issued a 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®. The comment period ended on May 15, 2013. This proposed Update contains consequential amendments to the various FASB Accounting Standards Codification Topics that will be impacted by the proposed Accounting Standards Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which was issued on February 14, 2013.
On February 14, 2013, the Board issued a proposed Accounting Standards Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities). The comment period ended on May 15, 2013. The proposed Update contains proposed classification and measurement guidance.
On December 20, 2012, the Board issued a proposed Accounting Standards Update, Financial Instruments—Credit Losses (proposed Update). The comment period ended on May 31, 2013. The proposed Update contained some proposed guidance pertaining to accounting for credit losses.
On May 26, 2010, the FASB issued one comprehensive proposed Accounting Standards Update, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities (proposed Update), which addresses the measurement, classification, and impairment of financial instruments, as well as hedge accounting. The comment period ended on September 30, 2010.
The FASB and IASB issued for comment a Discussion Paper, Reducing Complexity in Reporting Financial Instruments, in March 2008. The comment period ended September 19, 2008.

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

See Exposure Drafts.

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.

October 19, 2010 FASB Roundtable Meeting—Discussions about the proposed Accounting Standards Update
Session 1 
Session 2 
October 18, 2010 FASB Roundtable Meeting—Discussions about the proposed Accounting Standards Update
Session 1 
Session 2 
October 12, 2010 FASB Roundtable Meeting with Private Companies and Not-For-Profit Entities—Discussions about the proposed Accounting Standards Update

Please refer to the classification and measurement, impairment, and hedge accounting project pages for Board meeting minutes related to each component of the broader Accounting for Financial Instruments project.

Board/Other Public Meeting Dates—Prior to ED Issuance

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

Rahul Gupta
Project Manager
rgupta@fasb.org

Shahid Shah
Practice Fellow
sshah@fasb.org

Steve Kane
Practice Fellow
smkane@fasb.org

Stephen McKinney
Practice Fellow
scmckinney@fasb.org


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