FINANCIAL REPORTING

A Report Suitable For Presentation to the Board of Directors Explaining the Role of IASB

A Report Suitable For Presentation to the Board of Directors Explaining the Role of IASB

(1): Critically analyze the challenges faced by the IASB in fulfilling its mission.

Currently, the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) are undertaking a project to develop a common conceptual framework that . . . is both complete and internally consistent. Such a framework would provide a sound foundation for developing future ac counting standards and is essential to fulfilling the Boards' goal of developing standards that are principles-based, internally consistent, internationally converged, and that lead to financial reporting that provides the information needed for investment, credit, and similar decisions. That framework, which will deal with a wide range of issues, will build on the existing IASB and FASB frameworks and consider developments since they issued their original frameworks. An overview of the importance of the Framework, why the existing Framework does not fully meet the needs of the IASB, FASB, and other accounting standard setters, and the need to revisit the document are discussed in Bullen and Crook (2005) and Johnson (2004a, b, and 2005).1 As explained in these IASB and FASB staff papers, several gaps in the Framework need to be filled and a number of areas need to be updated. The framework project consists of eight phases: objectives and quali tative characteristics, elements and recognition, measurement, reporting entity, presentation and disclosure, purpose and status, application to not-for-profit entities in the private sector, and finalization. For each phase of the project, the IASB and FASB plan to issue a discussion paper to seek comments on the boards' preliminary views and an exposure draft. Consistent with the IASB's mission to work in partnership with not only the US FASB but with national standard setters worldwide (see e.g., Hague et al.), staff of the Canadian Accounting Standards Board and New Zealand Financial Reporting Standards Board are serving as project managers for key components of the framework project. As part of Phase A, the boards issued a discussion paper Preliminary Views on an Improved Conceptual Framework for Financial Reporting:

The Objective of Financial Reporting and Qualitative Characteristics of Decision-useful Financial Reporting Information on July 6, 2006.2 Com mints received are currently being considered. The draft chapters presented in the discussion paper define the objective of financial reporting and the qualitative characteristics of decision-useful financial information. The purpose of external financial reporting is defined as providing information that is useful to present and potential investors and creditors and others in making investment, credit and similar resource allocation decisions. This paper first considers the need for a framework from an insider's perspective and then addresses some of the controversial and pressing issues facing the IASB and FASB as they undertake their quest for a common improved framework. Specifically, we address applicability of the framework to not-for-profit entities, areas where accounting standards have preceded the concepts supporting them, the differing status ...