Question

Question 1 Using appropriate academic references, critically evaluate the current status of the new conceptual framework project jointly undertaken by the FASB and the IASB. What prompted the regulators to undertake this project in the first place? (50 marks)

Answer 1

At their joint meeting the IASB and the US FASB decided to add to their respective agendas a joint project to develop a common conceptual framework, based on and built on both the existing IASB Framework and the FASB Conceptual Framework, that both Boards would use as a basis for their accounting standards.

The two boards reached the following tentative decisions about the approach to the project:

• The project should initially focus on concepts applicable to business entities in the private sector. Later, the boards should consider the applicability of those concepts to other sectors, beginning with not-for-profit organisations in the private sector.
• The project should be divided into phases, with the initial focus being on achieving the convergence of the frameworks and improving particular aspects of the frameworks dealing with objectives, qualitative characteristics, elements, recognition, and measurement. Furthermore, as the frameworks converge and are improved, priority should be given to addressing issues that are likely to yield benefits to the boards in the short term, that is, cross-cutting issues that affect a number of their projects for new or revised standards.
• The converged framework should be in the form of a single document. It should include a summary and a basis for conclusions.

• The summaries of the discussions in meetings has been published. The IASB work plan has also been updated.

  The topics at the IASB–FASB joint meeting, in order of discussion, were:

• Segment reporting
• Primary Financial Statements / Financial Performance Reporting
• Financial Instruments with Characteristics of Equity / Distinguishing Liabilities from Equity
• IBOR Reform
• Goodwill and Impairment / Identifiable Intangible Assets and Subsequent Accounting for Goodwill
• Disclosure Initiative / Disclosure Framework
• Implementation

1. Revenue
2. Leases

• The topics discussed at the IASB meeting, in order of discussion, were:

• SME Standard review and update
• Implementation matters: IFRIC Update
• Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
• Goodwill and Impairment
• Management Commentary
• Business Combinations under Common Control
• Financial Instruments with Characteristics of Equity
• Rate-regulated Activities
• Disclosure Initiative
• Primary Financial Statements
• IBOR Reform and the Effects on Financial Reporting
• Dynamic Risk Management

The regulators to undertake this project in the first place is is to eliminate a variety of differences between International Financial Reporting Standards and US GAAP. The project, which is being done jointly by FASB and IASB