" To explain its thinking, the exposure draft provides an insurance contract as means of example on its proposed thinking of the relation between unconditional and conditional rights. According to the example, an entity purchasing an insurance contract has two inherit rights: both an unconditional right to the insurance coverage and a conditional right to reimbursement if an insured loss occurs sometime in the future. The unconditional right is a present asset, whereas the conditional right to reimbursement is not a present asset as it becoming an asset is dependent on an uncontrollable and unpredictable future event.
Likewise, the proposed conceptual framework also proposes to delete the term "contingent liability" from is standards. Under the current definition, "contingent liability" refers to either a possible obligation whose existence depends on a future event or a yet unrecognized present obligation. The reasoning for the proposed elimination is similar to that used for the proposed elimination of the term "contingent asset" previously discussed. Namely, the board proposes the term's deletion because "a contractual liability often comprises both an unconditional obligation that meets the definition of a liability and a conditional obligation that may indicate the presence of the related unconditional obligation but is itself only a possible future liability that does not meet the definition...
As is, the current conceptual frameworks use inconsistent terms and ideas between the standards and the framework, thus leading to inaccurate financial reporting. In order to be able to produce accurate financial reporting, a standardized format needs to be utilized. The purpose of the standards and conceptual framework is to provide this needed standardized format. Thus, it is essential that the guidance provided by the standards and conceptual framework be accurate and consistent. The proposed conceptual framework offered by the joint taskforce of the FASB and IASB succeeds at accomplishing this and therefore should be approved and adopted for use.
Bibliography
Casabona, Patrick and Robert Traficanti. (2001): Investment Pricing Methods: A Guide for Accounting and Financial Professionals. New York: John Wiley & Sons, Inc.
Financial Accounting Standards Board. (2006): Selected Issues Relating to Assets and Liabilities with Uncertainties: Invitation to Comment. Financial Accounting Foundation.
Mulvey, John M. And William T. Ziemba. (1998): Worldwide Asset and Liability Modeling. Cambridge: Cambridge University Press.
Other industry concerns and costs that would have affected both stakeholders and investors is the overall cost of updating computer accounting systems and process to account for the new methodologies. The airline industry most likely would have had to drop the frequent flier campaigns even though they were very successful marketing campaigns due to the fact that the new deferred revenue method would have implied too many costs to
Sarbanes-Oxley. The political pressure of the past several years following the dot.com bubble and the collapse of several major companies created a need for new securities legislation, which culminated last year in the Sarbanes-Oxley Investor Protection Act, which establishes new guidelines for the securities industry. Initially a Democratic brainchild, the act became favored by Republicans in the House when it was realized that such adjustments would be of great benefit to
Enron could engage in their derivative trading strategy with no fear of government intervention because derivative trading was specifically exempted from government regulation. Due in part to a ruling by the Commodity Futures Trading Commission's (CFTC) chairwoman, Wendy Graham, derivatives remained free of regulatory oversight. Ms. Graham, wife of Texas senator Phil Graham, made this ruling 5 weeks before resigning as chairwoman of the CFTC and joining the Enron Board