IASB the International Accounting Standards Board (IASB)

IASB

The International Accounting Standards Board (IASB) currently has three types of active projects on their agenda. These include an agenda consultation project, financial crisis related projects, and memorandum of understanding projects. The following is a summary of these current active projects, their timetables established for the achievement of milestones, as well as the conceptual frameworks involved in the projects.

The first type of project currently active on the agenda of the IASB is an agenda consultation project in which the IASB initiated a formal public agenda consultation for the first time in July 2011. This consultation was focused on the future work plan of the IASB, and was aimed at obtaining input from the public regarding the work plan and its direction and balance. The agenda consultation was conducted with broad public participation, including awareness through conferences in Europe, North America, and South America, in which small group meetings have been assembled for collaboration with local standard-setting organizations throughout the world. The most recent update regarding this project was on July 20, 2011 when the IASB discussed the upcoming public consultation and agreed with proposals for the consultation as well as approval for the consultation document. As far as milestones are concerned, the third quarter of 2011 saw completion of consultation documentation, while comment summary is scheduled for completion in the first quarter of 2012, and a feedback statement is slotted for completion in the second quarter of 2012.

The second type of projects currently on the agenda of the IASB is financial crisis related projects. The first one currently on the agenda involves financial instruments. This project aims at the improvement of financial statements in order to make them more user-friendly. This is to be achieved through the simplification of the measurement and classification requirements currently in place for financial instruments. This project is known as the replacement of IAS 39, and there are three key phases to the project. These three phases in order are: 1) classification and measurement; 2) impairment methodology; and 3) hedge accounting. The first phase included changes that were to the requirements for financial liabilities, including changes involving the fair value option for financial liabilities involving credit risk. The second phase involved the January 2011 publication of a document entitled "Financial Instruments: Impairment," with a period for commentary that closed in April. The third phase included the publication of an exposure draft entitled "Hedge Accounting," which was published in December 2010, with comments concluding in March 2011 and ongoing re-deliberations.

Another subtype of project currently on the agenda for the IASB involves the offsetting of assets and liabilities. This project involves the presentation of obligations and rights by entities in the form of net amounts as presented in their statement of financial position, and is also known by the term "netting." This project stemmed from the need to resolve accounting differences in order to improve comparability of financial statements, and the IASB sought to determine an effective offsetting solution. Changes were formally proposed through an exposure draft put forward by the IASB entitled "Offsetting Financial Assets and Financial Liabilities." Different models for offsetting were decided upon and acted upon in June 2011. Initiatives were put in place for the convergence of requirements for disclosure to aid in the comparison of financial statements. Most recent activity regarding this project involved a meeting in September 2011 in which application inconsistencies for the offsetting requirements were discussed, along with the potential necessity for other consequential amendments based on outcomes of the current project, as well as talks regarding satisfaction of the IASB regarding process steps of the project and the potential need for re-exposure. Milestones for this project include the completion of an exposure draft slotted for the first quarter of 2011 and targets for the project completion in the fourth quarter of 2011.

The third type of project currently active on the agenda of the IASB is memorandum of understanding projects. The first of these projects involves leases. The primary objective of this project is the development of a new strategy for lease accounting aimed at assuring recognition in financial position statements all assets and liabilities under lease contracts. This project has involved publication of papers discussing the concept of leases, public comment on these papers, and analysis of this feedback by the IASB. Also, the IASB presented revised proposals for common leasing standards in July 2011. Milestones of the leasing project include the completion of an exposure draft in August 2010, the completion of a second exposure draft in the first quarter of 2012, with a project target date sometime in 2012, and an effective date for the project yet to be confirmed.

The second memorandum of understanding project involves revenue recognition. The goal of this project is to implement strategies for clarification of principles used for the recognition of revenue from customer contracts. Revenue as it is stated in financial statements is one of the most important means for the assessment of the prospects, growth, and performance of a company. This project involves all contracts with the exception of contracts involving insurance, leases, and financial instruments. Recent news surrounding this project includes an agreement by the IASB to re-expose their proposal for a revenue recognition standard common to all contracts, as well as discussions regarding whether proposed disclosure requirements should be applied to financial statements. The publication by the IASB of a second exposure draft of revenue proposals was slated for mid to late 2011. Milestones for this project include the release of a subsequent second exposure draft in the third quarter of 2011, comment analysis in the first quarter of 2012, with a target date for the project sometime in 2012.

The IASB aims toward changing the conceptual framework for standards in financial reporting (Whittington, 2008). In general, the fair value worldview is used as their preferred basis for measurement, which is based in an assumption of perfect and complete market conditions, therefore necessitating the reporting of fair values based on current market prices in order to meet the needs of creditors and investors (Whittington, 2008).