Insights

With more and more countries adopting the International Financial Reporting Standards (IFRS), the decision makers from both the U.S. and international accounting boards have been meeting regularly to come to a consensus on all of the differences between the two boards. The most recent meeting discussed financial instruments and what is the most appropriate way to account for them.

Financial instruments have been a hot topic for a while especially with the market fluctuating dramatically and questions still remaining as to whether the recession is over. Both boards agree that more use of fair value as a measurement tool is proper. However, the financial statement presentation of the financial instruments is still up in the air.

At the meeting, the boards agreed on a set of core principles that will help them create a converged standard. The significant core principles agreed-upon by the two boards are as follows:

1. Improve comparability for the benefit of investors.
2. Provide transparency.
3. Implementation of the new requirements should be more straightforward.

Two items of significance where there are differences in opinion between the boards are how to handle impairments on the financial instruments and how to measure fair value. The Financial Accounting Standards Board (FASB) has already issued a standard or developed a model relating to both of these, and the International Accounting Standards Board (IASB) plans on issuing exposure drafts in the near future.

More information relating to the accounting for financial instruments including a summary of decisions reached between the FASB and IASB and a comparison of FASB and IASB proposed models is located on the FASB website.

Schneider Downs provides accounting, tax and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA, and Columbus, OH.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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