Conceptual framework

The IASB and the US Financial Accounting Standards Board (FASB) have begun a joint agenda project to revisit their conceptual frameworks for financial accounting and reporting. The goals of the project are to develop a common conceptual framework that both Boards can use in developing new and revised accounting standards.

A draft project plan considered by both Boards envisages that the converged framework will be completed by 2010, but that conclusions on a number of priority issues will need to be reached much sooner. The Boards' discussions to date have focused on the objectives and qualitative characteristics of financial reporting.

The IASB and FASB have recently prepared a joint article 'Revisiting the Concepts', which discusses the goals and plans for the project. A copy can be accessed on the IASB website at www.iasb.org/uploaded_files/documents/10_484_communications_paper.pdf.

This is an important project, which the ASB is monitoring closely. The IASB and FASB project is focusing on concepts applicable to private sector business entities. The ASB is working with a number of other national standard-setters to consider the implications of the emerging proposals for public sector entities.

Measurement

The IASB has agreed to publish a discussion paper 'Measurement Bases for Financial Accounting: Measurement on Initial Recognition', prepared by the staff of the Canadian Accounting Standards Board (AcSB). The paper will, however, make clear that the views expressed in it are those of the AcSB staff and not necessarily those of the IASB.

The paper is likely to conclude that the measurement basis to be used on initial recognition should be fair value. Fair value should be derived from market-based values. Where market evidence is unavailable or lacking, other measures may be used, but the objective of simulating what a marketbased value would be, if one existed, remains.

The ASB will be examining the proposals in the discussion paper when it is published (likely to be in the next month or so, with a six-month comment period) and will be seeking to engage UK constituents in the debate.

Management Commentary

The IASB has discussed a draft of a preliminary views discussion paper on Management Commentary (the international term for the OFR) that has been prepared by a project team of staff from a number of national standard-setters, including the ASB. The IASB has agreed to publish the discussion paper, once the project team has revised the draft and the Board has reviewed the questions asked of commentators. It is expected that the discussion paper will be issued in the autumn, with a six-month comment period.

Revenue recognition

The IASB and FASB have confirmed that they will continue to work on a joint project on revenue recognition. The Boards have reaffirmed that the general standard should require revenue to be recognised on the basis of changes in assets and liabilities, without consideration of additional recognition criteria, such as earnings or realisation.

The Boards have decided to pursue the project on an approach that would measure performance obligations at the amount that a customer would pay the entity for them. This may be viewed as an 'entry' perspective and is much more akin to the approach of FRS 5 Application Note G than the exit value based 'legal lay-off' approach that the Boards were previously developing.

Convergence with US GAAP: income taxes

The IASB, as part of its short term convergence project with FASB, is planning to issue an Exposure Draft of a revised IAS 12 'Income Taxes' later this year. The scope of the IASB's project is to identify and eliminate any differences between IAS 12 and the equivalent FASB standard. It does not include a more fundamental review of the concepts underlying the standards. The ASB has signalled, in its Technical Plan, that its current intention is to issue a UK Exposure Draft at the same time as the IASB issues its proposals; the UK Exposure Draft would propose introducing a standard based on IAS 12 to replace FRS 16 'Current tax' and FRS 19 'Deferred tax'.