Project Update

Accounting for Financial Instruments—Joint Project of the FASB and IASB

Last updated on February 6, 2014. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the IASB and the FASB (Boards). It was prepared by the staff and is for the information and convenience of their constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process.

Project Objective
*Next Steps
Due Process Documents
Board/Other Public Meeting Dates
Background Information
Contact Information


NOTE: This page contains information pertinent to the Accounting for Financial Instruments project overall. Please refer to the classification and measurement, impairment, and hedge accounting pages for specific details on each of those topics within the broader Accounting for Financial Instruments project. See the links below:

Classification and Measurement
Credit Impairment
Hedge Accounting

Project Objective

The objective of this project is to significantly improve the decision usefulness of financial instrument reporting for users of financial statements. The project will replace the FASB’s and IASB’s respective financial instruments standards with a common standard. The Boards believe that simplification of the accounting requirements for financial instruments should be an outcome of this improvement. Although the project objective is comprehensive, it is also the Boards’ objective that the project should be completed expeditiously.

The Boards believe that this project will:
  1. Reconsider the recognition and measurement of financial instruments
  2. Address issues related to impairment of financial instruments and hedge accounting
  3. Increase convergence in accounting for financial instruments.
The Board decided to include redeliberations on the Accounting for Hedging Activities Project within this project. Therefore, this project will also:
  1. Simplify and resolve practice issues in accounting for hedging activities
  2. Improve the financial reporting of hedging activities to make the accounting model and associated disclosures easier to understand for users of financial statements
  3. Address differences in the accounting for derivative instruments and hedged items or transactions.
To meet the project’s objective, the Board will perform extensive outreach to obtain feedback from all constituents, including investors, preparers, auditors, regulators, and others on issues relevant to this project.

*Next Steps

Classification and Measurement

The Boards will continue redeliberations considering feedback received on the FASB’s February 2013 proposed Accounting Standards Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, the IASB’s November 2012 Exposure Draft, Classification and Measurement: Limited Amendments to IFRS 9, and previous Exposure Drafts issued by the Boards.

Impairment

The Boards will continue redeliberations considering feedback received on the FASB’s December 2012 proposed Accounting Standards Update, Financial Instruments—Credit Losses (Subtopic 825-15), the IASB’s March 2013 Exposure Draft, Financial Instruments: Expected Credit Losses, and previous Exposure Drafts issued by the Boards.

*Hedge Accounting

The FASB will perform research and consider feedback received through comment letters and outreach activities to determine the best path forward for redeliberations on hedge accounting. The FASB will also consider the IASB’s hedge accounting model during the research and redeliberations process.

Due Process Documents

Please refer to the classification and measurement, impairment, and hedge accounting project pages for due process documents issued related to each of those topics within the broader Accounting for Financial Instruments project.

Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

Please refer to the classification and measurement, impairment, and hedge accounting project pages for current Board meeting minutes related to each of those topics within the broader Accounting for Financial Instruments project.

Click here for prior Board/Other Public Meeting dates and minutes.

Background Information

At their joint meetings in April and October 2005, the FASB and the IASB discussed the future of reporting for financial instruments. The Boards established three long-term objectives to improve and simplify the reporting for financial instruments:

  1. Develop a new standard for the derecognition of financial instruments
  2. Require all financial instruments to be measured at fair value with realized and unrealized gains and losses recognized in the period in which they occur
  3. Simplify or eliminate the need for special hedge accounting requirements

In March 2006, the Boards further clarified their intentions to work together to improve and converge financial reporting standards by issuing a Memorandum of Understanding (MoU), A Roadmap for Convergence between IFRSs and US GAAP—2006 – 2008. As part of the MoU, the Boards worked jointly on a research project to reduce the complexity of the accounting for financial instruments. This joint effort resulted in the IASB’s issuance of the March 2008 Discussion Paper, Reducing Complexity in Reporting Financial Instruments, which the FASB also published for comment by its constituents. Focusing on the measurement of financial instruments and hedge accounting, the Discussion Paper identified several possible approaches for improving and simplifying the accounting for financial instruments.

At the joint meeting in October 2008, the FASB and IASB decided to create an advisory group that comprises senior leaders with broad international experience in financial markets. The Financial Crisis Advisory Group (FCAG) was asked to identify any accounting issues that require the Boards’ urgent and immediate attention as well as issues for longer-term consideration. On July 28, 2009, the FCAG issued their Final Report.

The Boards also organized three roundtables in 2008 – one each in London (November 14, 2008), Norwalk (November 25, 2008), and Tokyo (December 3, 2008). The purpose of these roundtables was to (a) allow members of the Boards to hear input from a wide range of stakeholders, including users, prepares, and auditors of financial statements, regulators, and others; and (b) help the Boards identify accounting issues that may require their urgent and immediate attention to improve financial reporting and help enhance investor confidence in financial markets.

Participants in the roundtables made general comments about the importance of (a) working toward convergence between IFRS and U.S. GAAP and (b) allowing sufficient due process before the IASB or the FASB make any changes to current accounting guidance. Participants raised the following issues at the roundtables: (a) impairment, (b) fair value option, (c) fair value measurement, (d) clarification of the interaction of conflicting accounting standards, and (e) clarification for investments in collateralized debt obligations.

In addition to considering the potential for short-term responses to the credit crisis, both Boards emphasized their commitment to developing common solutions aimed at providing greater transparency and reducing complexity in the accounting of financial instruments. As starting points for this longer term objective, the Boards considered the comments received in response to the Discussion Paper on reducing complexity and the Exposure Draft on hedging, the deliberations of the Financial Crisis Advisory Group, input received at the 2008 roundtables, input received from the IASB Financial Instruments Working Group, and numerous informal discussions with constituents. Please refer to the FASB Outreach Summary (as of May 2010) for a summary of feedback received prior to the issuance of the May 2010 proposed Accounting Standards Update.

The FASB and the IASB continue to consider constituent feedback on necessary improvements to financial reporting for financial instruments. The Boards will continue to deliberate certain issues and determine the best path forward within the context of project objectives.

The FASB and the IASB will continue to consider constituent feedback on necessary improvements to financial reporting for financial instruments during deliberations.

Contact Information

Rahul Gupta
Project Manager
rgupta@fasb.org

Upaasna Laungani
Project Manager
ulaungani@fasb.org

Stephen McKinney
Practice Fellow
scmckinney@fasb.org

Nick Milone
Practice Fellow
nkmilone@fasb.org

Nga Zimmerman
Assistant Project Manager
nlzimmerman@fasb.org