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What are the key issues to know about GAAP/IFRS convergence in the area of financial instruments? (Webinar Attendee Question)

This question was asked during the Proformative webinar "Convergence of Financial Instruments, Leasing, and Rev Rec Standards."  A video of the webinar can be viewed here: https://www.proformative.com/resources/webinar-video-convergence-financial-instruments-leasing-rev-rec-standards

Answers

Topic Expert
Sunil Thukral
Title: Controller/Technical Accounting Advisory..
Company: Consultant
(Controller/Technical Accounting Advisory/ SEC Reporting, Consultant) |

The Financial Instruments accounting standard is another important accounting standard that is in the process of being converged. However, it might take some time before convergence is reached in this topic as FASB and IASB do not agree on some of the basic underlying concepts so both the Boards will be back on the drawing board for this for quite some time.

Below is the relevant extract from the FASB's website on this topic:

"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:

Reconsider the recognition and measurement of financial instruments
Address issues related to impairment of financial instruments and hedge accounting
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:
Simplify and resolve practice issues in accounting for hedging activities
Improve the financial reporting of hedging activities to make the accounting model and associated disclosures easier to understand for users of financial statements
Address differences in the accounting for derivative instruments and hedged items or transactions.
To meet the project’s objective, the Board has implemented an extensive outreach plan to obtain feedback from all constituents, including investors, preparers, auditors, regulators, and others on issues relevant to this project. "

Please feel free to let me know if you need any additional information on this topic as this is one of the most complex pieces of accounting.

Kind regards,

Sunil Thukral, CPA, CFA
Sunil [dot] CPA [dot] CFAatgmail [dot] com

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