the iasb fasb conceptual framework project
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The IASB/FASB Conceptual Framework Project. A Public Sector Perspective Kevin Simpkins. Outline. Concepts – Why they matter Overview of the Project Progress to Date Some Public Sector Issues Concluding Thoughts. Concepts – Why they Matter (generally).

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the iasb fasb conceptual framework project

The IASB/FASB Conceptual Framework Project

A Public Sector Perspective

Kevin Simpkins

outline
Outline
  • Concepts – Why they matter
  • Overview of the Project
  • Progress to Date
  • Some Public Sector Issues
  • Concluding Thoughts
concepts why they matter generally
Concepts – Why they Matter (generally)
  • The Basis for Accounting Standards Development
  • A Key Element in “Principles-based” Standard setting
  • An antidote to vested interests (or just preconceived conclusions!)
  • To enhance efficiency in standard-setting
concepts why this project matters
Concepts – Why this project matters
  • Key to IASB/FASB Convergence
  • New concepts will have significant influence internationally
  • IPSASB’s implicit framework is that of the IASB
  • IASB/FASB work will be a key reference source for the IPSASB

(Note that IPSASB is considering its strategy for a Conceptual Framework at its meeting this month)

overview of the iasb fasb project objective
Overview of the IASB/FASB Project - Objective

“…to develop a common conceptual framework that is both complete and internally consistent…

…a sound foundation for developing future accounting standards…”

overview of the iasb fasb project process
Overview of the IASB/FASB Project - Process
  • Building on the Existing Frameworks
  • Concentrating on environmental changes and omissions from existing frameworks
  • Prioritising cross-cutting issues that affect a number of projects
  • Initially considering private sector business entities only
overview of the iasb fasb project the phases
Overview of the IASB/FASB Project – The Phases

Phase A Topic

A Objectives and qualitative characteristics

B Elements, recognition and measurement attributes

C Initial and subsequent measurement

D Reporting entity

E Presentation and disclosure, including financial reporting boundaries

F Framework purpose and status in GAAP hierarchy

G Applicability to the not-for-profit sector

H Entire framework

the iasb fasb project progress to date
The IASB/FASB Project – Progress to Date
  • Phase A – Objectives and Qualitative Characteristics
    • Exposure draft due in near future
  • Phase B – Elements, recognition etc.
    • Early work done on asset and liability definitions
  • Phase D – Reporting Entity
    • Planning and Preliminary Analysis done
the iasb fasb project some public sector issues
The IASB/FASB Project – Some Public Sector Issues
  • Timing of Consideration of Not-for-Profits
    • Creates risk NFP context will not be well considered
    • Is delivering some concepts that are not broadly applicable
    • Inefficient as a standard-setting approach
    • A challenge for “neutrality” – both transactions and sectors
the iasb fasb project some public sector issues cont
The IASB/FASB Project –Some Public Sector Issues (cont)
  • Stewardship/Accountability is not a Separate Objective of Financial Reporting
    • The objective is to assist investors and others in making investment, credit and similar decisions
    • Too narrow for the public sector – accountability is at least a separate objective
    • A risk – the pervasive impact of an incomplete objective because “all things are related”

An aside: Whither prospective information?

the iasb fasb project some public sector issues cont1
The IASB/FASB Project –Some Public Sector Issues (cont)
  • Too narrow a Primary User Group
    • Primary User Group is present and potential investors and creditors
    • In the public sector legislation and funders are key users who cannot be excluded
  • No recognition of Compliance
the iasb fasb project some public sector issues cont2
The IASB/FASB Project –Some Public Sector Issues (cont)
  • Pervasive Focus is on Assessing Cash Flow Prospects
    • Cash Flows are relevant to the public sector but not always
    • Service performance is a more important focus for the public sector environment
    • The focus extends deeply such as into the asset definition area
the iasb fasb project some public sector issues cont3
The IASB/FASB Project –Some Public Sector Issues (cont)
  • Changes to the Qualitative Characteristics
    • A process approach – new for all
    • But does not encourage consideration of differences between entities
    • Relevance relates to “economic decisions of users”
    • Materiality is also related to “economic decisions” of users
the iasb fasb project some public sector issues cont4
The IASB/FASB Project –Some Public Sector Issues (cont)
  • Asset Definition too Narrow
    • Economic Benefits again!
    • Benefits “to the entity”
    • The notion of stand ready assets (and liabilities) is new and needs careful consideration
    • No help with the tough issues – social policy obligations especially
concluding thoughts
Concluding Thoughts
  • This project is important as are the others being worked on internationally
  • The potential impacts are significant and likely to be enduring
  • The public sector needs to monitor the work of both IASB and IPSASB and your own national bodies and comment
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