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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 ... – PowerPoint PPT presentation

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Title: The IASB/FASB Conceptual Framework Project


1
The IASB/FASB Conceptual Framework Project
  • A Public Sector Perspective
  • Kevin Simpkins

2
Outline
  • Concepts Why they matter
  • Overview of the Project
  • Progress to Date
  • Some Public Sector Issues
  • Concluding Thoughts

3
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

4
Concepts Why this project matters
  • Key to IASB/FASB Convergence
  • New concepts will have significant influence
    internationally
  • IPSASBs 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)

5
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

6
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

7
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

8
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

9
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

10
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?

11
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

12
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

13
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

14
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

15
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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