FASB has announced a reprieve from the December 15, 2010 effective date of the board’s proposed FAS 5 revisions. An effective date will be decided at a future meeting, after redeliberations. While this does not constitute a satisfactory resolution of the matter, ACC is hopeful that FASB’s decision to delay implementation could signal that the Board and staff realize that these FAS 5 proposals – often described as a solution in search of a problem – were not well-defined, and threatened substantial damage to companies, their stakeholders, and the disclosure process.
The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) met in a joint session last week to work on a number of major initiatives to revise GAAP and IASB standards. Both board’s leaders agreed that their staffs are not able to meet the challenges of working on so many projects concurrently; they announced that they will postpone implementation of their long-running effort to revise FAS 5, which was slated for implementation by companies before the end of the year.
Pursuant to significant criticism, unaccompanied by a clear constituency of supporters citing to well-defined concerns that the proposals claim to address, the FASB board members suggested that staff needs more time to work with those affected by the rules and that such a process would get “short shrift from us if we endeavor to do it in the first quarter.”
FASB and IASB said they expect to resume work on FAS 5 after their targeted June 2011 completion date, in favor of focusing instead on at least three other major priorities: financial instruments, revenue recognition, and leases. If the timetable were not deferred, the most recent exposure draft (issued in July of 2010, and amending the first FASB revision of FAS 5 proposed in 2008) would have become effective for many firms’ 2010 financial statements and for interim statements covering reporting periods starting after the new year. ACC and other groups protested both rounds of proposals to amend FAS 5, citing concerns for the proposal’s negative impact on privilege, damage to the accuracy of reporting, and disadvantages to reporting companies engaged in litigation, among other things. ACC’s comments, and the hundreds of corporate co-signatories who joined our letter, are available here.