Year in Review

Significant 2002 Financial Reporting Developments

Financial scandals and their effect on the general condition of our financial reporting system once again dominated the headlines during the past year. As a result of this turmoil, there has been a greater focus on reliable and transparent financial statements, driven by clearly articulated principles. In addition, the Financial Accounting Standards Board (FASB or the Board) is revisiting the way it operates and has placed greater emphasis on harmonizing accounting standards internationally. In this environment, we can expect to see monumental changes in the future for our financial reporting system. During the past year, the FASB issued the following Statements:

• No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
• No. 146, Accounting for Costs Associated with Exit or Disposal Activities
• No. 147, Acquisitions of Certain Financial Institutions
• No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure.

• No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others
• No. 46, Consolidation of Variable Interest Entities.

The Governmental Accounting Standards Board (GASB), the standard-setting body for state and local governmental entities, issued one final pronouncement during 2002, GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. The Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 02-2, Accounting for Derivative Instruments and Hedging Activities by Not-for-Profit Health Care Organizations, and Clarification of the Performance Indicator, during the previous year and continued to make some progress on several other projects. However, the AICPA and the FASB announced in late 2002 that AcSEC would focus on industry-specific accounting guidance and stop issuing general purpose accounting Statements of Position after an agreed-upon transition period.

As always, the FASB’s Emerging Issues Task Force (EITF or the Task Force) had a busy year, reaching consensus positions on various practice issues, including revenue arrangements with multiple deliverables, business combinations, a vendor’s accounting for rebates, and financial instruments. In addition, the FASB announced that beginning in January 2003, it would have to ratify all consensus positions by the Task Force before they become effective. The Board would consider ratifying the consensus position at a subsequent public Board meeting, generally within two weeks of the EITF meeting, and the consensus would become effective when ratified by the Board, not on the date of the EITF meeting.

This letter summarizes the significant new and proposed rules considered by these bodies, as well as some of their other agenda projects.

Continue Reading - Final FASB Pronouncements

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