Introducing “Approach Y”: A Better Lease-Accounting Model for Lessees (Part 2)

(Previous Posts: Part 1) Here is the second in a series of working papers that I am preparing to explain “Approach Y”—a lease-accounting model for entities that are lessees. The new working paper, which compares the measurement outcomes of Approach Y and other approaches, is attached. Also attached is the Excel file to which the new working paper [...] Read more > >

Introducing “Approach Y”: A Better Lease-Accounting Model for Lessees (Part 1)

To date, the Financial Accounting Standards Board (FASB), the International Accounting Standards Board (IASB), and the Boards’ constituents have not reached a consensus on how lessees should account for leases. Several approaches to lessee accounting have been identified and debated, but so far none of them has been widely embraced as the clear solution to [...] Read more > >

Disclosure Framework Update

The FASB’s Disclosure Framework team is close to issuing an Invitation to Comment, which will present the staff’s thinking on this important project.  While this is a FASB only project, there are several other bodies that are watching the project closely, including the IASB and SEC.  This post provides a brief update on the project [...] Read more > >

Auditor Judgment Frameworks; or Principles-Based versus Rules-Based Accounting Standards Part II

A recent paper by Backof, Bamber, and Carpenter (2011, International Financial Reporting Standards and Aggressive Reporting: An Investigation of Proposed Auditor Judgment Guidance) investigates auditors’ judgments under IFRS and US GAAP.  The authors conduct an experiment where 200 auditors from a Big 4 accounting firm were asked whether they agree with management’s preferred accounting methods [...] Read more > >

Principles-Based versus Rules-Based Accounting Standards

If you were to pose a question to any undergraduate accounting major with familiarity about IFRS as to what is the primary distinction between IFRS and U.S. GAAP, you’d probably get the response that IFRS is principles based and U.S. GAAP is rules based.  It’s a notion that was promoted by former IASB Chairman Sir [...] Read more > >

Fair Values and Private Companies

In the most recent The Accounting Review (Vol. 87, No. 2), Caskey and Hughes examine how alternative fair value (FV) measures affect the ability of debt covenants to mitigate suboptimal investment decisions.  A primary result from the paper is that the FASB’s “highest and best use” measure of fair value is dominated by more conservative [...] Read more > >

Accounting for Asset Securitizations

The most recent issue of The Accounting Review (March 2012) contains a study by Barth, Ormazabal, and Taylor that examines the association between two measures of credit risk and asset securitizations.  I found the study to be interesting and relevant to standard setters. Accounting for asset securitizations is controversial, and critics have charged that GAAP [...] Read more > >

Why is the Bank Lobby Against FV-NI?

Financial institutions complained loudly two years ago when the FASB issued a proposed standard on financial instruments that would require fair value reporting for loans with changes in FV being recognized in earnings (FV-NI).  I would describe the bases for these complaints falling into two broad categories.  The first category is the notion that it [...] Read more > >

Update on the Leases Project

When I first arrived at the FASB, my expectation was that the Leases project was winding down and we might have a final standard before I left.  This was also what the FASB website indicated.  How things have changed!  After an Education Session a couple of weeks ago and the joint IASB/FASB Board Meetings this [...] Read more > >

FASRI Roundtable: Other Comprehensive Income

The current model of reporting other comprehensive income outside of earnings is controversial and receiving attention from standard setters.  The FASB/IASB Issues Conference this past December spent a significant amount of time on this issue.  Specifically, the primary issues are 1) presentation of OCI in the financial statements (which is the topic of the recently [...] Read more > >