We ask FASB to wait for converged answers

  • Deloitte Comment Letter Image

03 Nov 2008

Deloitte & Touche LLP (United States) has submitted to the FASB two comment letters urging FASB not to proceed with the following proposed amendments to two FASB pronouncements – FAS 140 on derecognition and FIN 46(R) on consolidation – but, rather, to wait for completion of the joint FASB-IASB projects on the two topics:

  • The Proposed FASB Statement Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140 would change FASB's current derecognition model.
  • The Proposed FASB Statement Amendments to FASB Interpretation No. 46(R) would change FASB's current consolidation model.
Here is an extract from the FAS 140 (derecognition) letter. The same point is made in the other letter:

Rather than issuing this proposed Statement as a final standard, the FASB should work with the IASB to develop a common derecognition model that can be applied by all entities reporting under either US GAAP or IFRSs. Currently, the two boards are expected to issue joint final standards by 2010. Therefore, if the FASB were to issue this proposed Statement as a final standard, US registrants would have to apply three different derecognition models within a short time frame, resulting in operational challenges for preparers.

Because derecognition and consolidation are inextricably linked, we also strongly encourage the FASB and IASB to concurrently develop a common consolidation principle. The derecognition and consolidation principles should be conceptually consistent, based on the concept of control, and consistent with the definitions of an asset and a liability being developed in the joint conceptual framework. We believe that such consistent principles are fundamental to more faithfully representing the assets and liabilities of a reporting entity.

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