A regular meeting of the Financial Reporting Council (FRC) took place on December 7, 2001. The FRC was created in October 2000 with the technical assistance of the ICAR with the objective of analysis and developing recommendations on theoretical and practical application of IFRS.
Alongside organizational issues, the following projects of the International Accounting Standards Board (IASB) were also discussed at the meeting:
- First Time Application of IFRS
- Reporting Performance
- Measurement (Present Value)
These projects constitute the priority projects set by the IASB, which were considered during the IASB and the Standards Advisory Council (SAC) at IASB in the autumn of 2001. The first time application of IFRS project is of a short-term nature, since the IASB intend to adopt a corresponding (SAC) in 2002. Reporting performance and Measurement project are estimated for a longer term.
The objective of the First Time Application of IFRS project is to provide for more detailed explanations on the matters of the first application of IFRS by entities. Currently, only SIC 8 First application of IFRS as the basis for accounting treatment of the Standing Interpretation Committee (SIC) highlights these matters, which is obviously not enough to answer all questions companies will have in shifting to reporting under IFRS.
The prime idea of the Reporting Performance project is to shift to a concept of recognition of «full» income, when totals of all gains/losses of net assets of the entity (excluding those that result from the transactions with the owners of an entity) shall be reflected in a comprehensive income statement. The project may be defined as a revolution in accounting and financial reporting area. Its implementation will drastically affect the Income Statement and also the Cash Flow Statement, which is expected to be tied on by-item basis to the Income Statement.
IASB measurement project implies the continuation of the present value project initiated by the previous members of the IASB. This project was required by the existence of a large number of various measurement methods and lack of a distinct and clear measurement concept. The objective of the IASB Measurement project is to form a unified concept for measurement of reporting items, including applying this measurement as a basis for fair value determination and accounting for the impairment of assets.
Discussion of the above IASB projects during the FRC meeting demonstrated the lack uniformity in most of the solutions offered by the projects. This is particularly fair to the project on Reporting Performance; the SAC members unanimously supported the idea of further discussion on this project at a technical seminar, scheduled for February. (The seminar was held on February 8, 2002.)
In addition to the IASB projects discussed during the meeting, the problem of IFRS convergence with national standards of financial reporting was also discussed. Convergence, or in other words, IFRS reconciliation with national standards is set as one of the goals of the IASB according to the IASB Statutes. However, at present specialists lack the understanding of convergence and of how this objective may affect the process of development of IFRS. This effect may be very significant and that was demonstrated by the discussion of the IASB projects during the SAC meeting in Washington in October 2001. Practically every project was reviewed from the convergence point of view.
The last matter considered at the FRC meeting was related to the IASB project with regard to Extractive Industries accounting which is now «frozen». The role of this document particularly to the countries with developed extractive industries, including Russia, is extremely important. It was decided during the SAC meeting to create a working group with the purpose of analyzing previously achieved results on the IASB project and developing position of the specialist from Russia with regard to its perspectives. Performance shall be reported to the IASB. It is assumed that the specialists from audit firms and extractive industries will be engaged in the working group activity. The FRC meeting on February 13, 2002 approved a list of participants and procedures for the working group activity.
For more information on the matters considered during the Financial Reporting Council meeting, including the complete set of materials on the IASB projects in English and a summary of these materials in Russian, and also decisions made by the Council, please, search the Internet address of the Council at http://www.icar.ru under FRC.