Michael Doan

Just before the holidays FASB released ASU 2011-12: Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.

As the title of the ASU states, this is a deferral of ASU 2011-05. The reason for the deferral according the FASB:

Stakeholders…recently raised concerns that new presentation requirements about the reclassification of items out of accumulated other comprehensive income would be costly for preparers and add unnecessary complexity to financial statements.

However, not all of the 2011-05 was deferred:

The Board did not defer the requirement to report comprehensive income either in a single continuous statement or in two separate but consecutive financial statements.

ASU 2011-12 can be found here after accepting the FASB’s terms and conditions.

The FASB released Concepts Statement No. 8—Conceptual Framework for Financial Reporting—Chapter 1, The Objective of General Purpose Financial Reporting, and Chapter 3, Qualitative Characteristics of Useful Financial Information (a replacement of FASB Concepts Statements No. 1 and No. 2). Con No. 8 can be downloaded from the FASB website.

The release is intended to create a sound foundation for future accounting standards that are principles-based and enables the convergence with IASB’s international standards.

In the current economic environment, its difficult to obtain a bank loan or a line of credit. Businesses fortunate enough to have a line of credit worry about having their line pulled as bank credit managers continually tighten their lending requirements to keep their reserve ratios up with regulatory demands. A recently proposed Accounting Standards Update (ASU) No. 1810-100 (PDF) issued by the Financial Accounting Standards Board (FASB) could make it more difficult to obtain a bank loan.

ASU No. 1810-100, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities — Financial Instruments (Topic 825) and Derivatives and Hedging (Topic 815) would, according to the FASB, result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRS, including word changes to describe the principles and requirements.

The impairment test and expanded use of fair value measurements in the proposed ASU 1810-100 has caused a stir in the banking industry. Banks say that changes in the accounting standards will require them to beef up their reserves and scale back loan originations. If this happens, businesses may find it even more difficult to get a line of credit.

Comments on this proposed standard is due September 7, 2010