e) Other ‘fundamental’ projects As noted above, ‘fair values’ is currently the most controversial issue for standard setters world-wide. Labelling this ‘Number 1’, other fundamental projects currently include:
2) Revenue Recognition In June 2002 the FASB and IASB decided to undertake jointly a project on revenue recognition. The primary objective of this joint project, in which the FASB is taking the lead, is to develop a comprehensive set of principles for revenue recognition that will eliminate the inconsistencies in the existing authoritative literature and accepted practices. For its part, the IASB’s plan is that the project will lead to a revision of the IASB Framework and IAS 18 Revenue54. A particular problem is the treatment of liabilities arising from performance obligations (which is therefore relevant to insurance contracts) and the IASB’s own title for the project is ‘liabilities and revenue recognition’.
3) Reporting Performance FASB and IASB are undertaking a joint project on Performance Reporting and have established a Joint International Group (JIG) which held its first meeting in January 2005. It focuses on the issues relating to providing a single ‘statement of comprehensive income’ and whether this should include a subtotal similar to the concept of ‘net income from continuing operations’/ ‘profit and loss’ (and relatedly ‘earnings per share’) and whether there should be ‘recycling’ between the subtotals, e.g. when previously revalued assets or liabilities are realized (Barker, 2004). So far the discussions have not generated a clear definition of either net income or performance. This reflects views expressed in earlier FASB interviews with analysts that ‘financial performance cannot be reduced to a single financial metric or a single financial statement’.55 The work on this project is clearly relevant to, and potentially influenced by, consideration of how to present and explain ‘performance’ (both insurance and investment performance) under the EV-based approaches to life insurance accounting.
4) Conceptual Framework In October 2004 FASB and IASB adopted a joint project to develop a common conceptual framework that both converges and improves upon their existing respective frameworks. The initial focus would be on objectives, qualitative characteristics, elements, recognition and measurement and would give priority to addressing cross-cutting issues that affect a number of their projects on individual standards.56 It was recognised that measurement is one of the most underdeveloped areas of the two frameworks (although, as discussed further in e.g. Macve, 2004c), the project summary appears to ignore the greater degree of progress made in this regard by the UK’s ASB in utilising the concept of ‘deprival value’ or ‘value to the business’ to select the appropriate asset/liability valuation basis in different circumstances). 57
54 See http://www.fasb.org/project/revenue_recognition.shtml ; http://www.iasb.org/uploaded_files/documents/16_20_revenue-ps.pdf (accessed 28 April 2005). http://www.iasb.org/uploaded_files/documents/8_954_finalsummaryminutes-15april2005- publicwebsite.doc ; http://www.fasb.org/project/interviews.pdf (accessed 28 April 2005). http://www.fasb.org/project/conceptual_framework.shtml (accessed 28 April 2005). 55 56
e.g. http://www.frc.org.uk/asb/publications/it8_p62.html (accessed 3 May 2005).