Fair Value
Big changes to FASB's controversial standard on fair-value measurements seem unlikely any time soon. Even the representatives of financial-services institutions, until now the fiercest opponents of the FASB standard, SFAS 157, seem wary of calling for replacement or suspension of the measure in the face of the plummeting stock market. Indeed, Bob Traficanti, the head of accounting policy and a deputy controller at Citigroup, who in May publicly objected to the standard's effects on banks during the subprime crisis, fully supported it in November at the SEC's final roundtable on the topic. Traficanti, a former FASB project manager, said both he and Citigroup "believe 157 should be left intact."

Many agree that it doesn't make sense to tamper with the rule now and risk losing whatever investor confidence still remains. "From everything I hear, I don't think anyone is going to be suspending fair value, or anything like that," says Robert Kueppers, deputy CEO of Deloitte USA. Thus, the study on SFAS 157 that the SEC is presenting to Congress this month seems unlikely to recommend a radical change in mark-to-market regimes.

Financial Statement Presentation Project
This once-radical effort to have companies reorganize their financial statements in ways that would potentially change how Wall Street views them has been toned down to a large extent. In the original draft version, for example, companies would have eliminated the net-income line from their reports; in FASB and the IASB's current joint proposal (out for comment until April 14), net income still exists as a subtotal on the statement of comprehensive income. Still, "it's a very ambitious project and a very different presentation," says Grant Thornton's John Hepp.

The proposed new format calls for companies to reconfigure the balance sheet and the income statement to follow the lines of the current cash-flow statement. Each one would separate data into at least the following four categories: business (or operating) items, financing items, income taxes, and discontinued operations. The proposal provides broad guidelines for classifying business and finance terms that permit some flexibility in communicating the unique aspects of each business. The flexibility does not extend to income taxes, discontinued operations, and equity, however. Companies would also be required to provide a new statement that reconciles income to cash flows as part of their notes section.

Still, "it's very important to understand this is a much-longer-term thing," says Kueppers. "We might see some discussion of it in 2009, but I don't think any decisions will be made before 2010," at the earliest.

Like so many issues, the future of the Financial Statement Presentation project "will depend on how enthusiastic [investor] response is," says Hepp. Assuming it happens, though, the door would be open for the implementation of those original radical ideas. A joint statement from the two boards affirmed that they would retain the notion of net income for now, but that "a future standard on financial-statement presentation would replace existing guidance in both U.S. GAAP and IFRS."

FAS 5: Accounting for Contingent Liabilities
Last summer, FASB ignited the ire of the business community with its proposal to require companies to disclose "specific quantitative and qualitative information" about loss contingencies such as securities litigation. The changes would "add uncertainty, complexity, new liability, and a great deal of cost while compelling companies to provide potentially unreliable, and often immaterial, information about pending litigation," said a comment letter from the U.S. Chamber of Commerce. Up against dozens of similarly scornful letters, FASB beat a hasty retreat and directed its staff to develop an alternative model, which was to be field-tested (along with the original controversial version) last fall. FASB could not confirm any specific dates.

This quarter, public roundtable discussions about FAS 5 are on the docket, with a final decision expected to take place sometime this spring. The revision, should it occur, would not be effective until after December 15, 2008, according to the board.

Alix Stuart is a senior writer at CFO. Additional reporting was provided by Sarah Johnson, David Katz, Marie Leone, and David McCann.

Private Practices
Will IFRS provide the "little GAAP" that companies want, or pose too large a burden?

While the largest U.S. companies are getting invitations from the Securities and Exchange Commission to be first-movers on international financial reporting standards, private companies could, in fact, steal some of their thunder. That's because the American Institute of Certified Public Accountants, which governs private-company auditing, has recognized the International Accounting Standards Board as a valid standards-setter. Once the IASB finalizes its "IFRS for Private Entities," due to happen this quarter, U.S. private firms could, in theory, immediately embrace the "little GAAP" they have been seeking for so long.

Mark Ellis, CFO of privately held Michael C. Fina, believes that would be a good move. Right now, nearly every accounting change requires a team of auditors to implement, he notes, whereas the new set of principles-based standards would be easier to apply internally. "I see this as a way for CFOs to do more, and for accounting firms...to not charge as much," says Ellis.

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