Fasb Case Study

A recent issue that is becoming increasingly contentious and providing a hurdle to convergence between GASB and IASB is accounting for Financial Instruments. The financial crisis of 2008 had devastating consequences for the financial markets everywhere. Blame was widely spread and both IASB and GASB considered making changes in the accounting of financial instruments, particularly the delayed recognition of credit losses on loans. FASB and IASB began working together, but found irreconcilable differences in their solutions to this problem. Their main differences involved classification and measurement, recognition and derecognition and hedge accounting. One of the fundamental differences on which IASB and FASB disagree is the qualifying criterion of financial instruments. IFRS, unlike GASB has qualifying criteria that entities must meet in order to elect the fair value option. Furthermore, IFRS has different criteria to elect the fair value option for assets, liabilities and equity. Under IFRS 9, paragraph
Although both organizations impose limits to reclassification of financial instruments the process is strict under FASB guidelines. Under IASB An entity may reclassify financial assets if it changes its business model for managing financial assets [IFRS 9, paragraph 4. 4. 1] However Under FASB 320-10-35-5 reclassifications are much less common and occur only when an entity can no longer maintain a classification such as when an entity can no longer hold a debt security until maturity its classification as a held-to-maturity maturity would no longer make sense. Under IASB reclassication of securities is possible to a greater extend and somewhat elective whereas under FASB the change in classification is mandated. Although this is one reason why convergence will be difficult between FASB and IASB there are a number of