FASB Examines Business and Financial Reporting, Challenges from the New Economy.

Many observers maintain that there is a disconnect between the information provided in today's financial statements and the information needs of investors and creditors. In examining this issue, observers point to the widening gap that exists between information needs of "New Economy" companies and "Old Economy" financial reporting. The Financial Accounting Standards Board has published a Special Report, Business and Financial Reporting, Challenges from the New Economy, that examines the intersection between the new economy and business and financial reporting.

The report reviews a range of studies and articles that compare accounting treatments for traditional assets and the challenges of new economy notions of intangible assets. It concludes that the debate over "new" versus "old" is unhelpful and that the perceived shortcomings of business and financial reporting do not easily lend themselves to a simplistic and single solution. The more important question is whether business financial reporting should change and, if so, how.

According to the report, standard setters should focus their attention on:

* Examination of the conceptual and practical issues surrounding recognition of internally generated intangible assets and measurement of those assets.

* Expanded and systematic use of non-financial performance metrics.

* Expanded use of forward-looking information. An appendix of the report describes four projects that standard setters might consider in addressing the financial reporting challenges that are a part of the new economy.

As the FASB begins to consider whether it should add new projects to its agenda, the board hopes constituents will view this report as an opportunity to offer their insights on the subjects covered. Comment letters would be most useful if received by July 1.

Business and Financial Reporting, Challenges from the New Economy is available free of charge on the FASB's Web site:

www.fasb.org