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* In December the Financial Accounting Standards Board (FASB) issued four exposure drafts that represent the first phase of a comprehensive project FASB and the International Accounting Standards Board (IASB) have undertaken to "converge" their respective standards into a common set of high-quality accounting standards.

The EDs and their respective proposals are as follows:

** Accounting Changes and Error Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3 proposes retrospective application of a voluntary change in accounting policies instead of cumulative effect adjustment, as is currently required.

** Earnings per Share--an amendment of FASB Statement No. 128 would revise the guidance for calculating the number of incremental shares included in diluted shares when applying the treasury stock method. It also would eliminate provisions allowing an entity to rebut the presumption that contracts with the option of settling in either cash or stock will be settled in stock and require that shares that will be issued upon conversion of a mandatorily convertible security be included in the weighted-average number of ordinary shares outstanding used in computing basic earnings per share from the date that conversion becomes mandatory.

** Exchanges of Productive Assets--an amendment of APB Opinion No. 29 would require that such exchanges be accounted for based on the fair value of the assets involved, unless the transaction does not have commercial substance that can be identified by comparing the entity's expected cash flows immediately before and after the exchange.

** Inventory Costs--an amendment of ARB No. 43, Chapter 4 would exclude unusual or abnormal amounts of idle capacity and spoilage costs from the cost of inventory and expense them as incurred. According to FASB the proposed amendment would reconcile wording differences between Accounting Research Bulletin no. 43 and the IASB's International Accounting Standard no. 2, Inventories, each of whose principles--before the restatement and revision--could be applied inconsistently even though their intent was identical.

Comments on each ED are due April 13.

* FASB issued Statement no. 132 (revised 2003), Employers' Disclosures about Pensions and Other Postretirement Benefits, in December to in, prove financial statement information on defined benefit plans ( The board--replacing its existing guidance on pension plan disclosure requirements--issued the revision to address investors' and other financial statement users' concerns about the level of transparency in reporting on such plans. The statement is effective for fiscal years ending--and quarters beginning--after December 15, 2003. A series of questions likely to be asked about it is available at

* Another FASB revision exempts certain entities from the requirements of Interpretation no. 46, Consolidation of Variable Interest Entities ( fin46r.pdf). The board published the additional guidance to address concerns about issues that arose when companies implemented the interpretation. Under the revision special effective date provisions apply to enterprises that fully or partially implemented the original guidance before the board revised it in December 2003. These changes are explained in detail in the amended interpretation.
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Publication:Journal of Accountancy
Date:Feb 1, 2004
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