FASB Task Force Focuses on Attack Impact

September 24, 2001 (PLANSPONSOR.com) - With third quarter reporting rapidly approaching, the Financial Accounting Standards Board (FASB) has taken up the issue of how to deal with the financial reporting implications of the recent terrorist acts.

In a regularly scheduled meeting last week, the Emerging Issues Task Force (EITF) of the FASB attempted to provide some guidance for financial officers. If the group can reach consensus on an issue, that consensus becomes part of generally accepted accounting principles (GAAP). A consensus is defined as an agreement reached by at least 11 of the 13 task force members.

Financial Focus

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The EITF discussion focused on three issues, including

  • how losses or other costs caused by the incident should be reported in financial statements
  • when those losses or costs should be recognized (on September 11 or some later date), and
  • whether other information about the economic effects of the incident should be provided in financial statements.

The task force tentatively agreed that many of the incremental losses attributable to the events of September 11 should be classified as extraordinary and also reached agreement on what kinds of losses should be included, according to the press release. They noted that while property damage losses and other asset impairments directly resulting from the incident would be reported as an extraordinary loss, insurance company losses resulting from policyholder benefits would not be so treated.

The EITF also tentatively agreed that liabilities and related losses generally should not be recognized until there is an obligation to the payee but said qualifying losses should be classified as extraordinary even if they are incurred in subsequent periods.

Next Steps

Task force members will review the draft conclusions with the objective of finalizing that guidance in a meeting to be held on Friday, September 28, 2001, at 1:00 p.m. (EST).

A draft of the tentative conclusions reached on those issues will be posted on FASB’s website ( www.fasb.org ) on Wednesday, September 26, 2001.

The EITF was formed in 1984 in response to recommendations of the FASB’s task force on timely financial reporting guidance. Its members are drawn primarily from public accounting firms but also include representatives of large companies.

If At First You Don't Succeed… – 3-

August 24, 2001 (PLANSPONSOR.com) - Wealthier Americans can bridge the "advice gap" by hiring an investment advisor. But few working families can afford such a luxury on their own. Instead, they end up getting their advice from Bob at the coffee shop.

PLANSPONSOR:  What kind of impact will these new competitors have on the advice market?

BOEHNER :  Today there are all these firms out there, making investment decisions which impact the investment returns of many of these 401(k) plans.  And yet these same firms are largely prohibited from sharing that expertise with these same [plan] participants.  I’m optimistic that the additional competition will enhance both the type and quantity of investment advice available to participants.

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One of the phenomena that we have noticed is that despite a growing number of advice offerings, most participants don’t yet seem to be taking advantage.  Of course, we are still early in the product cycle, but do you think the Retirement Security Advice bill will make a difference in participant behavior?

Look, I’m just a congressman.  What may happen in the marketplace is anyone’s guess.  I don’t know that it will – but I’m convinced that the American people, most of the time, get it right.

– Nevin Adams            editors@plansponsor.com

Editor’s note:  Early August, the bill passed the Employer-Employee Relations (EER) Subcommittee by a voice vote.  As we went to press, the bill had attracted 42 co-sponsors from both parties, including nine Democrats.  The current list of co-sponsors includes Rep. Martin Frost (D-Texas), the chairman of the House Democratic Caucus, the third-ranking Democrat in the House, House Majority Leader Dick Armey (R-Texas), House Financial Services Committee Chairman Michael Oxley (R-OH) and Representative Rob Portman (R-Ohio).

The full committee is expected to vote on the bill sometime soon after Congress returns in September.

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