FASB Conceptual Franework

It’s funny how these things work out. A few days ago, I was at Disney's Four Seasons Resort for Western CPE's Orlando conference, speaking about the exposure draft for the final chapter of the FASB's Conceptual Framework. At the time, I indicated it was still an exposure draft but that I expected a final issuance any day now. Low and behold, when I checked my emails later, the announcement from the FASB was in my inbox. For several years, the FASB has been working on a complete conceptual framework to serve as a basis for any and all future GAAP standards issued by the FASB. While the information is non-authoritative and does not change any current GAAP, it can be used by the FASB in developing new standards, as well as practitioners in exercising professional judgment when guidance does not exist. The latest chapter — Chapter 6 of Concept 8 — addresses one of the fundamentals of any financial framework: measurement. It provides a discussion on the two measurement systems which the board feels are both relevant and provide a faithful representation. Those two methods are the entry and exit price systems. The entry price is the price an entity pays to acquire an asset or receives to assume a liability, while an exit price is the price received to sell an asset or paid to settle a liability. Both methods should be considered when making a determination on the proper accounting treatment. The concept also provides plenty of guidance on the selection of a measurement system. I will be explaining this in more detail in upcoming presentations this year, as well as other aspects of the new and complete framework.