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.
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.
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.