For WizardKim-DP2
3rd Post Discussion:
Respond to the post below from your fellow classmate. Any opinions, or anything you would like to add to discuss about their post. Must be three substantial paragraphs, and three references.
The past two weeks I often chose the shortest, or what appeared to be the most interesting, video to analyze for our discussion post. However, this week I decided I wanted to watch a video that pertained to this weeks reading assignment. This week, the task of reading and analyzing chapter two of ourAdvanced Accountingtextbook was assigned. For those of you who have not yet had time to read the chapter, the primary focus is on the consolidation of financial information. The consolidation method is one of the most complex procedures in the accounting profession and takes a deep understanding to truly appreciate what is happening (Hoyle et al., 2017). When the parent company uses the consolidation method, it requires them to report the subsidiaries assets, liabilities, revenues, and expenses with their own as if they were one single economic entity (Bishop, 2019). In an attempt to find a board meeting that closely related to the consolidation method, I clicked through many of the more recent meetings until I found the virtual board meeting held on Wednesday, September 2, 2020.
In the board meeting held on September 2nd, the board members discussed possible ways to improve the accounting for asset acquisitions and business combinations (FASB Board Meeting,2020). While there was a debate on whether the narrowing of the differences between the two accusation methods would ultimately improve the accounting profession, there was no mention this board meeting was a part of phase three of a much larger objective (Improving the Accounting for Asset Acquisitions and Business Combinations,2020). On May 29, 2013, the Financial Accounting Standards Board decided to add the task of clarifying the definition of a business with the overall objective of providing further guidance on evaluating if a transaction should be treated as an acquisition (or disposal) of assets or acquisition (or disposal) of a business. On October 8, 2014, the board ultimately decided in order to handle this project in a more mannerly fashion, they should split the objective into three phases (Improving the Accounting for Asset Acquisitions and Business Combinations,2020). According to the Financial Accounting Standards the three phases were:
Phase 1: Clarify the definition of a business Phase 2: Clarify the scope of Subtopic 610-20, Other IncomeGains and Losses from the Derecognition of Nonfinancial Assets, and clarify the reference to in substance nonfinancial assets and address the guidance on partial sales or transfers of assets within the scope of Subtopic 610-20 and the corresponding accounting for retained interests in those assets. Phase 3: Discuss whether there are differences in the acquisition and derecognition guidance for assets and businesses that could be aligned (Improving the Accounting for Asset Acquisitions and Business Combinations,2020).
Ultimately, with the first two phases complete, all that is left is to discuss whether or not the accounting profession can be improved by narrowing the differences between the two acquisition models.
Over the course of the video, many of the board members repeatedly mention they cannot forget the overall objective of the financial statements is to provide meaningful information to the investors (FASB Board Meeting,2020). What is interesting is despite being members of the same board, many of the member felt differently on how the narrowing of differences would eventually affect the investors. In the end, all of the board members felt it was appropriate to remove two items from the overall objective of the project (FASB Board Meeting,2020). The first item removed was related to in progress research and development. Many board members were not in favor with the idea of narrowing the differences between the treatment of in progress research and development, whether it be the acquisition of assets or a business (Improving the Accounting for Asset Acquisitions and Business Combinations,2020). The second item removed was related to lease contracts (FASB Board Meeting,2020). After much discussion, the board members felt the issues that surrounded the treatment of lease contracts and recognition would be better handled in the FASBs current implementation efforts on leases (Improving the Accounting for Asset Acquisitions and Business Combinations,2020). The final thing I found interesting and ironic is the fact the Financial Accounting Standards Board is using Zoom for their meetings and having technical difficulties like many students around the world are currently having (FASB Board Meeting,2020).
Video Link:https://www.youtube.com/watch?v=q-VT2bF1MYk
References
Bishop, J. (2019, May). Consolidation and equity method of accounting. https://www.pwc.com/us/en/cfodirect/publications/accounting-guides/consolidation-framework-equity-method-accounting-vie-guide.html.
Financial Accounting Standards Board. (2020, September 2).FASB Board Meeting – Wednesday September 2, 2020. YouTube. https://www.youtube.com/watch?v=q-VT2bF1MYk.
Financial Accounting Standards Board. (2020, September 8).Improving the Accounting for Asset Acquisitions and Business Combinations (Phase 3 of the Definition of a Business Project). Project Update. https://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdateExpandPage.
Hoyle, J. B., Schaefer, T. F., & Doupnik, T. S. (2017).Advanced accounting(13th ed.). Mcgraw-Hill Education.
