Recent Comment Letters from IMA: The IMA[R] Technical Committees and Panels Finished Up the 2012 Calendar Year by Providing Comment Letters on the FASB's Disclosure Framework Discussion Paper and the Private Company Decision-Making Framework Project as Well as COSO's Revision of the Internal Control-Integrated Framework

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Greetings from the world of Professional Advocacy! IMA's technical committees and panels ended the 2012 calendar year by submitting influential letters to the Financial Accounting Standards Board (FASB) and the Committee of Sponsoring Organizations of the Treadway Commission (COSO) about financial reporting frameworks for private and public companies and internal controls.

FASB's Proposed Disclosure Framework

On July 12, 2012, the FASB issued an Invitation to Comment on its Disclosure Framework discussion paper, which is part of a project aimed at improving the effectiveness of disclosures in notes to financial statements by clearly communicating the information that's most important to financial statement users. Although reducing the volume of notes to financial statements isn't the primary focus, the Board hopes that a sharper focus on important information will result in more clarity.

On November 7, 2012, IMA submitted a letter to the FASB that was endorsed by three of IMA's technical committees: the Financial Reporting Committee, the Small Business Financial and Regulatory Affairs Committee (SBFRC), and the eXtensible Business Reporting Language (XBRL) Committee. This is the first letter endorsed by three of IMA's standing advisory committees. A copy of the letter can be found on IMA's website: www.imanet.org/about_ima/advocacy_activity/financial_reporting_committee.aspx. The following is a summary of some of the specific issues it addresses:

* The FASB's proposed model for a disclosure framework wouldn't result in streamlined disclosures due to the open-ended decision model based on disclosure of any item that could potentially impact future cash flows.

* The FASB should undertake the project in coordination with the Securities & Exchange Commission (SEC) to achieve a better integrated financial disclosure model for companies subject to SEC reporting regulations. The FASB's purview should be limited to and focused on historical and factual financial information, and the SEC's purview should be focused on analysis-related disclosures. Further, interim disclosures should follow the SEC interim reporting framework, which views interim financial statements and related disclosures as integral components of the annual reporting model and should be scaled accordingly.

* The decision question model contained in the discussion paper should be applied by the FASB in determining the appropriate required disclosures for each topic. IMA's technical committees don't believe that disclosures can be determined effectively if the model is applied solely at the individual company level. Yet the committees do support companies having some level of flexibility in applying the model to their circumstances.

* IMA's technical committees suggest that, as part of the due diligence on this topic, the FASB review recently issued or proposed standards against the ultimate decision question framework and to hold roundtables or provide other feed-back venues to assess whether the overall objectives can be met before deciding to proceed to a formal exposure draft. More specifically, that study should fully examine how information provided in disclosures is utilized by investors in projecting cash flows.

* IMA's XBRL Committee believes that there are two areas that should be considered in a future comprehensive study by all stakeholders of disclosures for U.S. companies: nonfinancial key performance indicators and Web-based communication.

What factors should be taken into consideration when developing a Disclosure Framework that will be beneficial to preparers and users of financial statements?

FASB's Private Company Decision-Making Framework Project

IMA's SBFRC was developed in 2008 in response to the increased focus that standards-setting bodies have given to financial reporting issues that impact private companies. The majority of SBFRC members represent private companies and smaller public companies. …