Capital maintenance to be excluded from IFRS

Capital maintenance to be excluded from IFRS

Last updated on 4 May, 2012

The current International Accounting Standards Board´s Framework for the Preparation and Presentation of Financial Statements includes eight paragraphs dedicated to the Concepts of Capital and Capital Maintenance.

The Framework - with the exception of the Concepts of Capital and Capital Maintenance - is in the process of being updated. The Joint “Conceptual Framework project aims to update and refine the existing concepts to reflect the changes in markets, business practices and the economic environment that have occurred in the two or more decades since the concepts were first developed.

Its overall objective is to create a sound foundation for future accounting standards that are principles-based, internally consistent and internationally converged. Therefore the IASB and the US FASB (the boards) are undertaking the project jointly” according to the IASB.

The Concepts of Capital and Capital Maintenance are not included in the phases to be updated in the Joint Conceptual Framework Project.

Kevin McBeth, FASB Conceptual Framework Project Manager (Phase C Measurement) stated in email correspondence with me: "In the measurement phase the staff suggested that capital and capital maintenance be discussed in the measurement phase, as it was in the original FASB Conceptual Framework. However, to date the Boards have not taken a decision on where, or even whether, those topics will be included in the converged framework."

It is thus not clear where, or even whether the Concepts of Capital and Capital Maintenance as stated in the current Framework, Paragraphs 102 to 110 will be included in the new Conceptual Framework. According to Kevin McBeth, the Concepts of Capital and Capital Maintenance may even be excluded from the future converged Conceptual Framework.

Kindest regards

Nicolaas Smith
realvalueaccounting@yahoo.com

Update:

The Capital Maintenance section of the original Framework (1989) was retained in the latest Conceptual Framework (2010).

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