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Updates from FASB

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Recently, the Financial Accounting Standards Board (FASB) issued a new chapter of its Conceptual Framework: Chapter 2, The Reporting Entity.

The new chapter establishes the concepts that FASB would use in developing standards of financial accounting and reporting. It provides a framework for developing standards that meet the objective of financial reporting and enhance the understandability of information for existing as well as potential investors, lenders, donors, and other resource providers of a reporting entity.

It describes a reporting entity as “a circumscribed area of economic activities that can be represented by general purpose financial reports that are useful to existing and potential investors, lenders, and other resource providers in making decisions about providing resources to the entity.” It also specifies the following three features of a reporting entity:

  • Economic activities have been conducted
  • Those economic activities can be distinguished from those of other entities
  • The financial information in general purpose financial reporting faithfully represents the economic activities conducted within the circumscribed area and is useful in making decisions about providing resources to the reporting entity.

To access the text of the chapter, please click here

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