NEWS RELEASE 07/10/01
FASB Proposal Would Amend Accounting for Certain Costs and Activities Related to Property, Plant and Equipment
Norwalk, CT, July 10, 2001—The Financial Accounting Standards Board (FASB) today proposed to amend Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to exclude from its scope the accounting for acquisition, development and construction costs of real estate developed and used by an entity for subsequent rental activities. The accounting for those costs would be subject to the guidance in an Exposure Draft of a proposed Statement of Position (SOP) issued by the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants. The FASB and AcSEC are jointly responsible for setting U.S. accounting standards for level B of the hierarchy of generally accepted accounting principles.
The FASB's proposal also would amend APB Opinion No. 28, Interim Financial Reporting, to require that the costs that the proposed SOP would require be expensed as incurred on an annual basis also be expensed as incurred in interim periods.
AcSEC drafted the proposed SOP to address diversity in accounting for expenditures related to property, plant and equipment (PP&E), including improvements, replacements, betterments, additions, repairs and maintenance. The proposed SOP addresses accounting and disclosure issues related to determining which costs related to PP&E should be capitalized versus those that should be charged to expense as incurred. The proposed SOP also addresses capitalization of indirect and overhead costs and component accounting for PP&E.
If adopted as a final Statement, today's FASB proposal would be effective for annual and interim financial statements for fiscal years beginning after June 15, 2002, with earlier adoption encouraged. The comment period ends October 15, 2001. The Exposure Drafts of the SOP and the FASB proposal are available free of charge on the FASB's website, www.fasb.org.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely heavily on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.
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