The Financial Accounting Standards Board says it will take into considerations the recent suggestions of its overseer, the Financial Accounting Foundation, regarding business combinations and fair value rules to determine if further standard-setting is in order.

FASB Chairman Leslie Seidman acknowledged the recent findings of FAF's Post-Implementation Review, which concluded some preparers are still having trouble applying FASB's 5-year-old business combinations standard, Statement No. 141R: Business Combinations, including its interplay with FASB's Statement No. 157: Fair Value Measurement. Both of those standards have since been renamed under FASB's Accounting Standards Codification.

FAF's review said preparers are having trouble applying the definition of a business that is contained in FASB's accounting standard, accounting for purchased loans, and separately reporting some intangibles and goodwill. FAF also said some preparers are struggling with how to apply fair value measurement rules to certain types of assets and liabilities acquired in business combinations.

In its final report to FASB, the review team said FASB should enhance and formalize its process for identifying, prioritizing, tracking and resolving key financial reporting issues. FASB also should regularly report on and update the status of those issues and should clearly identify and document the need that a given standard-setting project is meant to address. Finally, the review team said FASB should consistently perform research such as field work or reviewing academic studies as early as possible in the agenda-setting and deliberation process to inform its decision-making.

FASB said it will take a fresh look at its business combinations rule and its fair value rule in light of the existing standard-setting agenda to determine if changes are in order. It also will consider the review's findings in connection with some current projects that are already on FASB's agenda, Seidman said in her letter to FAF, including a key proposal on impairment of financial instruments, which already in advanced stages of development. FASB said it will consult with its advisory groups and track the parallel review effort taking place at the International Accounting Standards Board to assure its standards remain converged with international rules.

FAF's review did not include a full review of FAS 157, but addressed ways in which it was difficult to apply in connection with business combination rules. FAS 157, in fact, is the next standard FAF intends to fully review through its post-implementation review process. Seidman points out FAF should take into account additional factors when conducting that review, such as the present focus of the Public Company Accounting Oversight Board on how well auditors are auditing such accounting.

The PCAOB's increased attention on auditors has resulted in “greater focus by preparers and auditors on testing and documenting significant assumptions and inputs used in fair value measurements, which in turn may affect the complexity of valuation techniques used to measure fair value, the time required to complete required valuations, and the use of external valuation specialists,” Seidman wrote. “We request that the team inquire about these environmental issues that may be contributing to the cost and complexity of applying the requirements.”