FASB Issues New Conceptual Framework Chapter

The FASB has issued a new chapter, “The Reporting Entity” (Chapter 2), of Concepts Statement No. 8, Conceptual Framework for Financial Reporting.

In the new chapter, a reporting entity is described 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.”

The chapter also establishes that a reporting entity has three features:

• “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.”

For more information, see the press release on the FASB’s Web site.