Skip to content
FASB

Exclusive Midyear Interview with FASB Chair Richard Jones

Denise Lugo  Editor, Accounting and Compliance Alert

· 12 minute read

Denise Lugo  Editor, Accounting and Compliance Alert

· 12 minute read

FASB Chair Richard Jones likened the accounting year so far to country music group Zac Brown Band’s “Same Boat,” a song about “how we’re all in the same boat and we’re all working towards the same thing.”

“When I think about standard-setting and I look at our stakeholders, I think we ultimately all have the same objective in mind,” Jones told Thomson Reuters (TR) in an exclusive August 2023 interview. “Are we rowing together sometimes? Yes, sometimes not as much, but ultimately, I think overall successful standard-setting does have us rowing together,” he said.

He also addressed the board’s priorities for the remainder of the year, including proposals, new rules to come, the interaction between the FASB and the SEC’s Office of the Chief Accountant (OCA), and other issues.

The FASB is the nation’s main developer of Generally Accepted Accounting Principles (GAAP) for public and private companies, not-for-profit organizations, and employee benefit plans. Jones has chaired the standard-setting board since July 1, 2020. His term will conclude in 2027.

[This is an edited and shortened version of the interview]

TR: What are the board’s priorities for the remainder of the year (August – December)? Are you able to give us a preview about what to expect?

Jones: If you go to our technical agenda overview on the FASB website, each project shows what [FASB Technical Director] Hillary Salo and I believe to be the next milestone and expected timing, and that helps with transparency. For example, on our project on accounting for and disclosure of crypto assets, you’ll see from our website that we’ve gotten the exposure draft out, we’ve gotten feedback from stakeholders, and that soon we will be bringing that feedback back to the board. If our board decides to move forward, the next milestone could be a final standard which, if all goes according to plan, will be issued in the fourth quarter. We share that information on our website for each project for the reasons that you mentioned. I do think sharing our planned approach and timing with stakeholders, despite the limitations that go along with it – that it could change – is extremely important.

What about the highly controversial income tax disclosure proposal? You’re getting a lot of pushback on that, including from legislators — will it be finalized this year or delayed?

Jones: Let’s face it, the topic of income taxes gets a lot of people’s interest. We’re focused on people who make investment and capital allocation decisions – what provides them with the best information to understand a company’s tax provision so they can understand how that affects both current earnings and potentially future earnings and future cash flows. We’ve obviously settled on an effective tax rate approach, at least in our exposure draft, as well as additional detail about taxes paid. That’s what we heard from those allocators of capital about what will help them with their investment allocation decisions. But there are other things going on with other organizations with public policy objectives and sometimes people comingle our project and its objectives with those other public policy efforts – for example, you may see the OECD has their country-by-country tax reporting, that’s not our project and not what we are doing and their objective is very different than ours. Accounting and financial reporting related to income taxes certainly gets a lot of people’s interest and we’re always interested in their perspectives whether they be preparers, practitioners, investors or our elected officials. So, we engage with each of those parties. I think it’s helpful when we explain what we’re doing and what we are not doing. I think it’s also important that we understand what their concerns are, and if there is a way that we can address some of those concerns and meet the needs of the allocators of capital or not. I would say that’s all part of the process. Our exposure draft is out, the comment period’s closed, and it will be coming back to our board shortly. It is possible that it could be finalized before the end of the year. I think our website says that if everything went accordingly, it would be, but that’s based upon all that input coming back to us and the Board and making decisions based upon that input.

The board just voted on and agreed to finalize proposed segment expense disclosure rules. When will a final standard be published?

Jones: So on segments, yes, we did vote to issue it. I think you will see the final ASU either at the end of the third quarter or the beginning of the fourth quarter.

Any other new standards or proposals you would like to especially spotlight?

Jones: I would mention the disaggregation of income statement expenses exposure draft. We’re very eager for stakeholder input on that. It responds to one of the most frequent and, I would say, one of the highest priority investor concerns that we’ve heard, but we’re looking for ways to make sure it’s operational, recognizing that it could be a heavy lift for certain preparers in understanding how we got the balance right in a cost benefit equation. We also have our proposal on acquired loans out, with comments due by August 28. We do have comment letter deadlines, but if people come in a week or two late, we still read those letters. So I encourage people to weigh in on that one, to the extent that it’s applicable to them, particularly the financial services companies where it probably has the most significant impact.

Research Agenda; Digital Currencies

Are there any emerging issues that you will put on the FASB’s research agenda this year, noting you as chair set that agenda?

Jones: I think we have a pretty full research agenda, and I think we’ve moved things actively and fairly quickly from the research agenda to the technical agenda. One example is crypto accounting. I think you’ll see continued progress as we bring projects from the research agenda to the board for a decision on whether it’s something we want to add to the technical agenda. To the extent that we free up capacity and/or new issues are brought to our attention, I would say I’m always receptive to projects. I won’t tell you I’ve got this secret list that I’m thinking of adding or not, it’s probably more based upon what I hear are priorities, and what issues I think would benefit from our doing some work upfront on before bringing them to the board.

You’ve already mentioned the crypto assets proposal which looks like it’s going to pass. We’re hearing a lot about digital currencies – anything more on the FASB’s end coming around that?

Jones: The project we’re focusing on for crypto currencies is really focused on measurement. That was what we heard from stakeholders was the highest priority and we purposefully scoped the project to address that priority, which in my mind means we can get it done more timely than if we cast a broader net and try to deal with everything. We have heard from some that there are other issues they may be interested in us looking at, and obviously to the extent that we hear those, we’ll certainly listen. And to the extent that there’s a pervasiveness issue and an improvement in accounting that our board thought needed to be addressed we could consider it. We don’t have anything in that category right now but it doesn’t mean that couldn’t change.

Reporting Environment; Interacting with SEC’s OCA

Shifting gears a bit – what type of economic climate is the accounting profession operating in right now? How does that impact the way you set standards?

Jones: Maybe I’d broaden it a little to what the environment is that the accounting profession is operating in because I think that it’s often beyond economics. If I think from a standard-setter perspective, we can use terms like ‘management should use judgment or something should be accounted for at fair value.’ From a standard-setter perspective, we’ve said ‘judgment,’ we’ve said ‘fair value’ and it sounds like we’re done. And I think that’s one of the key things we as a standard-setter need to recognize, and I believe we do, that those terms require an internal control structure around them for the preparers to document how they’ve reached those judgments or how they’ve determined those fair values and it’s not necessarily the simplest accounting for the preparer and it’s not necessarily the simplest item from a process or accounting perspective for an auditor to audit. So keeping that balance in mind, and remembering that we’re operating in that internal control structure environment, we’re operating in an environment where when management makes judgments they have to talk about the judgments they’ve rejected not just the judgments they’ve selected, and we need to consider how that affects cost and complexity. So if you go back 20 years ago, if you said ‘management, use judgment’ I think people might have said ‘that’s great, thanks standard setter I can use my judgment and move on.’ I think it’s a different environment today, and I think it’s one that is very important that we, as a standard setter, continue to focus on.

How closely does the board work with SEC’s OCA in terms of decisions that you rule on? [From questions people pose at times it’s clear that some are unaware of how that process works]

Jones: We are an independent standard-setter. We have seven total board members, each from varying backgrounds. I will tell you they all come to our meetings with their view of what they think will better or improve accounting or financial reporting and they make their decisions accordingly. Obviously, the SEC recognizing our standards as authoritative is an important piece. We certainly have a close working relationship with OCA, meaning we share information back and forth. For example, when they’re seeing things, they may refer standard setting projects to us, and we’d certainly focus on those. That being said, we are an independent standard setter, so at the end of the day we follow our due process and the standards we set are the standards that we, as a majority of the board, believe are appropriate. The SEC has an important role in our economy and we certainly listen to them to understand their perspectives, but at the end of the day, our board members make their own decisions.

What the Accounting Profession Should Know

What’s the one thing you wish the accounting profession would understand or get correct – either contextually or in terms of a rule or regulation or the board’s process?

Jones: I’m a lifelong accountant, that’s been my profession. The job I had before that was mowing lawns so that I could become an accountant, so when I look at the accounting profession, I think the key word there is ‘profession.’ I view accounting as a profession and with that I think it’s held to a higher standard. When I look at my role here as a standard-setter, I recognize that the only way that we’re successful is to have that profession involved in our process, because at the end of the day, while the information may be prepared with a primary focus on investors for capital allocation, it has to work. In other words, it has to be able to be applied by accountants and it has to be able to be audited by auditors and those two parts of it are key.

We have one more minute which I will cede to you for any insights you would like to get across that I didn’t ask but that might be important to you.

Jones: Probably the most important thing to me is continuing to encourage our stakeholders to be involved in our process. To the extent they’re seeing issues that they think we need to address to improve accounting and financial reporting, raising them to us as, and as we head down a path of making those improvements, participating in the process so that we all end up with the best accounting and financial reporting outcome.

 

This article originally appeared in the August 17, 2023, edition of Accounting & Compliance Alert, available on Checkpoint.

Get all the latest tax, accounting, audit, and corporate finance news with Checkpoint Edge. Sign up for a free 7-day trial today.

More answers

Reminder: IRS Information Return Error Notices

The IRS is reminding payers such as banks, credit unions, and businesses that file information returns to check their returns for mismatch …