FASB Pushes Forward with Targeted Accounting Reforms, Investors to Benefit

The FASB remains on track with its efforts to enhance financial reporting standards, with a slew of new proposals and final standards set to be issued in the coming months.

In a meeting with the Financial Accounting Foundation’s (FAF) Standards-Setting Oversight Committee, FASB Chair Richard Jones and Technical Director Jackson Day provided the most current updates on the board’s progress on several key projects.

In a major push to address investor concerns, the board is poised to release seven proposals in the third quarter, tackling critical areas such as financial asset purchases, software cost accounting, and more.

By year-end, the board plans to unveil two standards designed to make financial statements more transparent and user-friendly for investors, a key milestone in its efforts to improve financial reporting. These standards focus on the disaggregation of income statement expenses and induced conversions of convertible debt instruments.

“We need to be cognizant of any standard that we put out there, there is a cost, and there has to be a benefit associated with it,” Jones told trustees on August 12, 2024.

He highlighted the importance of addressing investor priorities, including projects on digital assets, income tax disclosures, and the breakdown of financial reporting information. The completion of the conceptual framework, particularly the measurement methods, was also touted as a significant milestone, providing a robust foundation for consistent decision-making.

In response, FAF Trustees acknowledged the delicate balance the FASB must strike in meeting the diverse demands of its stakeholders, noting that some push for swifter action while others feel overwhelmed by the sheer volume of projects. In this context, trustee Richard Reisig asked, “Would an argument be fair to say, ‘well, a lot of those are kind of targeted’” allowing for a more focused approach?

In agreement, Jones said “we scoped them to deal with what we thought was the most critical need,” and also carefully weighed various factors, including the timing of proposals and rules. To ensure a manageable approach, he explained, “we were very careful to make sure that it wouldn’t be overwhelming to the extent you did want to respond to all.” Jones noted that the response would likely vary depending on the stakeholder, with large public accounting firms probably responding to all proposals, while preparers in the community might pick and choose.

In terms of investor outreach, the board is “being deliberate in our approach with this critical stakeholder group, sharing examples of outcomes and seeking their feedback to ensure we’re meeting their needs,” he added.

The meeting also touched on the ongoing post-implementation reviews of major standards, such as revenue recognition, credit losses, and leases. Jones emphasized the importance of continuous improvement and stakeholder outreach to ensure the standards’s effectiveness and relevance.