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US Securities and Exchange Commission

In an Unusual Move, SEC’s Acting Chief Accountant Suggests Standard-Setting Priorities for Accounting Board

Soyoung Ho  Senior Editor, Accounting and Compliance Alert

· 5 minute read

Soyoung Ho  Senior Editor, Accounting and Compliance Alert

· 5 minute read

In an unusual move, Paul Munter, the SEC’s acting chief accountant, in a public statement emphasized the importance of investor views as the Financial Accounting Standards Board (FASB) sets its standard-setting and research priorities going forward. This would include work on disaggregation, climate change, and digital assets.

His views also come as the SEC, which oversees the accounting rulemaker, has been emphasizing investor protection aspects of their mission after Gary Gensler, President Biden’s SEC appointee, became chair in April last year.

More than 500 responded to the FASB’s June 2021 agenda consultation document, and Munter pointed out nearly 30 percent were from investors and other users of financial reports.

While Munter briefly discusses the need for the board to consider the cost aspect of applying the standards for companies, former FASB chairman Dennis Beresford, who has been closely following accounting-related matters, found it “very interesting” because of the statement’s heavy emphasis on the needs of investors.

“I don’t think the SEC has ever done anything like this before. But Munter seems to take some pretty strong positions on several projects and emphasizes the ‘investor’ point of view,” said Beresford, who headed up the FASB From January 1987 through June 1997.


Munter noted that investors have frequently identified disaggregation of financial reporting information as a priority. They want greater disaggregation in the income statement, cash flows, or in the notes to the financial statements.

“We believe that the FASB, through responses to the ITC [Invitation-to-Comment on agenda consultation] and other outreach, has received significant information on investor needs in this area and that prompt consideration of investor and other stakeholder input is merited to identify potential targeted improvements to financial reporting,” Munter said on February 22, 2022.

The board has a project on disaggregation of certain income statement expenses, and Munter said he wants to see meaningful progress in the near-term.

While he emphasized investor needs, Munter said that it is also important to assess the costs to companies in preparing the disaggregated financial information. He said that companies by law are required to maintain books, records, and accounts which accurately reflect the transactions and dispositions of their assets. Companies in the past noted that the cost of producing disaggregated information from such books and accounts may not be as relevant today because of advances in technology.

“As such, we appreciate the continued efforts of the FASB to understand current feedback on the ITC and to perform additional outreach to preparers and other stakeholders regarding the current expected costs of both implementation and ongoing application of potential financial performance disaggregation proposals,” Munter said.

Climate Change-Related Transactions and Disclosures

Following change in administrations last year, climate change has become a much more important topic in general. And the SEC has put climate change disclosure as a near-term priority.

In terms of comments provided to the FASB, Munter said that respondents said that today climate-related transactions are limited but urged the board to continue to monitor the business environment and suggested certain targeted issues for potential standard-setting. They also requested broader disclosures regarding the impact of climate change on the financial statements.

The FASB recently added a project on the disclosure of financial instruments with climate-linked feature to its research agenda as well as a topic on tax credit related to climate for its Emerging Issues Task Force (EITF) to consider.

“Taking into account feedback received over the past year, we believe there may be opportunities for the FASB to take thoughtful action on targeted areas of accounting, disclosure, and financial reporting that are consistent with the objective of general purpose financial statements, in response to the evolving business environment, transactions, and investor needs regarding climate-related issues,” Munter said.

He said that the FASB could also consider the near-term time horizon for financial statement disclosure requirements about risks and uncertainties.

Digital Assets

Accounting for digital assets has been identified by respondents as a project the FASB should take on, and many suggested that the accounting board allow or require companies to account for certain digital assets at fair value, given such assets are expected to increase in significance in the future.

The board in response added a project to its research agenda on the accounting for exchange-traded digital assets and commodities.

“Continuing stakeholder engagement and monitoring of the business environment will be crucial to the FASB’s ability to both properly scope any standard-setting projects in this area, and determine the accounting and disclosures that would provide the most useful information to investors, particularly as the digital asset landscape continues to evolve,” Munter noted. “While digital assets raise a number of critical issues under the federal securities laws, and the industry continues to change at a rapid pace, we believe there may be opportunities for targeted changes to accounting or disclosure guidance that could provide useful information to investors.”

Accounting for Goodwill

Accounting for goodwill has always been a complex topic of discussion—especially whether it should be amortized—but Munter did not endorse it for active standard-setting for the time being because of significant differences in opinion.

“We emphasize the importance of a robust process and analysis to make the case for any changes in the accounting for goodwill, which would include, among other things, the extent to which international convergence in this area is necessary or appropriate in the public interest,” Munter said. “In making the case for change, we also believe the FASB should be careful not to place undue reliance on analyses performed under another framework such as the Private Company Decision-Making Framework, or related guidance issued by consensus of the Private Company Council, in its standard-setting process for standards applicable to public companies.”


This article originally appeared in the February 23, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.

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