The FASB and the GASB are actively monitoring the evolution of electronic financial reporting, including how investors use Artificial Intelligence (AI) to consume data, Chairs of the accounting rulemaking boards said on Feb. 28, 2023.
The FASB is keeping tabs on the use of AI, including chatbots such as ChatGpt, studying how users of financial statements consume financial reporting information these days, FASB Chair Richard Jones told trustees of the Financial Accounting Foundation (FAF) on Tuesday.
“No, we’re not going to use it to write our standards – I would just note that,” he said. “But I think it is important and that’s part of our continuous outreach with investors in understanding their ability to process data, how they’re processing data, how do we get the most important data information in our investment capital allocation decisions.”
Jones’s remarks were in response to a question posed by Trustee Vice Chair Mary Barth, who broached the issue of AI, noting “it is getting a lot of press,” and has generated a buzz among academics.
Barth asked about the extent to which the FASB thinks about how investors ingest financial reporting information these days with the use of technology. “And if so, what are you doing about it, what are you thinking about it?”
“I’d say it’s part of an ongoing process,” Jones said. “Obviously we work with the SEC on certain XBRL tagging of information that is widely used in processing information but it’s something that we’re looking toward the future and what’s next and how our investors are processing that data,” he said.
Jones added that a key part of the board’s investor outreach “is really understanding which data is the most important, how is it processed and when does it actually influence those capital allocation decisions.”
The FASB develops U.S. Generally Accepted Accounting Principles known as U.S. GAAP for public and private companies, not-for-profit organizations and employee benefit plans. The GASB also develops U.S. GAAP but for state and local governments. The FAF holds oversight responsibility for both boards.
Data Act Big Issue for GASB
GASB Chair Joel Black, who also addressed the topic of electronic reporting but in relation to the passage of the federal government’s Financial Data Transparency Act (FDTA), said the Act is a big issue for the board.
The FDTA gives the SEC the requirement to implement a data standard for the municipal securities environment and any reports filed with the Municipal Securities Rulemaking Board (MSRB). This could pose challenges for the GASB as electronic reporting might result from the Act. (See Concerns Bubbling Up Over Data Transparency Act Implications for GASB in the Nov. 17, 2022, edition of Accounting & Compliance Alert.)
A concern Black reiterated is that if another entity also sets data standards for what information users need and the GASB was not involved in that process then it would affect the board’s mission, which is to ensure that users receive the right financial information out of government reports.
“It’s important that we be involved whatever that process is of determining what is the right information – that’s the development of the taxonomy, that’s something that the SEC possibly seemingly is going to be doing as it relates to the implementation of the Act,” he said. “We are certainly engaging with them, letting them know that we think we’re well positioned to help with before the annual financial reports such an endeavor of creating a data standard and that we’re ready to play a constructive role in that. So, we continue to reach out to them and engage with them and encourage them to engage with us.”
Asked by FAF Trustee Manju Ganeriwala how the GASB plans to approach some of the challenges it may face as a result of the Act, Black said the board had been monitoring electronic financial reporting for some time now.
“I think whether the Act occurred or not it has been something that we’re devoting more time to monitoring evolution in electronic financial reporting, how is technology changing, how investors and other users of government financial information are consuming that information,” he said. “So that has been of interest to us. I think this Act really speeds that up.”
This article originally appeared in the March 1, 2023 edition of Accounting & Compliance Alert, available on Checkpoint.
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