What's the Password? Five Possible Answers for Accounting Regulators
by Edith Orenstein on
A version of this article originally appeared at FEI's Financial Reporting Blog.
Password was a popular TV show back in the day, in which TV personalities teamed up with regular Joes and competed for prizes based on giving one-word “passwords” to their teammates to guess the “Password” that only the studio audience and TV viewers saw.
In this post, we attempt to identify, by use of only one word, that thing by which we believe each of the five standard-setters and regulators (and in one case, a quasi-standard-setter or de facto regulator, specifically, COSO) is likely to be most associated with in 2014.
As is the case in general for the FEI Financial Reporting and in particular when I identify material as “my two cents” - and I would classify this entire post as “my five cents” - please note the disclaimer which appears on the right side of the FEI blog.
Here's a summary of the five passwords:
1. FASB: Private
2. IASB: Next
3. SEC: Enforcement
4. PCAOB: New
5. COSO: Now
How would you describe, if you could only use one word, what the most important impact or initiative of each of the five organizations/regulators will be in 2014? Tell us below!
1. FASB: Private
FASB has built the foundation (and the first few floors!) of its increasing emphasis on private company financial reporting. This entails a serious focus on the practical, real-world needs of a majority of users of private company financial reporting, which could potentially differ from previous versions of generic “users” or even generic technical/expert “users” of financial reporting, such as FASB’s previous Investors Technical Advisory Committee (ITAC) which was, in substance and form, significantly influenced by public company analysts.
The “foundation” was laid on December 23, 2013, with the release of FASB's Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies.
The “layers” include several private company accounting standard updates recommended by the Financial Accounting Foundation (FAF) Private Company Council and endorsed by FASB, including ASU No. 2013-12, ASU 2013-09, and ASU 2013-03.
The work begun by FASB on simplifying GAAP for private companies could have a positive spillover effect on simplifying or making GAAP less complex for public companies, as well, in my view.
2. IASB: Next
As the IASB and FASB complete the last of the major projects under their 2002 bilateral Memorandum of Understanding (MOU), both boards move to an increasingly multilateral model.
Significantly, however, some may view the underlying tone of the two multilateral models as differing in subtle or not-so-subtle ways. IFRS Foundation Chairman Michel Prada described the IFRS Foundation's model as an “inclusive” multilateral model in his remarks in October 2013 in Germany, while FASB Chairman Russell Golden first spoke of FASB’s vision for a “decentralized, multilateral model” supporting “convergence” toward a set of “common, converged global standards” at a meeting of FEI’s Japan Chapter and Keidanren, the Japanese Business Federation, later in the very same week that Prada spoke in Germany.
FASB’s Golden was quite clear in his remarks in the “FASB@40” conference in September 2013 that:
"In all instances, the FASB's objective will be to promote the improvement and convergence of U.S. GAAP and IFRS."
Further establishing itself as an independent, adequately funded organization will be a key ongoing strategic goal of the IFRS Foundation and the IASB.
Christopher Westfall, editor-in-chief of Financial Executive magazine, captured highlights of the two chairman's remarks in his cover story, Convergence 2014. The article includes other important highlights from the CFRI conference.
Up next: SEC, PCAOB, and COSO