Acknowledging the impact a steady stream of new accounting standards has on stakeholders, Financial Accounting Standards Board (FASB) Chairman Russell Golden said on Dec. 6 that one of the board’s key goals in 2017 is managing the pace of change while continuing to improve GAAP.
During a first-ever request this year for suggestions about what the FASB’s top agenda priorities should be going forward, “some stakeholders opined that we should slow down on new projects until they’ve had the chance to absorb new guidance issued in recent years,” Golden said during a speech at the American Institute of CPAs’ Conference on Current SEC and PCAOB Developments in Washington, DC.
A public roundtable on Dec. 16 will address that and future projects.
“We’ll discuss how the need to focus on implementation is important in relation to when we start new projects,” said Golden, who was recently reappointed to a second, three-year term as FASB chairman. “The board is keenly aware of the pace of changes.”
He indicated that helping stakeholders earlier with transitions to new standards and disclosures is necessary to avoid technical corrections and complicated adjustments. That assistance also acknowledges that not everyone is a “technical accountant,” he said.
“Since 2013, we’ve introduced new, plain-language communications materials that provide a clearer, big-picture view of our activities,” Golden said. “They include our quarterly FASB Outlook newsletter, more FASB in Focus summaries of proposed and final standards, and cost-benefit overviews that explain how the board concluded that the benefits of issuing a final standard were worth the anticipated costs. We’ve also stepped up our video production to help viewers understand what we’re doing, why we’re doing it, and how it may affect them.”
The moves help make standard setting more “user friendly” to more people, he said.
Golden cited the Transition Resource Group (TRG) for Revenue Recognition as an example of how to identify issues that could lead to diversity in practice before a standard is finalized, which reduces costs and complexity.
“We realized in our work with the Revenue Recognition TRG that if we’d had a meeting before we issued the final standard, we might have been able to improve certain confusing words and phrases in the guidance before it was released,” he said. “Therefore, we convened the Credit Losses TRG before the credit losses standard was issued so that members could weigh in on the draft guidance before it was final. This will reduce the need to make technical corrections later.”
All that said, 2017 promises more changes and discussions of emerging issues.
- Final standards on hedging and insurance are expected by the end of 2017. The core principle of the hedging proposal is that hedge accounting should be permitted for a broader range of financial and nonfinancial risk management strategies than under current GAAP, Golden said.
- A roundtable on the proposed standard for long-duration contracts issued by insurance organizations, such as life insurance and annuities, will be held on March 15. The proposal is intended to improve existing recognition, measurement, and disclosure requirements – and to provide more useful information about the amount, timing, and uncertainty of cash flows. The board intends to roll out a final standard sometime in 2017, Golden said.
- Early in the new year, the board expects to issue final guidance to cut costs and complexities in determining the current vs. noncurrent balance sheet classification of debt.
- A final standard that improves the accounting for nonemployee share-based payment awards by public and private companies is expected in 2017.
- The FASB Small Business Advisory Committee now focuses on smaller public companies. Its first meeting with that intent was held the week before the conference. So, presumably that group will continue to meet next year.
- The FASB Investor Advisory Council is expected to have public sessions in its mission to advise the board on the disclosure framework, hedging, and other projects, as well as on emerging trends.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.