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FASB chair: most topics of interest to investors on agenda will substantially advance this year

The FASB plans to issue six exposure drafts and two final standards this year that come from topics investors flagged as priorities, according to Chair Richard Jones on May 2, 2024.

The board will aim to issue exposure drafts on: software costs; environmental credit programs; environmental, social, and governance (ESG) -linked financial instruments; government grants; derivative scope refinements; and hedge accounting improvements, he said at the 22nd Annual Financial Reporting Conference at Baruch College in New York. Final standards will be issued on purchased financial assets and disaggregation of income statement expenses.

"That may sound like a lot all in one period," Jones said. "And part of the reason I think that you're seeing this is when I joined back in 2020 in the midst of COVID one of the things that we focused on was doing agenda outreach and really resetting our agenda based on investor input and input from all of our stakeholders to see what we should focus on and what standard setting would be most critical to our stakeholders. That's what we focused on," he said. "We had a case for change as a result of that process. And I think what you're seeing this year is the continuation of the benefits from that outreach process."

Timing of issuance could slip "particularly because I alone can't do any of those things; it requires a majority of our board and it also requires the participation of our stakeholders," Jones said.

He also touched on the board's planned targeted revisions for the statement of cash flows, adding that part of the topic is still on the research agenda "because the one thing we heard clearly from all stakeholders was the statement of cash flows for financial service entities was probably not real useful to an investor and preparers were struggling with what the value there was."

He did not mention the coming new rules for induced conversions of convertible debt instruments or a proposal on interim reporting, but those will likely be issued this year as well, according to the board's technical agenda. Currently, the board has 12 projects on its technical agenda.

The update comes at a time when the FASB is on the brink of staff turnover: Vice Chair James Kroeker will leave at the end of June; current Technical Director Hillary Salo will transition to her new role as board member, and succeeded by Jackson Day. A change in board dynamic can influence which rules get passed and therefore that development is important. About that time period - or slightly later, the board plans to issue another agenda consultation document, a substantial process to solicit comment about its agenda - typically done every five years. (See Next FASB Agenda Consultation Document Likely Coming Next Summer in the Dec. 13, 2023, edition of Accounting & Compliance Alert.)

ITCs coming on intangibles, KPIs

Also notable is that FASB staff plan to issue Invitation-to-Comments (ITCs) on Intangibles and on financial key performance indicators (KPIs) for business entities. An ITC doesn't include board views but is used to solicit broad feedback about complex topics.

Both intangibles and KPIs are on the board's research agenda, a pre-step to determine whether a topic reaches the standard-setting bar.

Jones told the conference that KPIs have been a recurring theme, adding the reminder that "once we set standards on something, it's no longer non-GAAP."

The board therefore wants to understand how best to approach the KPIs topic, he said. "Is that something where we should begin mandating KPIs? Is it something where they should be elective? Is it something where there's a benefit to standardizing those and bringing them into the financial statements? So we'll give a chance for our stakeholders to weigh in on those issues."

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© 2024 Baker Tilly US, LLP

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