From the Chairman's Desk:
By Russell G. Golden, FASB Chairman

How We Reduce Cost, Complexity, and Uncertainty After a Standard Is Issued


As an ex-baseball player, I often find myself quoting Yogi Berra in speeches and articles. One “Yogi-ism” that I am particularly fond of is “It ain’t over till it’s over.”
 
Although Yogi was not an accountant, I find that some of his tongue-in-cheek wisdom oddly seems to ring true for the FASB’s endeavors. And in this case, I like to imagine that his quote relates to how the FASB’s work to reduce cost, complexity, and uncertainty “ain’t over” after we issue a standard….
 
We successfully improved four of our most recent major standards after they were issued.

So, with Yogi’s endorsement or not, I want to explore in this column how the FASB continues to reduce cost, complexity, and uncertainty in accounting after we issue a standard. In fact, we successfully improved four of our most recent major standards after they were issued. We accomplished this through Transition Resource Groups (TRG), good old-fashioned outreach with stakeholders, and technical inquiries.
 

Revenue Recognition


The Revenue Recognition TRG discussed issues that arose as organizations prepared to adopt the standard. TRG discussions and other stakeholder input helped the Board identify a few opportunities for greater clarity or simplicity.
 
Specifically, we further clarified guidance on:
  • Principal or agent determinations
  • Performance obligations and licensing, and
  • How an organization evaluates whether its promise to transfer a license is satisfied at a point in time, or over time. 
In the end, this work had the twin benefits of increasing clarity while reducing the cost to apply the standard.
We also addressed challenges raised by some stakeholders related to collectability, noncash consideration, contract modifications, and the presentation of sales taxes. In these cases, we clarified the guidance and made things simpler and faster to implement.
 
In the end, this work had the twin benefits of increasing clarity while reducing the cost to apply the standard.
 

Leases


We’ve also found ways to improve the new leases standard. For example, in November, we voted to move forward with two amendments. They are expected to reduce unnecessary costs, but not compromise the ultimate quality of information provided to investors.
 
Organizations that have land easements can adopt the leases standard in a more timely manner.

At that meeting, we directed the FASB staff to draft a proposed standard that would simplify transition requirements. The proposed standard would also make it easier for lessors to separate nonlease components from lease components.
 
We also voted to proceed with a final standard that will reduce costs for organizations that have land easement arrangements. Land easements are basically a “right of way” to use or access someone else’s land. With our November action, organizations that have land easements can adopt the leases standard in a more timely manner.

 

Credit Losses


For the credit losses standard, we quickly addressed technical questions submitted by stakeholders. To resolve those concerns, we held a TRG meeting and two public Board meetings.   
 
We also continue to meet with the SEC, PCAOB, and banking regulators to ensure that preparers have a smooth and timely adoption.
 
One of the areas we discussed with the regulators was stakeholders’ questions to ensure interpretations are consistent with the Board’s intent. Lastly, FASB staff provides training to agency examiners on a periodic basis.
 

Hedging


Lastly, in August, we issued our final standard on hedging, perhaps one of our most popular actions in recent years. In fact, many companies have decided to adopt early!
 
Our work on these four standards after they were issued shows how determined we are to reduce cost, complexity, and uncertainty at every opportunity.

We continue to improve the standard, after it is issued, by supporting stakeholders in their application efforts. Questions have tended to focus on specific transitional issues related to the new methodologies.
 
For example, we are addressing stakeholders’ concerns related to the last-of-layer method for hedging portfolios of assets, and hedging the contractually specified components in a nonfinancial contract.
 
Our work on these four standards after they were issued shows how determined we are to reduce cost, complexity, and uncertainty at every opportunity. Our work “ain’t over” until we find the sweet spot where a standard provides useful information to investors but doesn’t impose unnecessary complexity and costs on preparers. With your input, we will continue that work in 2018 and beyond.


Have an implementation question? The best way to contact us is through our Technical Inquiry Service, which helps us identify reoccurring questions, themes, and issues that may need to be addressed more broadly.