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

An Update on Our “Big Ticket” Projects


It was a little more than a year ago when we issued an Invitation To Comment soliciting stakeholder feedback about potential financial accounting and reporting topics we should consider adding to our agenda.

After extensive research and outreach, I am glad to say that last month, the Board added projects on liabilities and equity, financial performance reporting, and segment reporting. More details on these projects can be found within a featured video in this issue, here. We anticipate that these projects will help define our technical agenda for years to come.

Recognizing that our decisions have far-reaching consequences for stakeholders, we work hard to make sure we address the highest-priority issues while positioning organizations for a successful and smooth transition to new standards. That means we have to say "no" to some projects, and in our recent agenda consultation the following ones did not make the cut:
  • Accounting for Financial Instruments: Interest Rate Risk Disclosures
  • Pensions and Other Postretirement Employee Benefit Plans
  • A holistic project on accounting for intangible assets.
While the new projects are in the preliminary stages, I wanted to take this opportunity to discuss the progress we are making on our more seasoned, large projects (Disclosure Framework and Long-Duration Insurance), as well as provide you with an update on how we are reducing unnecessary complexity.

Disclosure Framework

The Disclosure Framework project evolved to ensure that the framework promotes consistent decisions by the Board about disclosure requirements, while also guiding reporting organizations when making disclosure decisions.

Throughout the years, the Disclosure Framework project evolved to ensure that the framework promotes consistent decisions by the Board about disclosure requirements, while also guiding reporting organizations when making disclosure decisions.

We continue to discuss the Board’s decision process, which ultimately will result in a chapter in the conceptual framework related to disclosures. The chapter will include:
  • A purpose for the notes
  • Certain limitations on the information that should be disclosed
  • The types of information that would be relevant to users of financial statements.
The other part of the project would update the conceptual framework’s current discussion of materiality. We recently began to deliberate stakeholder feedback on materiality, and will soon reevaluate our decisions related to Interim Reporting Disclosures and determine next steps.

We also will redeliberate other topic disclosure reviews:
  • Defined Benefit Plans
  • Fair Value Measurement
  • Government Assistance
  • Income Tax
  • Inventory Disclosures.

Long-Duration Insurance

The Insurance Project is a good example of how outreach to stakeholders helps us better understand costs and benefits of a standard.

The Insurance Project is a good example of how outreach to stakeholders helps us better understand costs and benefits of a standard.

When we started on this journey a decade ago, we considered a complete overhaul (including converging with the International Accounting Standards Board) of the accounting model used by life insurers for long-duration products such as life insurance and annuities.

Since then, after careful research, judgment, and feedback from investors and insurers, the Board decided to make specific improvements to the current accounting model. Therefore, we are focused on making the following improvements:
  • A current, updated measure of insurance reserves
  • An improved, uniform measure of benefits that protect account balances from capital market performance
  • Simplified amortization of deferred acquisition costs
  • Enhanced disclosures.
Last year, we issued a proposed standard, which we’re now refining based on the latest round of stakeholder feedback. We hope to complete redeliberations in the coming months, with the goal of issuing a final standard in 2018.

Reducing Unnecessary Complexity


As I discussed in an earlier column, the FASB continues to make progress on reducing costs by simplifying standards to make them more understandable, reducing uncertainty and diversity in practice, and minimizing complexity to help preparers better understand appropriate accounting models to use. Some examples include:

Hedging: The standard we issued this past August addresses areas that stakeholders told us could be improved. We expect the new guidance will reduce costs and align hedge accounting more closely with an organization’s risk management activities.

Consolidation: The FASB recently issued two proposals (here and here) to address practice issues and reduce costs that currently exist in Topic 810 on consolidation.

Cloud computing: The FASB and the Emerging Issues Task Force have been working on a project that addresses the accounting for implementation costs in a cloud computing arrangement, with the objective of reducing complexity by aligning the accounting for economically similar transactions.

Collaborative arrangements: The Collaborative Arrangements project is aimed at providing guidance that clarifies when to apply revenue guidance to collaborative arrangements. Our goal is to reduce cost and uncertainty.
We especially welcome your thoughts about ways we can reduce unnecessary cost and complexity in financial reporting.

Nonemployee Share-Based Payments: We issued a proposed standard that is intended to reduce cost and complexity by accounting for share-based payments to nonemployees and employees in a similar fashion.

With your continued feedback, we expect 2018 will be a productive year for the FASB. We especially welcome your thoughts about ways we can reduce unnecessary cost and complexity in financial reporting. A great place to start the conversation is by submitting new ideas for simplification in accounting via fasbcomments@fasb.org.