On The Agenda
The Board will embark on a new journey: to identify the next phase of the Board’s agenda and the types of projects that it will undertake as it moves forward.As the convergence agenda winds down and FASB begins the final stages of completing its projects on revenue recognition, leasing, financial instruments, and insurance—the Board will embark on a new journey: to identify the next phase of the Board’s agenda and the types of projects that it will undertake as it moves forward.
What will that agenda be? What’s the next big project? How will we keep converged standards converged? In the coming months, the FASB will establish an agenda that will likely include short-term and long-term projects that span several categories intended to help ensure we are balancing the varied needs of our stakeholders. Those categories include:
- Big picture
- Recognition and measurement
- Reducing complexity and promoting simplification.
Big picture projects are those projects that we believe will stand the test of time and impact the very “core” of accountingSo what’s the big picture? Big picture projects are those projects that we believe will stand the test of time and impact the very “core” of accounting. These projects will have broad impact across a spectrum of stakeholders. Even the FASB—the current Board and future Boards—will bear the influence of projects that fall into this category in the way it thinks about setting standards.
One such project is the FASB’s disclosure framework project, which is intended to focus on disclosure effectiveness to improve disclosure content (making it more useful to investors). See the Focus on Footnotes column in this FASB Outlook edition.
One of this project’s goals is to enable individual organizations to exercise more discretion and flexibility in applying existing and future relevant disclosure requirements. The FASB is scheduled to issue an exposure draft on the disclosure framework project by mid-February.
Recognition and measurement projects are intended to lead to greater transparency in financial reporting.Why should we also focus on recognition and measurement projects? Simply put, these projects are intended to lead to greater transparency in financial reporting. Weighing the cost of implementing changes against the benefits that are likely to flow to financial statement users is also an important consideration for the Board.
For example, in the accounting for pensions research project, the FASB will take a closer look at how pension plans are reflected in financial statements under existing standards to determine if opportunities for improvement exist.
The FASB has also conducted pre-agenda research related to accounting for government grants in response to the SEC’s observation that, while International Financial Reporting Standards address the issue, U.S. GAAP does not.
You may think that reducing complexity and promoting simplification is, well, simple. While desirable in concept, in practice achieving both is often easier said than done.Some projects may address disclosure-only issues, and for interpretation projects—the FASB will devote significant effort to addressing implementation and education issues as they arise. You will see more information about these types of projects in the coming months.
You may think that reducing complexity and promoting simplification is, well, simple. While desirable in concept, in practice achieving both is often easier said than done.
For example, some standards may be so technical that their meanings are unclear. This can make it challenging for preparers to know how to properly implement them. Other standards may have clear accounting treatments, but the work involved in properly implementing them is so onerous that the costs of complying far outweigh the benefits.
The FASB will be tackling these issues in a few ways.
Stakeholders and the Private Company Council (PCC) suggested that assessing goodwill impairment falls into this category, which led the FASB to recently add a project to look at the issue.
Additionally, the FASB is going to ask the PCC, the Emerging Issues Task Force, and its other advisory groups to help identify areas where it can reduce complexity in accounting and financial reporting.
In the coming months the FASB will look to finalize these areas and start using them as parameters to strategically set its agenda for upcoming projects. We can then take the “agenda discussion” project off our agenda.