From the Chairman's Desk
By Russell G. Golden, FASB Chairman
Suffice it to say, it was. We set some lofty goals—resetting our agenda to reflect new priorities while bringing our joint projects with the International Accounting Standards Board to a successful conclusion.
While we made considerable progress in these areas, there’s more work to be done.
I’d like to share with you how we plan to “get it done” in 2015—how we’ll build upon the successes of 2014 while addressing new challenges.
Specifically, in 2015, we plan to:
- Continue to improve GAAP by reducing complexity
- Finalize our major projects with the IASB
- Continue to promote international cooperation among standard setters, and
- Make the GAAP Codification more user friendly.
Continue to improve GAAP by reducing complexity
Investors and preparers have identified complexity in GAAP as an important issue that needs to be addressed. We responded in 2014 by reorganizing our technical agenda, adding a mix of long-term foundational and short-term simplification projects.
Both types of projects will take center stage in 2015.
We will continue to work on foundational, “big picture” projects that will help us be more consistent in our decisions, and hopefully avoid future complexity.We will continue to work on foundational, “big picture” projects that will help us be more consistent in our decisions, and hopefully avoid future complexity.
As part of that initiative, the FASB staff is researching areas where the conceptual framework remains incomplete—namely, the areas of measurement and presentation.
Our disclosure framework project will be a key area of focus this year. We’ll be looking at the issues that the Board should consider when setting disclosure requirements. We’re also researching ways to improve the relevance of disclosures in the areas of fair value measurement, defined benefit plans, income taxes, and inventory.
As part of our simplification initiative, we’ll address areas of unnecessary complexity through short-term simplification projects—without compromising the relevance of information provided to investors.
For example, our stakeholders identified inventory impairment as one area of unnecessary complexity. We recently issued a proposal that would require only one method to determine inventory impairment, as opposed to the multiple methods now in existence. We anticipate issuing that guidance in mid-2015.
Finalize our major projects
Finalizing our remaining major projects—Accounting for Financial Instruments, Leasing, and Insurance (both long-duration contracts and short-duration contracts)—is a major priority for 2015.
Consistent with our goal of long-term improvement, we’re proactively addressing potential complexity before finalizing the standards.Consistent with our goal of long-term improvement, we’re proactively addressing potential complexity before finalizing the standards. We’ll do so through extensive cost-benefit assessments to ensure that the information a standard provides justifies the cost of providing it.
For example, as part of the outreach for our revenue recognition standard, we hosted discussions with both preparers and users—in the same room—to hear their views on our proposals. These blended group discussions helped users understand the costs of implementing guidance from a preparer’s point of view. Likewise, it gave preparers to the opportunity understand why investors need certain information, even if that information comes at a cost.
Comments shared during these discussions changed our thinking on certain disclosures, and helped us improve the standard before it was finalized. We plan to host similar discussions on leases and financial instruments in 2015.
We recognize that the effectiveness of our upcoming standards will depend on their successful implementation.We recognize that the effectiveness of our upcoming standards will depend on their successful implementation. To that end, we created the joint Revenue Recognition Transition Resource Group (TRG). We anticipate additional meetings this year.
Based on what we’ve already learned at TRG meetings, we’re researching three potential, formal, standard-setting implementation activities, in the areas of licenses, the presentation of gross-versus-net, and determining separate performance obligations. If the Board decides more guidance is needed, the items will be added to the technical agenda.
During the first half of the year, we also will be considering the staff’s research on whether we should delay the effective date of the new standard.
Given the success of the TRG, we anticipate that it will serve as a prototype for other such groups as we prepare to issue our leasing and other major standards in the coming year.Given the success of the TRG, we anticipate that it will serve as a prototype for other such groups as we prepare to issue other major standards in the coming year.
Continue international cooperation
Although the era of bilateral work with the IASB is coming to an end, the FASB remains committed to the goal of creating more comparable standards worldwide.
We will continue to work with the IASB on our major joint projects, and we will continue to contribute to the development of IFRS as a member of the IASB’s Accounting Standards Advisory Forum. Our membership allows us to share insights on standard-setting issues based on our past experience or developed through our due process, stakeholder outreach, analysis, and deliberations.
We will continue to maintain and strengthen our existing cooperative relationships with other national standard setters.We also will continue to maintain and strengthen our existing cooperative relationships with other national standard setters. The broader flow of information and ideas resulting from these relationships mutually informs our thinking and contributes to the shared understanding of perspectives and circumstances.
We believe these relationships can reduce or avoid unnecessary differences among standards used internationally—with the understanding that the interests of our respective capital markets outweigh the goal of completely converged accounting standards.
Make the Codification more user friendly
Finally, in 2015, we are embarking on a new initiative to improve the readability of the FASB Accounting Standards Codification® (Codification).
To achieve our goals, we need you.Codification users have told us that pending content makes the Codification cumbersome to read. Therefore, FASB and FAF staffs are designing a new feature that will allow users to tailor their view of the Codification to their specific organizational type and early adoption options. This will help make the Codification easier to read and, by extension, more useful.
When we look back a year from now at what we accomplished in 2015, we will measure our success on the basis of reduced complexity, development of high-quality new standards, and a better, more usable Codification. We also look forward to working with the Financial Accounting Standards Advisory Council to identify future priorities.
To achieve our goals, we need you. I hope I can count on your continued input and engagement in our process, which is critical to our success this and every year.