FASB works to balance the desires of investors and preparers

The age-old tension between investors who use financial statements and the companies who prepare them has been evident in responses to the recent consultation on the FASB’s agenda.

When the FASB asked for comments as it considered mapping its future activities, providing more disaggregated information was one area presented for discussion.

“It appears that most investors and other capital distributors are in favor of further disaggregation of financial information. And preparers are not doing it,” FASB chairman Richard Jones said at the conference on Tuesday. AICPA & CIMA on current developments in the SEC and PCAOB.

Preparers oppose further disaggregation because it is expensive to produce, Jones said. He said the FASB will strike a balance between these views by:

  • Identify projects that fulfill the mission of the board and that can be carried out with the available resources;
  • Identify areas where there is a sufficiently widespread need to improve GAAP; and
  • Look for solutions with benefits likely to justify the expected costs.

“If the holy grail for an investor is a thousand items in the income statement, we won’t make it,” Jones said.

At the same time, Jones said that while the FASB seeks to remove unnecessary costs and complexity from the financial reporting system, that goal is not necessarily focused on the cost of preparing financial statements.

He said unnecessary costs and complexity affect all stakeholders, including investors.

“Our standards are judged by the quality of the information they provide to investors and the cost to investors and preparers, which, by the way, are costs borne by current investors,” he said.

The FASB received 522 responses to its consultation agenda, according to FASB technical director Hillary Salo. Common themes included:

  • Investors looking for disaggregated information on the fixed / variable nature and the recurring / non-recurring nature of a company’s income and expenses; and the jurisdictions or geographic areas in which a business operates.
  • Desire for the FASB to keep GAAP current and relevant in emerging areas such as digital asset accounting; the recognition of green elements such as financing linked to environmental, social and governance (ESG) measures; alternative tax structures; recognition of government grants; and software accounting.
  • Concern over cost and complexity of FASB consolidation guidelines.
  • Desire to improve the standards of distinction between liabilities and equity.
  • Desire to improve accessibility to the codification of accounting standards and FASB interpretation guidelines.

The board plans to analyze the consultation comments on the agenda in the first half of next year and start making changes based on the comments.

IASB update

IASB President Andreas Barckow told the conference that the strategic priorities of the board are as follows:

  • Financial information related to sustainable development: The announcement in November of the formation of the International Sustainability Standards Board by the IFRS Foundation is a big step towards consistent sustainability accounting. “The risk of climate change is a problem for today and not for tomorrow,” Barckow said. “… Sustainability is going to be part of your daily work if it isn’t already.”
  • Key projects: These include primary financial statements, post-implementation reviews, goodwill impairment and an advisory program.
  • Convergence: Barckow said the continued cooperation between the IASB and the FASB benefits both boards and their stakeholders.

Ken tysiac ([email protected]) is the JofAeditorial director of.

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