Last Thursday, the Financial Accounting Standards Board (FASB) published an invitation to comment (ITC) that gives issuers, investors, auditors, and other stakeholders the opportunity to provide feedback on the organization’s future standard-setting agenda.
Said FASB Chair Richard R. Jones: “What we learn during the agenda consultation process will help us decide what issues we can successfully address with feasible solutions whose benefits are likely to justify the expected costs of change.”
The input FASB received about its agenda during initial outreach is summarized in the ITC. The input generally fell within the following kinds of projects:
- Requiring greater disaggregation of financial reporting information to provide investors with better, more useful information that will directly influence their decisions and behaviors;
- Addressing emerging transactions to reduce diversity in practice and retain the relevancy of accounting standards codification;
- Reevaluating specific areas of existing GAAP to reduce unnecessary complexity; and
- Enhancing certain FASB standard-setting processes.
Among the things FASB wants commenters to address in their remarks are (1) whether the financial reporting topics described in the ITC are areas for which there is potential for significant improvement (2) the priority and urgency of addressing each topic (3) which potential solutions the FASB should consider in addressing each topic (4) for any potential solution, the expected costs and expected benefits and (5) whether there are other financial reporting topics beyond those described in the ITC that the FASB should consider adding to its agenda (and the priority and urgency of those topics).
The emerging accounting areas addressed in the ITC include the definition of a derivative; digital assets; ESG-related transactions, such as renewable energy credits and emissions allowances; financial key performance indicators (KPIs) or non-GAAP metrics; intangible assets, including software; and recognition and measurement of government grants for business entities.
FASB is seeking lots of guidance on the direction of accounting for digital assets.
According to the ITC, stakeholders continue to urge the board to provide guidance for digital assets considering that their use could become more prevalent in the future and that a project on digital assets may take the board several years to complete. “However, stakeholders acknowledged that there are challenges in identifying the scope of potential guidance,” the FASB document says.
In October 2020, the board decided not to add the digital assets topic to its agenda. “The board decided that it hadn’t risen to the level of pervasiveness [where] it should be one of the priorities,” Jones told CFO in March. “That doesn’t mean that couldn’t change.”
Among the questions the ITC asks accounting preparers and practitioners to address about digital assets are the purpose of an issuer’s holdings, and, “if the board were to pursue a project on digital assets, which improvements are most important, what types of digital assets should be included within the scope, and should this guidance apply to other nonfinancial assets?”
From investors, FASB wants to know “how significant are holdings in digital assets, such as crypto assets, in the companies you analyze? What type of financial reporting information about holdings in digital assets do you use in your company analysis? How does that information influence your decisions and behaviors?”
In March, Jones said he thought the agenda consultation project was important to do periodically. “I think that doing it at the beginning of my term makes sense,” he said.
Stakeholders are asked to provide comments on the ITC by September 22.