In an exclusive interview, FASB Chairman Richard Jones offers insight into the most pressing issues facing the tax & accounting industry today
Richard Jones, chairman of the Financial Accounting Standards Board (FASB), joined the board amid the COVID-19 pandemic about nine months ago, an unprecedented and uncertain time that is still unfolding around the world. Recently, Jones spoke with Thomson Reuters about FASB’s priorities and its review of revenue, leases, and credit loss rules amid economic uncertainty.
He shared his thoughts about whether technology will impact the way the board sets standards and provided the most current view of FASB’s work on segment reporting, goodwill, government assistance, debt, and a slew of other topics.
Jones said the chairmanship role isn’t what he expected. His advice for someone taking the helm of a major organization is to “do as much as you can, as quickly as you can, to connect with stakeholders.”
Thomson Reuters: What are the positive and negative surprises of the role so far?
Jones: What surprised me, very pleasantly, was the willingness of our stakeholders to engage with us. Engagement is a critical part of our mission — we need that external feedback to function and set standards. On the negative side, I would say I might have hoped we would be out of the pandemic a little faster than we are.
Thomson Reuters: What are the board’s agenda priorities this year?
Jones: One thing we’ve tried to convey is that we do understand the environment in which our stakeholders are operating. We recognize they have a lot of challenges. We’ve factored that into our standard-setting process as we prioritize what projects to complete. We also considered that when setting comment periods for our projects to ensure we get appropriate input, while recognizing that we have to prioritize some items to keep financial reporting functioning at a high level.
You can read the full interview with FASB Chairman Richard Jones here.
When it comes to our priorities for the year, I’d break them up into three categories: our existing agenda, our post implementation review, and our agenda outreach. As you probably know, our existing agenda is fairly extensive. In the last seven months we’ve brought about 75% of our agenda projects back to the board to focus on setting an achievable path to standard setting. In other words, we’re making sure our board agrees on the direction we’re headed and that we’re on a path to successfully finalize those standards. My goal is to get through the other 25% of our projects sometime in the next several months.
The post-implementation review (PIR) process is one of our board priorities. That’s because the success of the three standards currently under PIR review — revenue recognition, leases, and credit losses — is extremely important. They’re large standards, and it’s rare that such large standards are one-and-done. As part of the PIR process, we’re focused on understanding stakeholder feedback on these standards from those who have adopted or are in the process of adopting them. This will help us see if there’s any fine tuning we need to do to make those standards more successful. The PIR process is a multiyear process, and we are still in its initial phases.
Our third priority is the agenda outreach project that I announced in December. We’ve already started that process, and it will continue be a significant focus for us throughout the year.
Thomson Reuters: Shifting gears a bit to other topics trending in the marketplace. Do the technological strides and the move toward artificial intelligence and other developments impact the way the board sets standards now, or will they in the near future?
Jones: Great question. I think there is no doubt that investors can handle and process more information today than they could years ago. And I think that we will see a drive from investors for additional, more disaggregated information, a trend that will be reflected in some of the agenda requests we get. That said, there’s also a cost to providing that information — and we need to consider that as part of our cost-benefit evaluation.
Thomson Reuters: Let’s talk about some of the projects accounting professionals have been asking about. The project on government assistance appears to have stalled.
Jones: When that project was added to the agenda, the board at the time decided to pursue it as a disclosure project, versus an accounting and disclosure project. Consequently, they’ve been focused only on disclosures. I do plan to get that project back before the board in the near future to decide if we should continue to go in that direction. I think it fair for us to ask if there should be standard-setting related to accounting for government grants, not simply disclosure.
Thomson Reuters: When will a final standard on the classification of debt be issued? This project seemed very close to completion a year or two ago, but no final standard has yet been issued.
Jones: The board issued a revised proposal in the fall of 2019, for which we received comment letter feedback. Our plan is to bring that back to the board in few months and to set a path forward on that standard as well.
Thomson Reuters: The board is working to revise goodwill accounting rules, and some companies are interested in convergence. How does FASB plan to consider International Accounting Standards Board (IASB) viewpoints when deciding whether to reinstate goodwill amortization for all entities, noting that at the moment, a slight majority of IASB members do not want to reintroduce goodwill amortization?
Jones: When the IASB does outreach related to goodwill, they share that information with us, and vice versa. As you’re aware, we had a joint meeting with the IASB last fall to discuss where we were on our respective goodwill projects. This meeting allowed us to solicit their views and enabled members of each board to hear each other’s perspectives. At the end of the day, when developing GAAP, we do consider the consequences of being aligned or diverged with international standards as part of our cost-benefit analysis.
Thomson Reuters: Segment reporting is another major project on the board’s agenda. What will change for public companies in terms of disclosures, and how will that be useful to investors?
Jones: We’re in the preliminary phases of the segments project. We’re aiming to issue an exposure draft toward the end of this year or the beginning of next year. We’re pursuing a consistent ‘chief operating decision maker approach’ which is the ‘through the eyes of management’ approach.
We’re looking at the traditional disclosure of significant expenses that are reviewed by the chief operating decision maker as well as possibly providing users with some additional information about how expenses are allocated between segments. I would say we have several meetings to go before we approach an exposure draft. It’s a project we’ve heard is very important to investors, and our focus is to help them better understand some of that expense information.
Thomson Reuters: Any project or topic you’d like to highlight?
Jones: I want to say it’s an honor to step into this role, even in these challenging times. I really believe independent standard-setting is a great asset and a great privilege. It’s an asset for all of us because it produces the best standards. It’s a privilege because the FASB must continually earn our independence. I look forward to working with the board to do that.
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