Friday, February 17, 2023

SEC’s Chief Accountant supports FASB’s revised priorities, urges faster completion

By John Filar Atwood

SEC Chief Accountant Paul Munter has urged the Financial Accounting Standards Board (FASB) to set goals that can improve its accounting standards in a timely manner. In a rapidly changing business environment, large-scale projects that take too long to execute can delay the delivery of useful comparative information that investors need for their capital allocation decisions, he said.

In a public statement, Munter applauded FASB’s recently reprioritized project agenda, which now focuses on critical areas such as disaggregation of income statement expenses, accounting for and disclosure of crypto assets, improvements to income tax disclosures, and segment reporting. He also noted that under current leadership, FASB has made improvements to its standard-setting process such as more targeted scoping of projects and improved engagement with stakeholders.

Collaboration is critical. However, he urged FASB to work to increase its collaboration with the Financial Accounting Foundation (FAF) on improvements to the process by which new standards are set. It is critically important to FASB’s mission, Munter said, that it and the FAF trustees continue to discuss ways to improve standard-setting efficiency, effectiveness, and transparency.

Munter said that he appreciates that FASB sought stakeholder input on its 2021 agenda. He noted that many respondents asked for process enhancements, including improvements to the understandability and navigability of the Codification, which lays out U.S. generally accepted accounting principles. Stakeholder engagement is not enough, however, and must be followed up with a set of achievable projects, in Munter’s view.

FASB’s seven priorities. Munter acknowledged that FASB relied on investor and other stakeholder input when reprioritizing its technical and research agenda priorities. The effort resulted in seven FASB priorities—disaggregation of financial reporting information, improvements to the statement of cash flows, ESG-related transactions and disclosures, intangible assets, financial key performance indicators and non-GAAP metrics, digital assets, and enhanced income tax disclosures. FASB also removed some projects from its agenda, such as accounting for goodwill, in response to feedback.

With a better focus on stakeholder priorities, FASB must now execute on those seven items in an efficient manner, according to Munter. He believes this will require the group to scope the projects properly and to seek collaborative feedback from preparers, auditors, and other stakeholders. He urged FASB not to let implementation costs alone drive its standard-setting process.

He reminded FASB of the importance of, and benefits to be derived from, continued information-sharing between FASB and the International Accounting Standards Board on areas of mutual interest. Those should certainly include the impacts of changes in the global business and economic environment, Munter said.