On February 14, 2023, SEC Chief Accountant Paul Munter again addressed the FASB’s standard-setting process in a Statement titled “Accounting Standard Setting in a Rapidly Evolving Business Environment: A Focus on the Timely Delivery of Investor Priorities.” This Statement continues discussion of several issues mentioned in Mr. Munter’s February 22, 2022, “Statement on the FASB’s Agenda Consultation: Engagement with Investors and Other Stakeholders Vital to Development of High Quality Accounting Standards.”
In the 2022 Statement, Mr. Munter discussed several aspects of the FASB’s agenda consultation project, particularly the importance of investor and other stakeholder input. He also highlighted the importance to investors of several standard-setting areas including disaggregating financial statement information, accounting for digital assets, and climate-related transactions and disclosures.
Mr. Munter’s 2023 Statement continues this focus on the FASB’s standard-setting process. In the introduction to his Statement, he acknowledges that the FASB’s standard-setting project agenda has been reprioritized, “largely to focus on investor and other stakeholder priorities identified through the agenda consultation process.” He also mentions the Board’s focus on various projects, including:
Disaggregation – Income Statement Expenses;
Accounting for and Disclosure of Crypto Assets;
Improvements to Income Tax Disclosures; and
He then writes:
“Completion of these and other reprioritized projects in a timely manner is critical to the quality of accounting standards and the resulting quality of financial reporting. As FASB standard-setting projects move forward, we believe there are continued opportunities for improvement to the standard-setting process, and that constructive collaboration by preparers, investors, auditors, and other stakeholders, with a focus on timely solutions that meet investor financial reporting needs, is key to the development of high-quality accounting standards for the benefit of the financial reporting system, investors, and issuers.”
The next section in the Statement, titled “Enhancing the Accounting Standard-Setting Process,” includes this observation:
“The rapid pace of change in today’s business and economic environment requires a thoughtful, yet timely, response by standard setters to improve the quality of financial accounting and reporting standards, thereby enhancing the usefulness of the financial information provided to investors. The FASB’s recent agenda reprioritization, however, is just one step in addressing such needs in a rapidly changing environment. Consistent with many projects on its reprioritized agenda, the FASB should continue to scope its standard-setting projects to allow for achievable standards updates to be finalized in the near term on topics that are of the highest priority to investors. The FASB, with the support of its stakeholders, should act with a renewed sense of focus and urgency in order to enhance its standard-setting process and produce timely, meaningful improvements to its standards.”
In this section Mr. Munter also states:
“However, more work remains to be done—including improved collaboration across the FAF and the FASB regarding additional process improvements needed to accomplish more timely standard setting in response to investor needs. To accomplish its mission of establishing and improving standards that foster decision-useful financial reporting for investors, it is critically important that the FASB, and the FAF Trustees in their oversight role, continue to enhance its process to improve standard-setting efficiency, effectiveness, and transparency.”
The Statement then discusses projects which are top priorities for investors and how the FASB’s agenda “now better reflects a focus on investor and other stakeholder priorities in meaningful and achievable standard-setting projects.” Mr. Munter then notes:
“However, the proof is in the doing. The FASB should now execute on those stated priorities in an effective, efficient manner to produce timely, high-quality standards updates. As noted above, this will require the FASB to carefully design and execute on the scope of its projects. It is also of critical importance that preparers, auditors, and other stakeholders focus on providing collaborative feedback to the FASB on cost-effective solutions that meet investors’ needs for improved financial information.”
As always, your thoughts and comments are welcome!