Financial Accounting Foundation President and CEO Polley Resigns
On April 26, Teresa Polley, president and CEO of the Financial Accounting Foundation (FAF), resigned her post, signaling a major shift for the organization and the boards it governs. Polley, who had served in the role for more than a decade, told Thomson Reuters that her resignation was given after “a lot of thought over months” in light of changes in leadership at the organization. Polley’s departure and other leadership turnover at the FAF comes at a time of huge lobbying effort by the banking sector via congress to get FASB to rethink its new rules for reporting credit losses, which they contend do not reflect the economic reality of banking and will negatively affect the U.S. economy. In a press release, FAF Chairman Charles Noski praised Polley for her leadership of the organization’s internal initiatives, including major upgrades to FAF’s technology infrastructure, as well as her role in FAF’s strategic planning efforts, its appointment of leaders to serve as FAF Trustees and standards setting board members, and communications with governmental and other stakeholders. With Polley’s departure, the FAF appointed Vice President and General Counsel John Auchincloss to be acting president. He will serve until a permanent replacement for Polley is named.
SBAC Addresses Role of Technology in Financial Reporting
At its May 2 meeting, FASB’s Small Business Advisory Committee (SBAC) discussed the role of technology in financial reporting and its impact. Technological advances could affect, for example, the cost to provide financial information in the future and the time needed to implement changes in accounting standards, according to a 2018 FASB report titled, For the Investor: #Technology and #Data. Today’s financial reporting system is paper based and designed for human consumption of financial information, not machine consumption, the report states; however, investors commonly use financial information in digital format and computer-based earnings models. The SBAC also discussed the accounting for distinguishing liabilities from equity, including convertible debt. FASB is working to improve the accounting topic because current guidance is overly complex, internally inconsistent, path dependent, form based, and a cause for frequent financial statement restatements.
Companies Receive Clarification on Technical Items for Derivatives, Hedging, Credit Losses
Companies can now refer to a package of changes that clarifies the codification of FASB’s rules on credit losses, hedge accounting, and the classification and measurement of financial instruments—topics important to banks, insurance companies, and other financial institutions. The changes will not significantly affect current accounting practice or impose extra costs, according to the main tenets of the package, issued on April 25 as Accounting Standards Update (ASU) 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The changes will make it easier for accountants to understand the codification and eliminate inconsistencies, the summary explains.