Golden: Profession’s Leaders Need to Embrace Change, Think Differently
Leaders in the accounting profession need to remain proactive in thinking about potential future trends, with an aim of embracing change and ways to think about things differently, FASB Chairman Russell Golden told a financial reporting conference in New York. Managers need to rely on their teams, give them broad-based guidance at the beginning, and challenge them to visualize tomorrow, he said on November 11 at the Financial Executives International Corporate Financial Reporting Insights Conference. His remarks were in response to a question posed by Microsoft Corp.’s Corporate Controller Alice Jolla about what advice he would give to current and future finance professionals, as well as leadership insight he gleaned in his role as FASB Chair. FASB also recently created a customer relationship database, though not from a customer management standpoint, Golden said, but “to manage the comment letters that we receive. The comment letter analysis was a very manual process, and we also wanted to focus on how often do we touch various stakeholders and are we making sure that we’re touching the right stakeholders and at the right time.”
Investors Signal Appetite for More Disclosure around Corporate Litigation
Due to a level of ambiguity in aspects of the information investors get from companies’ financial statements, FASB should consider revising its disclosure rules for contingent liabilities, according to remarks made during the board’s Investors Advisory Committee (IAC) meeting on November 12. Investors are especially looking “for enhanced disclosures around what makes something ‘probable’ or not, and what makes something ‘estimable’ or not,” Nicole Burnap, director of accounting research at Glenview Capital, said. A contingent liability is the potential of a loss occurring in the future once various uncertainties are resolved; examples include the outcome of a lawsuit or a government investigation. Financial statement preparers have to understand the exact status of a contingent liability to determine which liabilities to present in the balance sheet or to report in disclosures, accountants have said. Analysts are typically interested in understanding the probability of such an issue becoming a full liability because it could impact the business’s status as a going concern. Under current rules, there is no need to record a liability unless the risk of loss is high. As a result, analysts look to financial statement disclosures to determine whether there are other risks that have not yet been recognized. These disclosures can provide advance warning of amounts that may later appear as formal liabilities in the financial statements.
IAASB Proposes Conforming Changes to Align With Revised Ethics Code
The International Auditing and Assurance Standards Board (IAASB) has issued a proposal seeking comments on conforming amendments to the international standards after the International Ethics Standards Board for Accountants (IESBA) revised its International Code of Ethics for Professional Accountants in April 2018. “The project aims to align the IAASB’s International Standards with the revisions to the IESBA Code by way of conforming amendments, thus ensuring that the IAASB’s International Standards can continue to be applied together with the IESBA Code,” the IAASB said. The code went into effect in June 2019. The board, which said the project is part of wider efforts to make the standards consistent throughout, wants comments by January 10, 2020.