Trustees to Propose Draft of Strategic Plan Next Year
Companies will be able to weigh in next year on a proposed draft of the Financial Accounting Foundation’s (FAF) three-to-five year strategic plan, Executive Director John Auchincloss recently said. The draft plan will be issued in the first half of 2021, Auchincloss said during the FAF’s quarterly trustee meeting. The FAF recently completed stakeholder outreach about its strategic direction, which included a survey taken by 700 participants, as well as 50 interviews with FASB, GASB, and FAF stakeholders, he said. “We plan on using what we heard to develop strategic direction and will seek additional input as needed.” The FAF is an independent trustee organization with oversight responsibility for FASB and GASB, the nation’s two main accounting rulemaking boards. The FAF has said its role and mission are inextricably linked to the work of the two standards-setting boards that the FAF Trustees appoint and oversee.
Guide Explains Standards-Setting Process
The PCAOB published a document that explains how the board uses economic analysis and public input in its standard-setting activities. The November 2020 document, “Spotlight: The PCAOB’s Use of Economic Analysis and Stakeholder Input in Standard Setting,” outlines how the board conducts economic analysis and gets stakeholder input before and after new standards go into effect. The Spotlight explains that the PCAOB is not required to follow the Administrative Procedure Act (APA), as it is not a government agency, but the board generally follows a notice-and-comment process to set standards. For example, the board issues a preliminary rulemaking document—a concept release—a proposal, or supplemental request for comment. The public is invited to provide comments by letters, and sometimes the board also holds roundtables to get views. The SEC, which oversees the board, must sign off on revised or new standards before they become effective.
New Rules for Classifying Debt among Topics for Interpretations Committee
The IFRS Interpretations Committee’s December meeting will include an issue that is bubbling up related to new rules for classifying debt as current or non-current, according to its agenda. The rules were issued in January to amend international accounting standard (IAS) 1, Presentation of Financial Statements. The amendment was subsequently deferred in July by one year, to January 1, 2023, in response to the COVID-19 pandemic. The guidance requires companies to reclassify debt from non-current to current and the IASB has said this could cause some companies to breach their loan covenant agreements. Since issuance, different interpretations are arising in practice related to the requirements for determining whether an entity has the right to defer settlement of the liability for at least twelve months after the end of the reporting period, according to an Interpretations Committee paper. These different interpretations may result in inconsistent application of the IAS 1 amendments, and without further clarification of the amendments, the deferral of the effectiveness may not be as useful as the board intended. Although the Interpretations Committee has not yet received a formal submission, based on informal feedback and inquiries, it has decided to consider whether action should be taken before the amendments become effective and divergence in practice develops.