More Amendments to Credit Loss Accounting Rules and Disclosures Proposed
FASB has issued a narrow proposal to remove troubled debt restructuring (TDR) accounting rules from the new credit loss accounting standard for lenders that have already adopted the provisions. The proposal aims to eliminate the recognition and measurement guidance for TDRs and instead require enhanced disclosures related to loan modifications to borrowers that are experiencing financial difficulty. The changes would narrowly amend credit loss accounting rules in areas that do not provide useful information and add cost and complexity, according to the proposal. Specifically, analysts have questioned the relevance of the TDR designation and the usefulness of the disclosures required about those modifications. Some have said that measurement of expected losses under the current expected credit loss (CECL) model already incorporates the forward-looking aspects of the TDR model and that relevant information for investors would be better conveyed through enhanced disclosures about certain modifications. In addition to the TDR changes, the board proposed clarifying provisions related to vintage disclosures—the presentation of financing receivable information by year of origination in note disclosures.
Trustees Ramp Up Efforts to Diversify Staff
The Financial Accounting Foundation (FAF) has advanced on its efforts to diversify the staff of accounting rulemakers FASB and GASB, with 25% of recent hires being racially diverse, executive director John Auchincloss said. Of recently hired post-graduate technical assistants, the staff that works on board standards-setting projects, 18% have been racially diverse, he said at the November 16, 2021, FAF quarterly trustee meeting. The FAF also expanded its pipeline, which currently has over 375 names of which 40% are female and 18% are racially diverse, Auchincloss also said. “We also continue to support our Board of Trustees opportunities committee in developing a diverse slate of FAF trustee finalists.” The FAF is the trustee organization with oversight of the FASB and the GASB, the bodies that develop U.S. GAAP for businesses and governments, respectively. For the past three years the FAF has been taking steps to diversify its entire organization via a three-year Diversity, Equity and Inclusion (DE&I) program. To that avail, the organization established a DE&I Committee led by GASB Chair Joel Black.
2022 Budget Set to Increase 8%
The PCAOB voted 3–0 to approve its 2022 budget of $310.3 million, representing an increase of 8% over its 2021 budget of $287.3 million. The increase is significant, but it also follows a modest increase of 0.9% in 2021 from the 2020 spending set at $284.7 million. This year’s budget meeting was unusual because not all five members were present. Two out of the four members appointed on November 8 have not joined the PCAOB as yet. Present at the meeting were PCAOB Acting Chairperson Duane DesParte and new members Kara Stein and Christina Ho. The rest of the members, who have not yet started their new jobs at the PCAOB, are Erica Williams, a partner with Kirkland & Ellis LLP, who will become the chairperson; and Anthony Thompson, who has served as executive director and chief administrative officer of the Commodity Futures Trading Commission. Normally, the PCAOB considers its budget and an updated strategic plan at the same meeting, but “given the new board has not yet been fully seated, the 2022 budget reflects resources for the PCAOB to carry out its mandated audit oversight responsibilities and to achieve the goals and objectives as set forth in its existing strategic plan,” DesParte said during the meeting. “Once the new board is fully in place, we will be reassessing our strategic goals and objectives and making adjustments in our resources as necessary to support any updated priorities or initiatives.”