Board Follows a Rigorous Process to Develop U.S. Accounting Rules
FASB Chair Richard Jones and Technical Director Hillary Salo detailed the board’s due process at the May 9 Oversight Committee meeting, stressing that a rigorous due process is followed to ensure that the full spectrum of the accounting profession gets to weigh in on all of its projects. “We’re always trying to understand do we have fulsome feedback from all of our different stakeholder groups,” Salo told the Financial Accounting Foundation (FAF)’s Standard-Setting Oversight Committee. Pressed by Oversight Committee Co-Chair Timothy Ryan on “do we look to see maybe who hasn’t commented and what’s our process there?” Jones and Salo affirmed that staff did, mapping out steps from start to finish of the board’s efforts to reach all walks of investors and preparers. “Generally, with regards to preparers and with practitioners, we are able to understand the nature of that—we have that full spectrum and we get that through comment letters,” Salo replied. “Investors are one of the areas that’s more challenging because they typically will not send us comment letters to put their public position out there that’d be publicly posted on our website—but we do significant amount of investor outreach to make sure that we have that fulsome input from an investor standpoint, whether that’s from the buy-side, the sell-side, credit analysts, lenders, private company and users of the financial statement, even the banking regulators when thinking about them as an investor or a user as well.” The topic of the board’s due process has become a thorny one for FASB, which has not been able to get ahead of criticism from some groups that more needs to be done to populate financial statements with a broader swath of information for investors. The Oversight Committee’s effort to drill down on the board’s outreach and due process was therefore not surprising, especially since it was the committee’s first publicly held meeting.
Regulators Aren’t Citing Accounting Rules as Cause of Recent Banking Failures
Regulatory agencies are not citing accounting rules for held-to-maturity (HTM) debt securities as a contributing factor in recent banking failures and views are mixed as to whether the board should address the topic, FASB Chair Richard Jones told the board’s trustees. FASB is monitoring the issue, Jones said at the May 10 Financial Accounting Foundation (FAF) quarterly meeting, which was livestreamed from Washington, D.C. “I was happy to read both the Fed report on [a] particular institution as well as an FDIC report on another institution where they talked about some of the contributing factors and did not cite accounting,” he said. His remarks were in response to trustees’ observations that Silicon Valley Banks (SVB)’s failings have caused people to question whether the HTM standard is right or wrong, and to a question on “how if at all that might impact the [FASB]’s technical agenda going forward.” FASB has received agenda requests but has also received mixed feedback in outreach on whether accounting rules for HTM securities need to be changed, Jones also explained. “Some have raised the question of should there be a change in the accounting,” he said. “Others have pointed out to us they believe they have all the information and the accounting should not change. We’ve gotten a couple [of] agenda requests, those are things that we’ll consider as part of our normal process. But it’s something we’re watching.”
IFRS Interpretations Committee Issues 8th Volume of Compiled Decisions with Focus on Leases
The IFRS Interpretations Committee, on May 4, 2023, published a six-month analysis of its views on assessing the definition of a lease, specifically for a battery contract with a supplier for use in electric vehicles (EV). This is the committee’s eighth volume of decisions, and this edition addresses how to assess whether such a contract contains a lease under International Financial Reporting Standard (IFRS) 16, Leases, when the supplier has substitution rights. The 15-member committee is the interpretative body of the International Accounting Standards Board (IASB), the accounting standard-setter that works under the governance of the IFRS Foundation to develop IFRSs for more than 140 jurisdictions worldwide. The committee is chaired by IASB member Bruce Mackenzie and works with the board in supporting the consistent application of IFRS. The decisions were published under Compilation of Agenda Decisions–Volume 8, and span from November 2022 to April 2023.