Board Defends Streamlining Efforts, Addresses Skepticism Over Prioritization Framework

The IASB is facing scrutiny over its proposed prioritization framework, aimed at streamlining project selection, with some members of its oversight committee questioning its clarity and transparency. The framework, designed to provide a consistent approach to prioritizing projects between agenda consultations, was met with skepticism by some members of the Due Process Oversight Committee (DPOC), who argued it lacked clear guidelines for making judgment calls. “I just feel very much that this is not clear from this paper how you do it, and you have concepts, and you have lots of suggestions,” DPOC Chair Theresa Ko said. “I do recommend and if I may suggest and ask you to come back with a short paper to show what is the proposed change, how you reflect what you want to do.” The IASB’s chair and senior staff defended the framework, saying it would provide a common language and discipline for prioritizing projects, rather than a set of rigid rules. But they acknowledged the need for further testing and refinement before considering its inclusion in the due process handbook. The discussions also raised concerns about the framework’s applicability to the International Sustainability Standards Board (ISSB), which was not directly engaged in its development. The DPOC will continue to review the framework, with a decision on its inclusion in the due process handbook pending further review and feedback.


Plan Is to Streamline Hedge Accounting with Upcoming Proposal

FASB has voted to issue a proposal to address six issues in hedge accounting, aiming to clarify existing guidance and simplify the application of hedge accounting in certain areas. The proposal will be issued with a 60-day comment period, considering the narrow nature of the amendments and the complexity of the issues being addressed. The guidance would apply to all entities, the board agreed. Early adoption would be permitted on any date after the issuance of a final update. “I just would emphasize on any date means on any date—it doesn’t mean as of the beginning of the period or the reporting period, it means any date,” FASB Chair Richard Jones said. The proposal would aim to improve hedge accounting, specifically in the areas of cash flow hedges, fair value hedges, and net investment hedges. The guidance would clarify existing guidance, reduce uncertainty and diversity in practice, and address inconsistencies in the application of hedge accounting rules, according to the discussions. FASB members said the potential benefits would justify the potential implementation costs, as companies would benefit from simplified ongoing effectiveness and similar risk assessments, expanded population of valid economic hedging strategies, and the ability to better reflect their risk management strategies in their financial statements.


Review Finds that Pension Transparency and Accountability Improved by Standards

GASB has released a comprehensive Post-Implementation Review (PIR) report on its pension accounting standards, finding that the standards have significantly improved transparency and accountability in state and local governments. The report, published on June 3, examines the effectiveness of Statements 67, Financial Reporting for Pension Plans, and 68, Accounting and Financial Reporting for Pensions, which took effect in 2013 and 2014, respectively. The standards aimed to enhance financial reporting, decision-making, and accountability in the public sector. According to the report, GASB’s standards have achieved their objectives, providing users with decision-useful information about pension plans and pensions. The recognition of net pension liability, a more comprehensive measure of pension expense, and enhanced note disclosures have all contributed to better “decision-useful information that enhances the value of the information for assessing accountability and interperiod equity.” Statements 67 and 68 are generally working well, but some users are having trouble with certain parts, such as calculating pension deferrals, sharing costs, and applying rules to closed or frozen plans, according to the report. “Those challenges may indicate a potential opportunity for additional clarification as well as educational and outreach efforts.” While the report does not “suggest any significant unanticipated consequences,” it notes three peripheral consequences of the standards’ implementation: increased funding for pension plan contributions, changes in investment portfolios, and a decrease in the average discount rate utilized. These consequences demonstrate the impact of the standards on governments’ financial management and decision-making.