Richard Jones became the new chairman of the Financial Accounting Standards Board (FASB) in December 2020. In early 2021, after meeting with stakeholders, Jones identified a list of projects he intends to prioritize as chairman.
The basics
The U.S. Generally Accepted Accounting Principles (GAAP) are the set of rules used by many domestic businesses to report their financial results externally. The FASB is responsible for creating and updating these rules. Richard Jones has said in a recent interview that he wants the FASB to be “very transparent” when making and reviewing the rules of the GAAP.
Stakeholders—including CPAs, investors, businesses, and not-for-profits—are also encouraged to engage actively with the FASB. According to Jones, “Engagement is a critical part of [the FASB’s] mission; we need that external feedback to function and set standards.” When prioritizing projects and setting comment periods, Jones’ goal is to consider stakeholder’s input in order to better understand the environment they’re operating in
Because Jones’ tenure began during a global pandemic with significant economic impacts, he expects to face many challenges in the coming year. Jones has indicated that the shift to one-party control of Congress and the White House and changes in technology may also affect the FASB’s direction in the future.
High-priority projects
In his recent interview, Jones also provides some information on the FASB’s current agenda. The following projects have been identified as high-priority:
- Environmental, social, and governance (ESG) disclosure rules
- Classification of debt
- Presentation of the statement of cash flows
- Government assistance
- Goodwill
- Segment reporting
- Non-GAAP measures like earnings before interest, taxes, depreciation, and amortization (EBITDA)
Concerning the status of global convergence projects, Jones has indicated that the FASB and International Accounting Standards Board (IASB) have “great communication” and will continue working together on “projects of common interest.”
Reviewing recent changes
Jones emphasized in his interview that FASB standards are subject to “continuous improvement.” Large projects, such as the updated standards for revenue, leases, and credit losses that were implemented in recent years, typically require adjustments after their adoption by public companies in order to make standards more effective and make it easier for smaller entities to comply with changes.
As such, Jones’ intends to conduct a post-implementation review of the changes in these standards. However, the FASB is still in the initial stages of review, and the review process usually takes multiple years.
Future changes
Finally, Jones noted that new technology—such as software developments and artificial intelligence—has allowed investors to access and process large volumes of data, increasing the demand for additional, more-disaggregated reporting. Jones has indicated that these developments will also have an impact on how the FASB sets standards in the future.
In recent years, as companies have worked to adopt the recent updates to standards for revenue, leases, and credit losses, the FASB has been relatively quiet. Now that it has a new chairman, however, the FASB is likely to return to rulemaking activities in key areas. For information about the latest developments involving GAAP, contact us today.