ThinkTWENTY20

In a statement released February, Paul Munter, Acting Chief Accountant of the US Securities and Exchange Commission (SEC) noted that, in June 2021, the Financial Accounting Standards Board (FASB) staff published an Invitation to Comment, Agenda Consultation (ITC), to solicit broad stakeholder feedback about the FASB’s standard-setting process and its future standard-setting agenda. More than 500 stakeholders responded to the ITC during the comment period, which closed in September 2021.

Munter said that respondents frequently noted that the objective of financial reporting (to provide decision-useful information to investors and other users of financial reports) should be the FASB’s focus, and that the FASB should be transparent about how projects would benefit investors and other financial statement users in line with this objective.

The also asked that, in its decisions to add projects to its agenda or make changes to its standards, the FASB should clearly make the case for change, whether through a preliminary yet robust analysis of the need for a project or through an explanation of its consideration of the expected costs and benefits of a change. In the FASB’s consideration of what would provide decision-useful information to investors, and in making the case for change, it should consider costs to both preparers and users, including the costs to users from not making needed improvements to accounting and disclosure requirements.

One of the topics that respondents thought were in particular need of attention included climate-related transactions, urging the FASB to continue to monitor the business environment and suggesting certain targeted issues for potential standard setting along with requests for broader disclosures regarding the impact of climate-related issues on the financial statements.
Munter notes that the FASB recently added a project to its research agenda to explore accounting for, and disclosure of, financial instruments with climate-linked features, and added a project to the Emerging Issues Task Force’s agenda related to the accounting for investments in certain tax credit structures including renewable energy tax credit investments.

Said Munter, “taking into account feedback received over the past year, we believe there may be opportunities for the FASB to take thoughtful action on targeted areas of accounting, disclosure and financial reporting that are consistent with the objective of general-purpose financial statements, in response to the evolving business environment, transactions, and investor needs regarding climate-related issues.”

Munter pointed out that a significant number of respondents identified digital assets as a priority for the FASB to consider. “Many of the respondents suggested that the FASB should permit or require issuers to account for certain digital assets at fair value. Investors and preparers alike commented that digital assets are expected to increase in significance in the coming years, as evidenced by a rise in market participants holding digital assets, which has accelerated the pace at which publicly-traded companies have become involved in digital assets and blockchain technology.”

In response to feedback received, he said, the FASB added a project to its research agenda on the accounting for exchange-traded digital assets and commodities. “Continuing stakeholder engagement and monitoring of the business environment will be crucial to the FASB’s ability to both properly scope any standard-setting projects in this area, and determine the accounting and disclosures that would provide the most useful information to investors, particularly as the digital asset landscape continues to evolve.”

For much more on what Munter had to say, please read SEC.gov | Statement on the FASB’s Agenda Consultation: Engagement with Investors and Other Stakeholders Vital to Development of High Quality Accounting Standards.