Preparers looking to have their voices heard on proposed accounting changes by the Financial Accounting Standards Board (FASB) should focus their attention on the transition resource group (TRG) process the standard-setter created to gain input from industry and investor stakeholders.
“Transition resource groups aren’t a new concept. We’ve had the concept in the past, but in slightly different forms,” said FASB Chairman Russ Golden to attendees of Financial Executive International Accounting Change for Financial Leaders Conference in Philadelphia on Tuesday. “Time and experience taught us a lot about what makes these groups effective.”
Stakeholder groups that help guide implementation are not a new concept, and have been attempted in the past by the FASB in different forms, including a derivatives implementation group, a share-based payment resource group, and a valuation resource group.
However, Golden explained, the TRG created in 2014 to help shepherd in the newly created revenue recognition standard was a particular success with its focus on transparency and collaboration.
“We knew that, for the standard to be successful, we’d need to be proactive in limiting the extent to which preparers and auditors disagree on how to interpret the standard,” Golden said. “Based on what we learned from previous groups, we decided that the TRG should hold public meetings to allow all stakeholders to follow our discussions and learn from each other about best implementation practices.”
Through the revenue recognition TRG, stakeholders submitted more than 100 implementation issues and approximately 36 were addressed directly, with the rest discussed at public TRG meetings, Golden explained. In addition, the rev rec TRG has resulted in 50 staff papers addressing other concerns raised by preparers and investors.
“Taken together, we believe that these efforts will improve the standard’s consistency of application and reduce its costs and complexity,” Golden told the audience.
With the revenue recognition group considered a success, Golden said other TRGs are likely in the future to gain input on accounting changes. FASB has already moved ahead with a TRG focused on a proposed credit loss accounting standard. The credit loss TRG has received more than 30 questions, with only five rising to the need for discussion at a public TRG meeting.
“Like our standards, we’re never ‘finished’ improving our TRG process—or how we support implementation in general,” Golden told the audience. “As with everything we do, we need your input to direct those resources appropriately. We can’t answer your questions if you don’t ask them. We can’t fix a problem we don’t know exists.”•