FASB Agenda 2016: More for Preparers to Monitor

by Erik Bradbury

A wave of new accounting guidance has been issued in the last couple of years, and it’s important for preparers to keep a watchful eye on the Financial Accounting Standards Board (FASB) agenda and research projects to stay informed about recent and potential standard-setting issues that may affect their organizations.

In 2016, for instance, the Board expects to issue exposure drafts on financial instruments topics including Impairment and Hedging, having released its final standard on Classification and Measurement in January. With many major projects now completed, including Revenue Recognition, Leases and Classification and Measurement, the FASB has a clean plate to start focusing on implementation issues as well as other important financial reporting topics.

As result of FASB outreach over the past couple years, including surveys of different advisory groups, the Board has added four new financial reporting issues to its upcoming agenda discussion paper expected in the first half of 2016:

(1) Pensions and other postretirement employee benefit plans,

(2) Intangible assets,

(3) Distinguishing liabilities from equity and

(4) Financial performance reporting.

Those topics may prove challenging, as the FASB has already received feedback from various stakeholders with different views on what needs to be done to address concerns within those areas of accounting.

Of particular note is the FASB’s decision to address concerns over “distinguishing liabilities from equity,” which has long been considered the most complicated area of accounting. According to Audit Analytics’ most recent restatement report, “debt, quasi-debt, warrants & equity (BCF) security issues” has remained the number-one area of SEC restatement for the past 10 years, despite efforts by the FASB to jointly address this area with the IASB through its former FICE (Financial Instruments with Characteristics of Equity) project. However, only limited scope improvements have been made to this topic over the past few years.

Also of note is the FASB decision to start addressing financial performance reporting, which may prove equally challenging as stakeholders have a wide range of views over how to improve current income statement reporting — including what measures and line items are most relevant to investors and users of financial statements. The primary objective of this project is to evaluate ways to improve the relevance of information presented in the performance statement.

Preparers will have a lot on their hands over the next couple years dealing with the adoption of major new standards including revenue recognition, leases and financial instrument topics. It is clear that the preparer community played a major role in shaping those standards into what they are today through their feedback directly with the FASB.

As a result, preparers should continue to stay engaged in the standard-setting process this coming year, especially as new projects begin to pick up steam. FEI will continue to play a critical role in shaping many of the standard-setting activities of the FASB, and will continue to provide a platform for preparers to engage directly with the standard-setters to make sure the preparer voice is heard.