FASB Publishes Summary of FASAC Meeting in June 2019

By Regulatory News

June 20, 2019

Loss Accounting: IFRS 9, Loss Accounting: ALLL, Regulatory Reporting: US

FASB published a summary of the quarterly meeting of the Financial Accounting Standards Advisory Council (FASAC). The key topics discussed at the meeting include implementation of leases and segment reporting. FASAC members also provided their views on the FASB’s research project, focusing on the recent major standards including those on leases, hedging, and credit losses. Overall, the Council members expressed diverse views on the philosophy for effective dates for major projects. Council members encouraged FASB to consider the need for (and time lag associated with) staggered effective dates on a standard-by-standard basis, rather than establishing an inflexible time lag for private companies and others.

FASAC members participated in the first of a series of discussions on the FASB’s post-effective date assessment of costs and benefits of the leasing standard. This session focused on public companies’ initial and recurring costs of transitioning. Some Council members noted that, although adoption of the standard had an insignificant overall impact on some companies’ financial statements, the initial level of effort and cost to apply the standard was somewhat higher than originally anticipated, primarily because of needed systems changes or new systems.

Some members also commented on some of the benefits of adoption to their companies. These include better centralized processes to manage their leases, improved internal consistency of leases, and increased ability to manage an organization’s asset base and lease obligations. Expected recurring costs include costs to capture the required data, sustain internal controls, and preserve systems. Other members, particularly investors and users, are beginning to consider the resulting changes in companies’ financial statements and how those changes impact their analysis or models. Those members indicated that additional time is needed to assess the benefits of change in the leases standard. FASAC members also discussed implementation issues related to the incremental borrowing rate, certain disclosures, and related parties.

Finally, FASAC members discussed potential improvements to segment reporting disclosures, centering on the approach to requiring additional disclosure by reportable segment. Overall, FASAC members preferred a principles-based approach to requiring additional disclosure by reportable segment, due to the wide variety of industries. FASAC members, particularly investors and users, expressed support for that approach and explained that having consistency over time for an organization could be more useful than comparability between organizations.

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Keywords: Americas, US, Accounting, Banking, Securities, IFRS 9, Hedging, Leases Standard, IFRS 16, Reporting, FASAC, FASB

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