The Future of FASB Standard Setting: Professional Accounting Update

By Erik Bradbury, FEI Professional Accounting Fellow The preparer community at large is embarking on an ambitious work program to begin implementing the most significant overhaul of existing accounting standards in recent memory, with new standards on revenue recognition, lease accounting, and financial instruments (credit losses and classification and measurement). Virtually every reporting company regardless of industry, sector, or size will be affected by these new standards issued by the Financial Accounting Standards Board (FASB) to some degree. Financial Executives International’s (FEI) Committee on Corporate Reporting (CCR) met in Dallas, TX, in September for its quarterly meeting to discuss the latest accounting and financial reporting issues facing the preparer community. To illustrate what needs to be considered in the near future, the chart below depicts the required public company adoption dates for each of these major new accounting standards: Highlighting the challenge ahead, it is notable that the new revenue recognition standard, which is arguably the most pervasive as every single company will be affected by adoption, has one of the earliest required adoption dates (2018 for public companies). Furthermore, we understand a significant number of implementation issues continue to surface through the AICPA working groups, accounting firms, and our own technical committees, and the Transition Resource Group is continuing to receive submissions and questions while working to resolve these issues. When it comes to the new standard on leases, many companies do not yet know the full impact of the changes and won’t know until they determine how many leases they have that fall within scope. Collecting the data, understanding the contracts, locating and determining the value of the liability and right-of-use assets may prove challenging and time consuming for many. In addition, companies need time to consider the impact to accounting policies, processes, controls, and IT systems which will require significant time and effort and more importantly, a concerted focus by management. For financial institutions, the changes occurring with credit losses is the most significant accounting change they will adopt in decades – equivalent to revenue recognition for a deeply affected industrial company and requiring similar time, effort and focus. Similar to revenue recognition, this standard is principles-based and will require...

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