FASB aiming to make preparers’ jobs easier


FASB is trying to make financial statement preparers’ jobs easier without diminishing the useful information they provide to investors, board Chairman Russell Golden said Tuesday.

The board is in the final stages of developing an internal policy that would guide the board in considering complexity as it develops and amends financial reporting standards, Golden said at the AICPA Conference on Current SEC and PCAOB Developments.

The policy would require FASB to evaluate before balloting whether the standard as a whole will reduce or increase reporting complexity. The policy also would require FASB to discuss its analysis of complexity at a public meeting and explain in its basis for conclusions how and why the standard reduces or increases complexity.

“We want to make it easier for you to know what to do, and we want to make it easier for you to do it,” Golden told the audience of CPAs. “But let me be clear, any decision we make would be weighted toward what the investor needs. If a change would impair an investor’s ability to do his or her work, then we would not consider this to be an appropriate agenda item.”

Candidates for future simplification include current accounting standards for liabilities and equity, and hedging, Golden said. The board also has tasked members James Kroeker and Daryl Buck with getting input from stakeholders on areas where complexity can be reduced.

Reducing the complexity of accounting standards has been a theme for Golden since he took over as FASB’s chairman this summer. He said complexity affects accounting in two ways.

First, the literature surrounding standards can be so dense and complicated that the meaning is unclear and preparers have difficulty applying the standards. Second, even if the accounting treatment is clear, the costs of complying sometimes far outweigh the benefits.

Golden cited the converged standard on revenue recognition that FASB is developing with the International Accounting Standards Board (IASB) as an example of its work to reduce complexity. He said the standard—due to be released in the first quarter of 2014—provides one set of principles, while  current GAAP has many pieces of accounting literature that have different industries recognizing revenue in different ways.
FASB’s efforts to reduce complexity were endorsed by SEC Chief Accountant Paul Beswick in a speech Monday at the conference. He said there are areas of GAAP that can be simplified without decreasing the quality of information provided to investors.

According to Beswick, some investors complain that accounting standards are so complex that they cannot understand the information presented in the financial statements. He said accounting standard setters’ tendency to focus on sweeping changes rather than targeted improvements in major projects has led to complex models.

“This complexity may lead to investors’ having less useful information if they cannot readily comprehend the information being provided,” Beswick said. “This does not mean we should not explore the models when it is appropriate. But we need to focus on what problems we are trying to solve and avoid replacing one set of challenges with another.”

FASB also is focusing on making implementation easier for preparers, Golden said. Starting with the revenue recognition standard, the board will create transition resource groups for standards that are approved. The groups will include specialized expertise and U.S. and international representatives.

Golden said he would like the groups to focus on education, interpretation, and amendments. He expects the groups to meet in public with the full board and publish minutes.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.


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