A&A Focus recap: FASB and ASB chair recap and preview activities

The AICPA A&A Focus Series webcast on Feb. 5 brought in two of the profession’s most influential members for a discussion of the landscape of accounting, auditing, and assurance, including Rich Jones, the chair of FASB, and Sara Lord, the chair of the AICPA Auditing Standards Board (ASB).

Hosted by Bob Durak, CPA, CGMA, director–A&A Technical Services at the AICPA, and Dan Noll, CPA, vice president–Financial Reporting & Audit Quality at the AICPA, the session featured discussions with the chairs of each respective board, who provided an overview of recent activities, information on how to provide insight on current projects, and a look into the future plans of each standard setter.

FASB Invitation to Comment, Agenda Consultation, and updates

In the broadcast’s first guest segment, Noll had a wide-ranging conversation with Jones, beginning with FASB’s recently released Invitation to Comment (ITC), Agenda Consultation. Jones emphasized the importance of stakeholder engagement in shaping the organization’s priorities. He highlighted how the ITC allows preparers, auditors, investors, lenders, and other stakeholders to share their concerns and suggestions on improving financial accounting and reporting standards.

Jones noted that FASB started the process by engaging with over 200 stakeholders to gather feedback. “Really, the question was, and it was an open-ended question. What do you think should be our priority? What areas do you think we need to work on and why?” Jones explained. “What should be the priority of the FASB?”

Noll and Jones walked through a few specific areas in the ITC where FASB is seeking stakeholder input. One major topic was the classification of liabilities versus equity, a frequent challenge for professionals dealing with complex financial instruments. Jones pointed out that while accountants might favor stricter classifications, investors often focus more on understanding liquidity events. He stressed that FASB seeks a balance that ensures clarity and utility in financial reporting.

Another issue addressed was the equity method of accounting. Firms may apply the equity method of accounting, while some prefer the fair value option. Some avoid the fair value option due to the continuous requirement to get fair values, which can add complexity and costs. Initial input from stakeholders discussed the possibility that FASB should allow a fair value option but should also leverage a practical expedient in certain situations, identifying equity investments that are not publicly traded, as a potential use case.

Employee stock ownership plans (ESOPs) were also discussed, particularly regarding disclosure requirements. Jones noted that some stakeholders believe that ESOPs are becoming more prevalent and suggest improved disclosure is necessary.

After wrapping the discussion of the Agenda Consultation, Noll walked Jones through a discussion of other select FASB activity. First was a discussion of the ITC, Recognition of Intangibles. Jones explained that different types of intangibles — such as patents, FCC licenses, and R&D — may require distinct accounting treatments. He emphasized the need to move away from treating intangibles as a single category and instead focus on their specific characteristics. “Is a one-size-fits-all model necessary? Or do we really just need to step back and make sure we have certain concepts for any asset that we’re going to recognize or any item that we’re going to expense? But we should really look at these individually to make assessments of the best accounting and financial report,” he stated.

In closing the conversation, Noll noted FASB is also seeking comments on a third ITC, Financial Key Performance Indicators for Business Entities.

Throughout the discussion, Jones reiterated the importance of stakeholder engagement in shaping FASB’s future priorities, encouraging participants to provide feedback, particularly on whether targeted improvements could ease the complexity of current accounting standards without diminishing the quality of financial reporting. Comments for all of the items discussed can be provided to FASB through their electronic feedback form or through written comments via email. Specific directions are included for each document on FASB’s “Exposure Documents” page.

Updates from the ASB

Sarah Lord, chair of the ASB, provided an update on key projects. The ASB, responsible for setting auditing and attestation standards for nonpublic entities, recently met for a three-day meeting that began on Jan. 29.

First, Lord noted that the ASB gave attention to the confirmation process for cash balances. The ASB is considering a requirement that auditors confirm cash balances unless specific circumstances prevent it. In addition, the board considered how auditors should handle confirmations received with incomplete responses from the returning party. The exposure draft, containing revisions, is scheduled for a vote during the ASB’s Feb. 13 meeting.

The ASB also discussed its strategy as the board is approaching the end of the last published timeline. A consultation paper is scheduled to be issued for comment in March. Lord noted: “Our goal is to promote standard setting that is usable, it protects the public interest, [and] is scalable for all types of entities.” The consultation paper will be available for download at aicpa-cima.com when released.

Lord addressed revisions under consideration to AU-C Section 240, Consideration of Fraud in a Financial Statement Audit. The ASB discussed the interplay between fraud standards and other standards addressing noncompliance with laws and regulations and when both might apply. The ASB is also examining how an auditor’s response might differ when noting fraud committed by the entity or if that fraud appears to have been committed by a third party. Additional discussion was had regarding changes and additions to requirements for auditors regarding their understanding of an entity’s anti-fraud programs, including fraud reporting programs like whistleblower hotlines, and any additional guidance on an auditor’s response to significant fraud risks that may be appropriate.

Additionally, Lord noted that the board has more narrow task force groups examining areas of the attestation standards, including one group focused on improvements to the core standards and one group focused on the potential addition of guidance on the topic of sustainability. Lord noted, with regard to sustainability, that the board is taking the approach that they do not need to create a suite of additional standards to address sustainability but to clarify how the current standards can be applied to sustainability engagements.

Per Lord, the board is also considering additional changes and highlighted issues under discussion, including issues related to the use of international standards and when that use is appropriate, potential  changes to guidance surrounding comparative information as it relates to financial statements, and the use of specialists in an attest engagement.

Lord encouraged stakeholders to provide feedback on these updates when available, emphasizing that broad input is essential in maintaining high-quality standards that serve both auditors and financial statement users.

Open forum discussion

The open forum portion of the webcast allowed participants to ask questions and share their perspectives on the topics covered. Questions were submitted regarding the timing of comment periods for FASB’s ITCs and other current exposure documents. The comment periods for the discussed items close as noted:

• ITC, Agenda Consultation — June 30, 2025. ITC, Recognition of Intangibles — May 30, 2025.
• ITC, Financial Key Performance Indicators for Business Entities — April 30, 2025.
• Proposed ASU, Environmental Credits and Environmental Credit Obligations (Topic 818) — April 15, 2025.
• Proposed ASU, Codification Improvements — April 22, 2025.

There were also several inquiries about goodwill amortization, a recurring topic of debate in accounting circles. Some participants advocated requiring all goodwill to be amortized, while others questioned the necessity of such a shift. Jones acknowledged these differing views and invited further feedback.

Another area of discussion was the implementation of the lease accounting standard. FASB is conducting a post-implementation review to determine if any improvements or clarifications should be considered. Jones encouraged participants to share their experiences with the new standard, explaining that such input is essential for evaluating its real-world impact.

On the auditing side, questions focused on the proposed changes to fraud detection standards and cash confirmations. With respect to cash confirmations, the audience questioned whether all cash accounts would require confirmation. Lord noted that the exposure draft would not contain a requirement that all cash accounts would be subject to confirmation, which reflects current guidance.

Lord also addressed a question about the use of artificial intelligence (AI), with participants asking whether AI could be leveraged for continuous monitoring of client books and records. Lord acknowledged the potential and highlighted the potential use of AI not only by the auditor but by an entity’s management as well.

Closing and a look at our next broadcast

Wrapping up the broadcast, Durak encouraged members to stay engaged and continue to contribute feedback on FASB and ASB exposure documents. He emphasized that participant input is crucial in shaping the profession’s future.

Looking ahead, the next A&A Focus broadcast is scheduled for March 5, 2025. Topics will include:

• A discussion with Jay Schulman, CPA, principal and National Leader of Blockchain and Digital Assets at RSM, the needs of key stakeholders in the stablecoins space, what the stablecoin reporting criteria are and why they are needed.  .
• An update regarding preparation, compilation, and review engagements with Mike Westervelt, CPA, principal with CLA and chair of the AICPA Accounting and Review Services Committee.
• A continuance of our series on revenue recognition with a discussion of step 4 of FASB’s recognition model with return guest Angela Newell, CPA, Accounting Professional Practice principal at BDO and former chair of the AICPA Financial Reporting Executive Committee.

AICPA members are encouraged to attend these monthly events and review the accompanying newsletters for more in-depth coverage of these critical topics. Members can access archives of past sessions at the A&A Focus Series webpage.

— Dave Arman, CPA, MBA, is senior manager–Audit Quality at AICPA & CIMA, together as the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.