The Financial Accounting Standards Advisory Council (FASAC) held its
regular quarterly meeting on Thursday, June 20, 2019. The following
topics were discussed:
Effective Date Consideration for Private Companies, Not-for-Profit Organizations, and Small Public Companies:
FASAC members provided their views on the FASB's research project,
focusing on recent major standards including leases, hedging,
credit losses, and insurance. Overall, Council members expressed diverse
views on the philosophy for effective dates for major projects. Many
Council members supported providing organizations with fewer resources
additional time to implement major standards, particularly given the
number of major standards issued in the last few years. Council members
also encouraged the Board 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. Those members observed that the time lag should
vary, depending on the potential costs and complexity of the guidance.
Council members also observed that there are some challenges with
staggered effective dates, including potentially decreased comparability
between organizations and difficulties in applying the equity method
when the investors and investees follow different effective dates.
Implementation of Leases: 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 the 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: 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 Council members
indicated that additional time is needed to assess the benefits of the
change in the leases standard. Council members also discussed
implementation issues related to the incremental borrowing rate, certain
disclosures, and related parties.
Segment Reporting: FASAC members discussed
potential improvements to segment reporting disclosures, centering on
the approach to requiring additional disclosure by reportable segment.
Overall, Council members preferred a principles-based approach to
requiring additional disclosure by reportable segment, due to the wide
variety of industries. Council 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.
The FASB Chairman provided highlights on FASB activities, and SEC and PCAOB staff members commented on current issues and activities.
The next FASAC meeting will be held on September 24, 2019. For more information on FASAC, visit the FASB website.