The ITC focuses on four projects: (1) distinguishing liabilities from equity, (2) goodwill and other intangibles, (3) performance reporting and cash flows, and (4) pensions and other postemployment benefit plans. During the meeting on October 6, FRC member Brooke Richards summarized the FRC’s recommendation for how the FASB should move forward with its agenda consultation project. First and foremost, the Board should focus on the disclosure framework project and implementation issues for the standards recently developed under the project with the IASB.

The FRC recommended that the FASB focus initially on targeted improvements for liabilities vs. equity, followed by incremental improvements for intangibles, taking the IASB’s model into consideration. The FRC believes the pensions project is a low priority since there are fewer defined benefit plans in existence today.

The FRC also believes that any near-term debt/equity project should consider targeted improvements where possible. It recommended that the FASB consider a closer, more comprehensive look at debt/equity as a separate longer-term research project that may need to address issues related to the proposed project on performance reporting. FRC members feel a long-term research project would be successful if robust project management practices are used. FASB staff said that implementation of project management and constituent outreach systems in 2017 will assist in streamlining the process for agenda projects.

FASB member Larry Smith expressed concern that such a research project could take many years to complete. But FRC member Mitch Danaher said that tackling the conceptual issues holistically through a research project would provide the best chance to ensure that the results would be capable of reducing the complexity of guidance to a tolerable level.

FRC member Jeff Ellis recommended that targeted issues for segment reporting be considered as part of a project for performance reporting since the U.S. Securities & Exchange Commission (SEC) often asks registrants about segments. FRC members believe investors should be looking at the same information for segments that’s used by chief operating decision makers (CODMs).

The FASB is conducting a roundtable session on the agenda consultation project on December 16, 2016, at its headquarters.


The FRC shared its overall concern with the direction of the FASB’s disclosure framework, recommending that the Board take a step back to determine if the project is addressing the objectives originally identified. The FASB should determine if prescribing specific disclosures is the right model for achieving effective disclosure. It also should consider looking at disclosure objectives for each topic instead of prescribing specific disclosures. In general, disclosures should be written with the expectation that not all investors are accountants. Danaher explained how at General Electric, where he works, prescriptive Generally Accepted Accounting Principles (GAAP) requirements were an obstacle to the company’s efforts to simplify and streamline three footnote disclosures in 2015. Prescriptive disclosures create a “checklist” mentality, when reporting companies should be focused more on ensuring that their reports are effective at communicating performance.

When asked about other issues that should be considered while moving forward with the project, FRC member John Stewart suggested that the FASB needs support from the SEC and the Public Company Accounting Oversight Board (PCAOB). And Danaher suggested that supporting and encouraging innovation in various ways—for example, supporting events like the PaceSetters accounting conference led by former FASB Chair Leslie Seidman—could further the broader objectives of the project.

FASB members indicated that the original proposal for the project was based on disclosure objectives without a focus on supplemental checklists. Constituents were opposed to the approach, especially auditors. The FASB will move forward with the project after considering all constituent feedback.


In May 2016, FRC member Jeff Ellis submitted to the FASB a list of 54 implementation issues for its standard on leases. To date, Ellis and FASB staff have discussed 30 of the issues. At the October meeting, the FRC expressed its concerns about accounting for sales-type leases. Ellis, for example, is unsure how investors can benefit from a lessor recognizing a significant loss on sales-type leases where a significant amount of the rents are contingent but those amounts can be reasonably estimated—particularly when the new revenue standard would require a seller to estimate variable consideration. Jim Kroeker, FASB vice chair, said that the leases standard likely wouldn’t be amended to ensure that accounting for sales-type leases is in alignment with guidance in the revenue recognition standard because the matter had been considered previously. The Board felt that it would have to address the lessee’s accounting for contingent rents in those circumstances.


The FRC also monitors activities of the FASB’s Private Company Council (PCC). Terri Polley, president and CEO of the Financial Accounting Foundation (FAF), provided an update on the PCC during the October meeting.

The FAF conducted a three-year review to assess the effectiveness of the PCC. The biggest change going forward will be the PCC’s oversight process. Currently, there’s an overlap of members on the Private Company Review Committee (PCRC) and the FAF Trustees’ Standard-Setting Process Oversight Committee (SSPOC). A final decision was expected to be made during a meeting with FAF Trustees in November 2016 regarding oversight of the PCC, which may result in the SSPOC taking sole responsibility of oversight beginning in January 2017. Going forward, the PCC will function primarily as an advisory group for the FASB.

The FASB reestablished the Small Business Advisory Committee (SBAC) earlier this year to address issues that impact small public companies. John Exline, a member of IMA’s Small Business Financial and Regulatory Affairs Committee, was appointed to serve on the SBAC. The Committee will help the FASB communicate with the small business sector, including obtaining input from smaller public companies on FASB guidance and other issues affecting them.

In addition to the meeting with FASB members and staff, the FRC also issued a comment letter in response to the ITC. The FRC’s comment letters are available at Please contact me at for additional information about IMA’s Financial Reporting Committee.

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