March 9, 2021
The Financial Accounting Standards Advisory Council (FASAC) held its quarterly meeting on Tuesday, March 9, 2021. The FASB Chair provided highlights on FASB activities that were not otherwise on the agenda for the Council meeting and SEC and PCAOB staff members commented on current issues and activities. Council members discussed the following topics:
Investments in Nonfinancial Assets: FASAC members discussed (a) the pervasiveness of investments in nonfinancial assets including commodities, digital assets, and art and collectibles and (b) whether improvements to the accounting for or disclosures about investments in nonfinancial assets are needed.
Overall, Council members indicated that investments in nonfinancial assets are insignificant or nonexistent in many companies. Some indicated that investments in nonfinancial assets and the exchange of digital assets may become more prevalent in the future.
Investors and other financial statement users indicated that investments in nonfinancial assets generally are insignificant for the companies they analyze. Some investors and other financial statement users stated that, if material, they would want transparent disclosures about the amount and type of investment, management’s intent to utilize the asset, and the impact to the financial statements (specifically the impact to cash flows).
Preparers commented that investments in nonfinancial assets are typically insignificant for their companies. Occasionally, some companies will accept cryptocurrency as payment from a customer. Some practitioners have seen a few companies that have significantly increased their investment in cryptocurrency; others observed an increase in investments in solar and carbon credits.
Some Council members noted that, given the lack of pervasiveness, improvements to the accounting for investments in nonfinancial assets is not an urgent issue for the FASB. As a first step, some Council members encouraged the Board to potentially consider improvements to the disclosure requirements to provide more transparency around management’s intent and how companies are accounting for those investments. Council members generally indicated that having consistency in the accounting for investments in nonfinancial assets could be beneficial and that management’s intended use of those assets is important and should be considered in accounting for those investments.
FASB Agenda Criteria and Agenda Consultation Process: FASAC members discussed the FASB agenda prioritization process, including the 2021 agenda consultation process.
Council members discussed the Board’s cost-benefit considerations and emphasized the importance of continuing to include all types of stakeholders in the outreach throughout the various project stages. For example, during pre-agenda research it is important to have robust dialogue with both preparers and investors to help balance the expected costs and benefits and reduce potential implementation costs. Some investors also suggested that the Board consider using surveys to expand the number and types of stakeholders involved with the standard-setting process.
Some Council members suggested that the Board’s agenda process considers both longer-term projects on broad issues that are pervasive across all companies as well as shorter-term projects on narrower issues that are significant to certain industries or types of companies. Some Council members also indicated the importance of the Board’s consideration and prioritization of its staff resources when considering potential projects.
FASAC Meeting Recaps are provided for those interested in following the activities of the FASAC. Official positions of the FASB are reached only after extensive due process & deliberations. More details on the FASAC’s input on the FASB’s projects can be found within the meeting minutes, which will be published on the FASB website in the coming weeks.