Hello and good morning. I want to thank Norm Strauss and the rest of the Baruch team for inviting me to join Paul Munter for today’s discussion. Like Paul, I'll start with our customary disclaimer: official positions of the FASB are reached only after extensive due process and deliberation. In other words, what I am about to say are my views and only my views.

I am not sure how many in our audience today have had the opportunity to teach someone else to drive a car, but as a father of three children, that’s something I’ve had the privilege to do. While teaching your children a new skill is greatly rewarding, I must admit that sometimes it’s a scary experience.

During the first few lessons, my sole objective was to ensure that we and those around us would reach our destinations safely. And for that I was focused principally on one thing—please stay in your lane—don’t veer into oncoming traffic—and please keep the brush on the side of the road from doing too much damage to the side of my car.

While it may sound like an easy task, driving in a straight line with as little overcorrection as possible requires constant attention and fine tuning. And watching some of my fellow motorists on a weekend drive down the Garden State Parkway reminds me that the challenge isn’t only for new drivers.

At this point you are probably wondering what in the world teaching a teenager to drive has to do with standard setting. For the past 49 years, the SEC has entrusted the FASB to develop financial accounting and reporting standards for public companies that give investors, creditors, and other capital providers information that helps them make decisions. In keeping with that aim, we've worked hard to make sure that the financial statements provide the most relevant information possible. Our standards benefit from a robust, thorough, and transparent process that results in high-quality standards that provide crucial decision-useful information to investors and other allocators of capital. Our standards are developed in full sunlight with the active participation of our stakeholders. In short, our processes drive the constant attention and fine tuning that is needed to make sure that financial reporting is not headed off the side of the road but instead reaches its destination in an efficient and effective manner. After all, high quality accounting standards that facilitate effective operation of the capital markets are in the public interest and protect investors.

Today I’ll talk about how our ongoing agenda consultation process—and how we’re incorporating what we heard from stakeholders to provide more useful information to investors—helps us set those standards. I’ll close with brief updates on our current technical agenda projects, including progress on our post-implementation reviews of key standards already in play.

When I spoke to you at last year’s conference, the FASB was about a month away from publishing our Invitation to Comment, which gave all stakeholders the chance to share their views on what financial reporting issues the Board should address next. We developed this agenda consultation document based on discussions with more than 200 stakeholders—one third of whom are investors.

The response to the ITC was tremendous. We were surprised and gratified by the more than 500 responses we received. Since late last year, the FASB has been actively addressing that input and prioritizing areas of significant investor feedback. This is a robust process, in part because “investors want it” and “it costs too much to produce” are not the end of the conversation but solely a starting point as we seek to understand how and when the information will influence capital allocation decisions and the nature and extent of any costs to be incurred.

Overall, investors and other financial statement users generally noted that the Board should prioritize projects that provide greater disaggregation of financial reporting information—in the income statement, in the statement of cash flows, or in the notes to financial statements—and that in many cases that would affect capital allocation decisions that they make.

We used that feedback to reshape and, frankly, improve key projects on our technical agenda.

For example, the FASB struggled to define a path forward on our dormant project on financial performance reporting. Investor input obtained during the agenda consultation process gave it new direction. We renamed the project and revised its objective to improve the usefulness of a business’s income statements through the disaggregation of certain expense captions focused primarily on selling, general, and administrative expenses, cost of sales and services, and cost of tangible goods sold.

Investor input also helped focus our long-term project on income tax disclosures to items that would benefit allocators of capital. We originally added that project to the technical agenda in 2014. Despite two exposure documents, a significant change in tax law, 100 comment letters, and other extensive outreach performed over the years, we still were unable to define a clear path forward. But again, investor input obtained during the agenda consultation process proved critical. We revised the project objective to focus on improving the transparency and usefulness of income tax disclosures. And we established a project scope that primarily focuses on income taxes paid and the rate reconciliation table.

In both of these instances, investor feedback from the agenda consultation process put us on the path of what I call “achievable standard setting”—and by that, I mean projects that fulfill our mission and which can be completed.

We’re also evaluating other stakeholder priorities through the lens of achievable standard setting while recognizing that while disclosure can provide key information to investors, the underlying accounting is of utmost importance. After all, good disclosure does not make up for bad accounting. In December, I announced comprehensive changes to the FASB’s research agenda, adding projects to explore potential paths forward on issues including the accounting for digital assets; environmental, social, and governance (ESG)-related transactions; and government grants, to name a few.

During the agenda consultation process, stakeholders of all professional backgrounds agreed that a project to permit or require companies to account for certain digital assets at fair value should be a top priority. Currently, we are looking at digital assets and commodities because in many cases they do have certain things in common: they’re actively traded, they’re viewed as exchanges of value between parties, and they’re often exchange traded. This month, we expect to bring results of that research back to the Board to decide if there’s an overlap beyond digital assets where it would make sense to have one accounting model—and what that model might look like.

Like digital assets, ESG is an extremely broad area, and people have different definitions of its subsets. Our research in this area will help the Board understand where specific ESG issues intersect with financial accounting and reporting and potential solutions. For example, we’ve seen bonds linked to an individual company’s emissions targets. If the company hits its emissions targets, it may pay a lower rate. If the company doesn’t hit them, it may pay a higher rate. Other bonds being issued offer different interest rates based upon hiring goals. We’ll bring back that research to the Board in the coming months.

The accounting for government grants was another priority area identified by stakeholders. Many suggested that adding GAAP guidance for the recognition and measurement of government grants would increase the relevancy and representational faithfulness of financial information provided to investors and other financial statement users. In the coming weeks, we expect to issue an Invitation to Comment to solicit feedback on whether the accounting for government grants under IAS 20 could be incorporated into GAAP.

Time does not permit me to share all the items we are working on as part of the agenda consultation process. However, rest assured, we are committed to addressing all stakeholder feedback.

Now I’ll turn my attention toward other existing technical agenda projects.

In the near future, we expect to issue a final standard on disclosure of supplier finance programs that will help investors better consider the effect of supplier finance programs on a buyer’s working capital, liquidity, and cash flows. We took on this project because financial statement users, including analysts and ratings agencies, asked the Board to consider adding some explicit requirements in GAAP that require companies to disclose information about these programs.

We also continue to make progress on our project on intangible assets and goodwill. We plan to meet with the IASB in September to share our progress on this project. We continue to pursue an “impairment with amortization” model that would reflect that what is acquired and initially ascribed to goodwill decreases in value over time.

And we expect to issue a proposed standard on segment reporting, an area of great importance to investors, during the third quarter of 2022. That project is aimed at improving the segment disclosures to provide users with more detailed information about a public company’s reportable segments.

Our post-implementation reviews of the revenue recognition, leases, and credit losses standards continue to help us fine-tune GAAP guidance in these areas. In the past year, we’ve issued several targeted improvements, including a standard on recognizing and measuring contract assets and contract liabilities in a business combination to help investors and other financial statement users better understand the financial impact of these acquisitions. We also improved discount rate guidance for lessees that are not public business entities—including private companies, not-for-profit organizations, and employee benefit plans. And we took what we learned from our May 2021 credit losses roundtable and other stakeholder outreach to take fresh looks at the accounting for acquired financial assets and the troubled debt restructuring model.

The FASB continues to work to earn the privilege of setting standards by engaging in the robust, inclusive process that built the comprehensive body of GAAP we have today. But we need your help to make sure our standards continue to drive our capital markets safely down the road.

On behalf of my colleagues on the Board, I thank you for your continued participation in our work. I look forward to taking your questions.