Before I begin, I must remind you that official positions of the FASB are reached only after extensive due process and deliberations. In other words, what I am about to say are my views and only my views.

In a couple of years, the FASB will celebrate its 50^th anniversary. We’ve been around far longer than any previous financial standard-setting body in the United States, and our structure and approach has been replicated by accounting standard setters around the globe.

I attribute the FASB’s longevity to an inclusive, thorough standard-setting process. One developed and fine-tuned over decades. One geared toward continuous improvement and the ability to respond to new challenges in our ever-changing capital markets. One built on extensive outreach that incorporates diverse views representing all corners of the U.S. capital markets.

Members of the FASB, including our current Board, come from diverse professional backgrounds. That’s by design. While each of us brings different experience to the table, each of us is there to serve and is equally committed to the same mission—to improve accounting and financial reporting so that it provides investors and other allocators of capital with information they’ll incorporate into their decision-making process.

Put another way: FASB members are not appointed to the Board to lobby or advocate on behalf of a specific profession or professional point of view. For example, there is no “preparer advocate,” or “practitioner advocate,” or “academic advocate” on the Board. The only thing each of us “advocates” is improvement.

That doesn’t mean we always agree on how to achieve improvement. That’s why there are seven of us. But we need a diversity of perspectives and experiences to get us to the best outcome to fulfill our mission—even in those cases when it’s a 4–3 vote.

Our longevity also means we’ve got nearly five decades of GAAP standards in the books. That’s not including guidance issued by our predecessors, AICPA literature, and other sources that have been incorporated into our Codification.

At this point, there are very few issues that haven’t already been addressed in GAAP. And while there will always be a need to improve and evolve standards to meet emerging financial reporting challenges, it begs the question, “where should the FASB go from here?”

Today I’ll talk about how we’re seeking answers to that question—through our current agenda consultation process and other outreach with our stakeholders.

Next Wednesday, the FASB will hold our first in a series of public meetings to discuss the feedback we received on our Invitation to Comment. Published in June, the Invitation to Comment gave all stakeholders the chance to weigh in on the Board’s future agenda.

When we embarked on the agenda consultation project that I first announced at this conference last year, we sought to do more than create a new project lineup. We wanted to offer stakeholders a broader opportunity to weigh in on the FASB’s future direction—in other words, where and how we should focus our resources to best fulfill our mission.

I believe the time is right for this reflection. For more than a decade, our agenda has tended to focus on fair value migration, international convergence of accounting standards, and post-crisis standard setting. For example, our bilateral convergence efforts with the International Accounting Standards Board (IASB) strongly influenced the revenue recognition standard. ENRON-era financial reporting scandals that rocked our capital markets in the early 2000s and resultant studies about off balance sheet financing contributed to our project to bring leases on the balance sheet. And the financial crisis of 2008 and a search to improve the accounting for loan losses led to our expected loss standard.

The completion of those projects put us in a sound position to take stock of our priorities.

By the time we issued the Invitation to Comment in June, we’d already spent the first six months of 2021 speaking with over 200 stakeholders representing a broad range of perspectives. They included discussions with more than 70 investors and other financial statement users. They also included discussions with other stakeholders including the AICPA’s technical committees as well as our advisory groups, who represent a cross section of our stakeholders focused on small and large public companies, private companies, and not-for-profit organizations.

Through these discussions, four main areas of potential standard-setting focus were identified:

• Providing more disaggregation of financial information
• Providing more guidance around emerging areas in financial reporting
• Reevaluating specific areas of GAAP to reduce unnecessary cost and complexity
• Enhancing certain standard-setting processes and procedures to help increase transparency and communication.

In the Invitation to Comment, we asked stakeholders to weigh in on these four categories—or others they believe are important. We also asked them to rate the priority and urgency of each topic, suggest potential solutions we should consider, and provide insight on the feasibility and potential impact of those solutions on investors, preparers, and practitioners.

We received more than 500 responses, so it will take more than one Board meeting to work through all the feedback. I can say that, based on what we’ve seen so far, it appears that most investors and other allocators of capital favor more disaggregation of financial information. And most preparers do not.

I’m not surprised. “Investors want it!” and “It costs too much to produce!” are the two most frequent comments we hear during stakeholder outreach.

But these comments are the beginning of the conversation, not the end.

As the Board discusses the responses to our Invitation to Comment, we will evaluate all stakeholder input within the context of “achievable standard setting.” Specifically, we’ll look to identify projects that fulfill our mission that we can successfully complete with the resources at hand.

During our deliberations, we’ll also look to identify areas where there’s a sufficiently pervasive need to improve GAAP. And we’ll seek feasible solutions whose benefits are likely to justify the expected costs of change.

If the “holy grail” for investors is 1,000 line items on the income statement—we aren’t going to achieve that. We can aim for a stretch goal, though—while being mindful of the fact that more information doesn’t necessarily equate to more relevant information. And it may just introduce more unnecessary cost and complexity into the system.

Let me be clear: when I talk about removing unnecessary cost and complexity in financial reporting, many people assume it is focused on the cost to prepare the financial statements. That is not the case. Unnecessary cost and complexity affect all stakeholders—including investors. And it’s not just professional investors that we need to consider but reasonable investors, including qualified retail investors, that rely on the information conveyed in the financial statements. Our standards are judged by the quality of information they provide investors and the cost to investors and preparers (which by the way are costs borne by the current investors) alike.

If a financial transaction is complex, then it follows that the accounting is more likely to be complex. I call that necessary complexity.

Unnecessary complexity, on the other hand, obscures relevant information investors use to make capital allocation decisions—imposing unnecessary costs on the system. I have yet to speak to an investor who believes unnecessary complexity is—well—necessary.

In fact, most financial reporting issues raised by investors can be traced back to unnecessarily complex guidance that fails to provide useful information for capital allocation purposes. Over the past six months, we’ve addressed—or begun to address—areas of concern identified by investors through our post-implementation review of major standards on leases, credit losses, and revenue recognition.

I’ll give you some examples.

During our post-implementation review of the leases standard, we heard concerns that lessors were sometimes required to recognize a day-one selling loss for a sales-type lease with variable payments—even if the lessor expected the arrangement to be profitable overall.  Investors noted that this accounting outcome did not faithfully represent the underlying economics either at lease commencement or over the lease term.

To address this, last July we published a standard that amended lessor lease classification requirements so that lessors must account for certain leases with variable payments as an operating lease under certain circumstances—effectively eliminating the recording of the day- one uneconomic loss.

In July, we also added a project to our technical agenda to address the accounting for acquired financial assets. During our post-implementation review of the credit losses standard, including a roundtable in May, stakeholders said that accounting for acquired loans provided inconsistent information for investors not all of which reflected the economics of the acquired loans and that improvements to that model could be made.

As part of that project, the FASB will consider (1) expanding the scope of the purchased credit deteriorated accounting model to all loans acquired in a business combination and (2) modifying the presentation of expected credit losses for acquired financial assets that apply that model.

Speaking of unnecessary complexity—investors told us that having multiple models for accounting for loan modifications is no longer relevant given the other requirements of CECL. Accordingly, last month, we issued a proposal that would remove the troubled debt restructuring (TDR) expected loss model, enhance disclosures about modified loans, and accelerate the timing of our vintage disclosures project. Investors and other stakeholders had questioned the relevance of the TDR designation and the usefulness of disclosures about those modifications. That proposed standard also would require that a public business entity disclose current-period gross writeoffs by year of origination for financing receivables and net investment in leases.

During our post-implementation review of the revenue recognition standard, investors told us the accounting for in process revenue transactions in a business combination was neither intuitive nor helpful and instead was driving them to greater use of non-GAAP information to understand the post-acquisition performance of the entity. To address this criticism, in October, we published guidance on how to recognize and measure contract assets and contract liabilities related to revenue contracts with customers acquired in a business combination. This standard aims to bring clarity and consistency to financial reporting in this area and more closely align the recognition of post-acquisition revenue with the revenue recognition model.

It requires input from all stakeholders—not just investors—to make these improvements. But at the end of the day, our mission is to establish and improve financial accounting and reporting standards to provide useful financial information to investors and other allocators of capital.

Investors rely on financial statements of companies as an important, unbiased source of information as they make investment decisions, and we recognize that they are uniquely positioned to provide input on what financial information is most useful to them.

In August, we issued our 2021 Investor Outreach report which details how we work with this important stakeholder group.

While the report is new, our investor outreach program is not. Over the years, the FASB has consistently engaged with thousands of investors and incorporated their thoughts and perspectives in the many accounting standards we have issued.

For example, the FASB staff engaged in more than 430 investor interactions over the year ended June 30, 2021—even as many stakeholders were still dealing with the effects of the pandemic. Substantially all those interactions were the result of FASB-initiated outreach aimed at soliciting a wide range of investor perspectives.

And it is a wide range. Our outreach includes, but is not limited to:

• Buy-side portfolio managers
• Analysts from long-only asset managers and long/short hedge funds
• Sell-side analysts (sector specialists)
• Accounting analysts (both buy-side and sell-side)
• Credit rating agency analysts and managers
• Private company lenders and other capital providers (e.g., venture capital/private equity)
• And other reasonable investors.

Not all investors speak with the same voice. And no single investor—or group of investors—has been designated to speak for the others. We are always talking to investors, not only about standards, but on developing new and more effective ways to interact with them. And we must be able to convey how and when investors will use the information provided by our proposed standards to influence their capital allocation decisions to make the case for changing our standards.

In our experience, investors typically do not actively follow accounting standard-setting activities. This requires us to go beyond our traditional processes to effectively educate them about, and obtain their views on, different financial reporting matters. Our investor outreach report documents our process of working with investors to bring greater transparency to this process.

We also recognize that at the end of the day, the output of our process is an accounting standard that must be applied by accountants and that accountants play an essential role in creating and maintaining a logical set of standards that most appropriately conveys an entity’s financial position and results of operations, information needed to keep our capital markets functioning. And that brings me to my last point: the importance of your continued involvement in our process.

Silence is the hardest thing to evaluate. Talk to us. Follow our activities. Engage.

I will be available to answer your questions at the 4:20 Q and A panel. But first, I’m pleased to introduce my colleagues—FASB Technical Director Hillary Salo and Deputy Technical Director Nellie Debbeler—who will join me to provide the FASB technical update.

Thank you.