FASB’s Take on DiversityPosted: May 12, 2014
I was originally going to title this blog “FASB Opposes Diversity…In Business Reporting.” Yes, it is a little sensationalist, but isn’t that what we are supposed to do to get you to read these things? And isn’t opposing diversity in reporting one of the lynchpins of many FASB projects? In fact it often times seems to be the primary reason for an item being added to the EITF agenda. (For those of you thinking that is the EITF and not the FASB, I would note for you that in its current structure all EITF decisions must be approved by the full FASB Board before they are issued.) If you don’t believe me look at the recent spate of ASUs that have been issued through the EITF process. In almost every case one of the cited reasons for needing to address the issue in the first place is “diversity in practice” on how the underlying transactions were being reported from one business to another.
So why did I decide against naming the blog “FASB Opposed Diversity…?” Because I read a recent letter from Russ Golden, the FASB Chairman, which made it clear that FASB is willing to tolerate diversity – differences – in reporting, at least when it comes to differences in standards issued from the FASB and IASB. That letter made it clear that converging standards for convergence sake is not enough of a reason to change U.S. GAAP. Or in Russ Golden’s words “When standards proposed for convergence do not represent an improvement to U.S. GAAP, we have no choice but to do what we believe is in the best interests of investors who use it.”
Of course “improvement” is like beauty and is based on the eye of the beholder. In the FASB’s case, they focus on users of financial statements (investors) to determine if changes are an improvement. That is not to say they don’t listen to auditors and preparers, but users of financial statements are clearly “more equal” than other constituents to borrow a phrase from Animal Farm. And it appears that the FASB may have an attitude that U.S. GAAP is “more equal” than IFRS when it comes to accounting standards. If that is true, then the leasing and financial instrument standards may be the last “converged” (or maybe not so converged) standards we see for a long time.