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Deloitte comments on FASB's invitation to comment on its agenda consultation

Published on: Oct 20, 2016

Deloitte & Touche LLP comments on the FASB's invitation to comment "Agenda Consultation," which was issued in August 2016.

An excerpt from the comment letter is shown below:

We applaud the Board for soliciting feedback about financial reporting issues that it should consider adding to its agenda. This is an important step in gaining constituent input on the most vexing issues and commitment to the future path for standard setting. We agree now is the time to consider what new major projects the Board should undertake. While constituents will be busy over the next few years implementing recently issued major standards, we would expect that all of the issues noted in the ITC will take years to complete and not result in final standards until after implementation of the recently issued standards is complete.

All of the topics included in the ITC have merit for being added to the agenda. While we do not think that the standards related to these topics are so flawed that they provide misleading financial information, they are areas with some of the most difficult issues and could be improved. However, since the Board’s resources are finite, priorities must be set. Therefore, we believe that only two of the four proposed topics should be added to the Board’s current agenda. Too many major projects on the Board’s agenda at the same time could dilute its resources and focus, in which case it could need additional time to complete projects and may not implement the best solutions.

Further, the additions to the agenda should not replace the current significant projects such as disclosure effectiveness and conceptual framework which we encourage the Board to continue working on and complete. The addition of the proposed topics also should not prevent the Board from taking on narrow projects as the need arises and provide support for the implementation of the recently issued major ASUs (e.g., on revenue recognition, leases, and financial instruments).

We believe that the two topics the FASB should add to its agenda are (1) distinguishing liabilities from equity and (2) reporting performance and cash flows.

In addition, we think that these two topics are related to some extent, since changes to performance reporting may be the key to differentiating claims on assets. For these projects to be successful, solutions should be rooted in broad concepts in order to be viable for a long period of time and to avoid contradictions with other standards. In addition, the Board should continue to use the project management steps it has instituted, including an extensive research phase for identifying root issues. Also, the Board’s latest innovation of more extensive education sessions to identify all the issues and how they interact before any decisions are made, appears to be helpful, provided there is full transparency around decisions giving constituents a chance to react and provide feedback.

Full text of the comment letter is available below.

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