Despite some calls to standardize accounting for cryptocurrency investments, the Financial Accounting Standards Board (FASB) has no plans to do so, Chair Richard Jones says.
"The board decided that it hadn't risen to the level of pervasiveness [where] it should be one of the priorities on our agenda," Jones said in a CFO.com interview released earlier this week. "That doesn't mean that couldn't change."
Jones, who took over as chair of the nonprofit standards-setting body last June, covered cryptocurrency investments, goodwill, and ESG performance in a video conversation with CFO.com editor Vincent Ryan. He also talked about FASB's policy of staggering effective dates for public and private companies and nonprofits and a process he launched last year to get more outside input on the organization's agenda.
Assets carried at historical costs
The broader issue with cryptocurrencies is whether FASB should set standards for any kind of non-financial asset that is typically carried at historical cost even though they're traded in active markets, he said.
"In other words, should we be standard setting on all of them versus one subset?" Jones said.
He pointed to precious metals and commodities such as oil as other subsets that could be subject to the standards.
The environmental, social and governance (ESG) movement, although of increasing importance as people seek more accountability from companies and other organizations for the impacts of their actions, is beyond FASB's domain, Jones said. But to the extent these areas insect with financial reporting, accounting standards already play a role.
"We have standards, for example, that require entities to make assumptions about future cash flows," he said. "Sometimes they are entity-specific assumptions and sometimes they're market-participant assumptions. What we don't do is say those assumptions have to do x or have to do y. They are supposed to be objective assumptions, and they're supposed to be unbiased."
Looking ahead, the trustees of FASB's parent organization, the Financial Accounting Foundation, are examining ESG issues and factoring them into their strategic plan for FASB, he said.
There's no consensus on any forthcoming changes to how companies account for goodwill in their reporting, Jones said, but discussing it is on FASB's agenda.
"If you believe acquired goodwill, as an asset, declines in value over time, you probably lean toward an amortization model," he said. "On the other hand, if you believe you really can't predict goodwill going down in value, you would [support] testing it for impairments."
The majority of the FASB board has so far been interested in taking a hybrid approach, which he described as an amortization model that also includes a testing component for impairments.
"At a future board meeting, members will discuss whether there should or shouldn't be a change in the impairment model and, if there should be a change, what it should be," he said.
Staggered effective dates
Jones defended FASB's policy, now a few years old, of subjecting public companies to new standards a year or two before private companies and nonprofits, and he suggested there's little likelihood that will change any time soon, despite some criticism.
"Private companies and their service providers learn from the public company adoptions," he said, "and they are not competing for the same resources."
Staggered effective dates are particularly important for major standards changes, which typically require organizations to bring in outside specialists to implement, pitting private companies and nonprofits against public companies in a competition for expert resources.
"If you think about a major accounting change — going out and hiring people to help you with that change and making systems changes — [staggered effective dates] is a way to make sure private companies won't be necessarily competing for the same resources," he said.
Staggered effective dates also enable FASB to tweak changes before private companies and nonprofits implement them based on the problems public companies encountered.
"We can identify those [problems], so we can make those changes and improvements before the private companies adopt," he said.
In one of his early moves as chair, Jones in December launched an agenda outreach project to gather input from the organization's stakeholders — finance leaders, accountants, regulators, investors — on what FASB should be looking at.
"We had just gone through a significant period of accounting change — the three big projects [leases, revenue recognition, current expected credit losses] that have either been adopted or are in the process of being adopted by preparers," he said.
The last time FASB asked for agenda input in a formal way was 2016. "I think it's important to do it periodically, and I think that doing it at the beginning of my term makes sense," he said.
Jones expects FASB to release a document this summer that will incorporate the dialogue it's had with its stakeholders through the process.