Fall 2020 Meeting Report

AICPA’s Financial Reporting Executive Committee

By Bill Schneider, CPA-Dallas, CGMA
November 2020

FinREC recently concluded a virtual meeting – aren’t all meetings virtual these days – spread out over two days to discuss several topics. The topics discussed are outlined below to give you an idea of what this committee is doing for you as a member of the CPA profession.

FinREC continued discussion of a series of documents to help with long duration insurance accounting. The document we discussed this time was put out for feedback and the focus was on incorporating that feedback into the final document. If you believe that decisions are already made and the feedback is just for show, you are wrong. While not every piece of feedback resulted in a change, all pieces of feedback were considered and reasons for not incorporating the change, such as the request about a situation that was too unique for the wider-use document, were evaluated before making final decisions on what to include and what not to include.

Being part of the process really brought home to me how important examples and specific requests for changes are for the bodies receiving the feedback. That kind of feedback doesn’t leave the group guessing as to what the submitter wants or seeks in a change. As a result, the request can be evaluated fairly. Vague comments are rarely addressed, not because the recipients ignore the feedback, but because it’s hard to know what change is really desired. When it’s clear what changes the feedback provider wants, it’s easy to consider inclusion, but vague , ”I don’t like it” comments are hard to address.

Also discussed was a proposed response letter to the Financial Accounting Standards Board (FASB) on the conceptual framework exposure draft on Elements of financial statement – assets, liabilities, revenue, expense, gains, losses. The FASB proposal includes eliminating the word control from the definition of an asset. In this case, FinREC discussed whether control should be included in the definition. The proposed definition of liabilities eliminated the term probable, which might tend to increase the types of items that qualify as liabilities. We discussed the implications of that change, as well.

In addition, the FASB proposal included language that effectively said the difference between revenue and gains and expense and losses is a matter of presentation, not a definition issue at the element level. That is, the proposed concept statement eliminates the use of “from ongoing major or central operations” for the definition of revenue and expense and “from peripheral or incidental transactions” from the gain and loss definitions. FinREC discussed whether this made sense or not. You’ll have to wait for the official response letter to be filed to see our conclusions on all these matters.

FinREC continued to review additional chapters to an update of the business combinations accounting and valuation guide. This meeting focused on Chapter 11, which is about selecting appropriate valuation approaches and techniques for acquired intangible assets. While the guide and chapter title focus on the valuation upon acquisition, the valuation guidance from the document also influences intangible and goodwill impairment testing. We have now made it through 11 chapters with two more to go.

Several early chapters already reviewed by FinREC were recently sent to FASB and the SEC for comment. Once the FinREC review of the guide is complete, it will be released to the public for comment.

Finally, FinREC is keeping an eye out on two new topics that may be coming from FASB:

• Supply chain financing, and
• Goodwill impairment for private companies.

I don’t know if we will be providing a response on these topics, but they are definitely “hot” in the accounting world, with lots of opinions about how they should be handled.

One way to look at FinREC is that we handle all of these matters, so you don’t have to. We provide responses to other standard-setting bodies, help with industry and other specific matters by providing details that help you understand what the standards are really getting at, and provide you information to make sure you can do your job a little bit better in a little bit of an easier manner.

Our next meeting will be held in January. If you would like to know a little more about FinREC , you can visit the AICPA webpage on FinREC here .