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By Denise Lugo
June 2 — Analysts and other users of financial information didn't comment on a Financial Accounting Standards Board proposal that would change the disclosure requirements for fair value measurements.
The lack of response from users—who are typically analysts—to the proposal is concerning, FASB members said June 1.
One of FASB's primary mandates is to develop accounting rules that provide information capable of aiding users in making decisions.. Their feedback is therefore extremely critical, board discussions indicated.
Though financial statement users have been willing to comment on background, getting them to submit public comments hasn't been successful because of the regulatory backlash many fear, according to the discussions.
Many companies have strict clearance procedures in place for their analysts to follow before they can publicly write or even comment on an issue.
This stemmed from the heightened regulatory oversight brought upon analysts following the technology bubble and subsequent stock market crash over a decade ago. Many blamed market hype and overly optimistic analysis. Other scandals that followed, such as Enron, added to the issue.
As a result, for analysts, issuing a written public comment letter has become complex. Many of them therefore comment to the board on background only, via staff outreach.
As a result, FASB receives uneven input. “I'm disappointed that they don't send comment letters,” FASB Chairman Russell Golden said. “I understand, though, that it's because the users choose not to publicly communicate that we're constantly in an unbalanced position,” he said.
The proposal, “Fair Value Measurement (ASC 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement,” was issued December 2015 (11 APPR 26, 12/18/15).
Of the 51 comment letters the board received, about 43 percent came from financial statement preparers, staff accountants told the board. The rest were from auditors, academics, trade societies and others.
“I was shocked there was so much negative in that analysis—this is all preparer feedback,” FASB member Harold Schroeder said. “There was no user input whatsoever, so that's the reason why as part of next steps you want to do user outreach,” he told staff accountants.
FASB's staff said it would do targeted user outreach to obtain additional feedback about the proposal. Feedback will also be solicited at a disclosure roundtable FASB will hold November with users, preparers and other practitioners, staff said.
FASB member Marc Siegel suggested staff put together a public document analysis summarizing the views of users so that those, like the current ones, will be publicly transparent.
The current batch of comment letters can be summarized in three words: “No new disclosures,” said Siegel. “And I think it's not indicative of a balanced view about what the feedback is going to be when you think about all the different constituents,” he said.
To contact the reporter on this story: Denise Lugo in Norwalk, Conn., at firstname.lastname@example.org
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For a copy of the board's handout, which includes a comment letter analysis go to: http://src.bna.com/fw3
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