Taking Stock of 2016, Looking Ahead and a Memorial Note

“The trouble with life in the fast lane is that you get to the other end in an awful hurry.”

 --- John Jensen, Danish athlete

 “If it weren’t for the last minute, nothing would get done.”

    --- Unknown wag

Here, in the last minutes of 2016, it’s time to take stock of what happened in the world of accounting standard-setting and regulation of financial reporting over the last year.

The Financial Accounting Standards Board and “life in the fast lane” might not be uttered in the same sentence. However, the necessarily careful—and in some cases, decade-long—deliberations of the FASB bore fruit this year in a number of rulemaking groves.

Companies and their auditors (as well as investors and regulators) closed out 2016, before approaching office parties and punch bowls, with detailed discussions on how they’d prepare for various new reporting regimes.

It’s worth it to recap what FASB has achieved since Dec. 31, 2015:


  • In February, the board issued a long-awaited standard on leases, which will require lease-related assets and liabilities to be on the balance sheet for the first time. Calendar-year public companies apply it in January 2019.

  • In June, the lives of banks’ financial executives and CPAs changed big-time when FASB released hugely important rules on loan and other credit losses. Those call for earlier recognition of such losses and setting up of allowance accounts and will require some prep time, depending on the size of company and its portfolios. The standard is to be effective in 2020, making for a long runway to takeoff.

  • In January, FASB issued a standard on recognizing and measuring financial instruments that, overall, presents “targeted improvements” and little change for banks and other companies. It becomes generally effective in January 2018.   

  • Starting in the first quarter and continuing through December, FASB pretty much finished the process of coining added guidance on revenue recognition to help clarify application of (and prevent first-time-reporting snafus) far-reaching rules that were issued jointly with the International Accounting Standards Board in 2014. Public companies are to apply the new, one-stop standard in 2018.

  • In September, what FASB calls a proposal for more “targeted improvements” to the accounting for long-duration insurance contracts hit the newsstands, representing a scaled-down product of what had been a top-priority convergence project with IASB. [In IASBlandia, insurance accounting always has been more significant because of the dearth of accounting guidance in that commercial arena, globally speaking.] The comment period for the FASB proposal ended Dec. 15.

 IFRS: Acknowledgment of Slim Prospects in the U.S.

2016 also marked a time for apparent acceptance among all concerned that the adoption—optional or required—in the U.S. of IASB-written international financial reporting standards, or IFRS, will not come to pass in the foreseeable future.

That seems to be the same fate for a relatively modest proposal floated by then-SEC Chief Accountant James Schnurr in late 2014. The Schnurr reporting option would allow US public companies to issue a set of comprehensive disclosures, based on IFRS, to complement required filings made under U.S. generally accepted accounting principles. The option idea stalled not long after the ignition key was turned.

IASB Chairman Hans Hoogervorst told me in an interview in late September that the notion of the U.S. Securities and Exchange Commission embracing IFRS—which seemed very probable some 10 years ago—is “politically dead.”

Instead, as they did in 2015, FASB and IASB continued to monitor each other’s major work closely to head off any glaring misalignments that could cause problems in cross-border reporting. The boards seek to minimize differences in prescribed and actual reporting under US GAAP and IFRS as they each forge separate paths.

In addition, regular discussions among leading rulemakers at the IASB’s Accounting Standards Advisory Forum were more substantive and timely over the last year than they appeared to have been previously.

Departures from FASB.  

In the year that is ending, two members of FASB—Daryl Buck and Tom Linsmeier—stepped down from the board. In the year that is coming, Larry Smith, a former KPMG partner and former FASB technical staff chief, is to leave the board June 30.

Buck, with an extensive background as a private-company preparer of financial statements in Oklahoma, chose to leave the board some three years early after serving since 2011.

Linsmeier, an academic who was a strong voice on FASB and whose views often aligned with investors’ and security analysts’, left the board in June because of term limits. He joined the faculty of the University of Wisconsin-Madison in his native Badger State.  

Christine Botosan, a professor of accounting at the University of Utah, took Linsmeier’s seat at the FASB meeting table in July. Harold Monk, a partner with Southern U.S. regional accounting firm Carr, Riggs & Ingram, LLC, joins the board Jan. 1. Marsha Hunt, corporate controller and vice president at Cummins Inc., assumes a seat in July, after Smith leaves FASB because of term limits.

Finally, the trustees of FASB’s parent group reappointed Russell Golden to a second hitch as board chairman in November. His second and final term is to end June 30, 2020.

The Next-Up Docket.

In the next year, a key part of FASB’s work will be deciding what will be the topics for major—and most likely long-term—standard-setting by the board.

As signaled in a Dec. 16 roundtable at the board, a good number of auditing firms, companies and investor representatives favor taking on a project to revamp the financial statements—especially those showing income and cash flows—and to improve reporting of an enterprise’s performance.

Other contenders, in order of apparent support, include distinguishing financial instruments with traits of both debt and equity, which has been a huge challenge for both FASB and IASB in past years; reporting on the value of intangible assets, including internally-generated research and development; and accounting for pensions and other postretirement benefits.

In Memoriam.

Sadly, two veterans of much standard-setting at FASB, Mike Crooch and Wayne Upton, died in the latter half of 2016. They contributed greatly to the board’s published product and were influential in standard-setting for many years.

Crooch—a former FASB member, ex-partner at Arthur Andersen and a native of Oklahoma—was known for his solid, plain-spoken explanation of issues and policy positions, as well as for his sense of humor. He spoke about the board’s consolidations project being “old enough to vote.” Crooch bestowed on me a particular nickname, to signify how I seemed to lurk inside and outside the meeting rooms at FASB, seeking a moment to ask (always) one more question of people who hold oceans more of accounting knowledge than I.

Wayne Upton, a former senior FASB staff accountant who later took high managerial positions on IASB’s staff, was known for imaginative ways of describing concepts and principles behind accounting proposals.  For example, he created the memorable (if fictional) “Mr. Knuckles,” a debt collector whose record of extracting repayment from would-be deadbeats enhanced the value of problematic purchased loans, as I recall.

Mssrs. Crooch and Upton are missed. 

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