FASB Sets Strategic Priorities for 2025, Seeks Stakeholder Input

STAMFORD, Conn., December 30, 2024 – The Financial Accounting Standards Board (FASB) presented its ambitious programme for 2025, focusing ​on stakeholder-centred decision-making and the application of better financial reporting standards. As Council President Richard Jones explained, ​this initiative will focus on a broad-based agenda consultation, building on ​his efforts in 2021 to align accounting standards with the changing needs of ​investors ​and businesses.

According to Jones, ​FASD aims to address ​critical areas such as ​software cost accounting, government grants, environmental credit programs and the modernization of intangible asset standards. “We have a strong set of accounting ​standards,” said Jones, adding that continuous improvement ensures that generally accepted U.S. accounting principles (GAAP) remain relevant ​and ​appropriate to their end.

Program Consultation and Key ​Projects

The ​program consultation process, which will begin in 2025, will seek input from businesses, financial statement writers, investors and other stakeholders. According to the AFSCA, the initiative stems from a ​successful series of ​2021 comments that ​led to ongoing ​projects, including software cost guidelines and ​environmental credit programs. These ​efforts are part of the AFSCA mission to address ​gaps in the U.S. financial reporting framework.

Over the past year, the Board has updated ​GAAP, ​completed a decades-long initiative to refine its ​internal manual ​and undertaken ​research on performance indicators and intangible assets. In 2025, Jones ​focused on proposals for government subsidies ​and derivatives, which he considered crucial for transparency and ​financial comparability.

Modernization of intangible ​property standards

The FASB recently announced its intention ​to collect high-level information on the revision of ​accounting standards for intangible assets, such ​as patents and trademarks. The current focus is on intangible and research and ​development costs, but stakeholders called for a broader framework. According to Ron Graziano, Director of ​Accounting and ​Tax Research at LSV Asset Management, ​these changes may coincide with the importance of the AFSB’s rental and income ​standards.

Many intangible assets, particularly ​those generated internally, are not included in the balance sheets in accordance with the rules in force. Graziano stressed the need to increase disclosure in ​order to help investors differentiate between the usual operating costs and the costs that ​could ​produce future cash flows. Greater transparency in ​this area could have ​a significant impact on investment decisions.

Set performance parameters

Performance ​measures that are not governed by GAAP, often referred to ​as non-GAAP measures, are another focal point for FASD. ​These parameters, such as free ​cash flow and adjusted net income, are often used in corporate income reports, but there are no standardized calculation methods. In November, AFSCA asked the public to comment on the desirability of launching a formal project to better define ​these key performance indicators.

“These measures can be an important way for the company to tell its story,” said Shripad Joshi, CEO ​of S plagaamp; P ​Global ​Ratings, at a December ​meeting. ​However, Joshi ​also ​warned against his abuse to present too optimistic representations of the company’s performance. He argued that stronger regulatory guards would improve their reliability for ​stakeholders.

FASD research ​aims to determine what measures ​should be standardized. Graziano, member of the AFSCA Investor Advisory Committee, noted that stakeholder feedback ​would ​be ​essential to reduce the ​scope of potential indicators.

Revisit derivatives Accounting ​standards

AFSCA’s work on derived rules is expected to continue in 2025, with Council considering comments on its July proposal to extend exceptions to existing standards. The current framework requires that transactions such as re-shipments and ​options take into account a ​reasonable value, a complex process that ​the AFSCA aims to ​simplify for rating operations.

“As the economy and regulatory environment ​evolve, these instruments evolve,” said Lara Long, member of the ACFA Advisory Committee. He ​stressed the importance of updating the guidelines to reflect these developments. The proposed ​exceptions could, for example, simplify ​reporting to companies that provide funds related ​to ​greenhouse ​gas emission targets, reducing compliance burdens while maintaining transparency.

Clarification ​of accounting ​for government grants

Another priority of ​the AFSCA is to address inconsistencies ​in the accounting of public subsidies. The Council’s proposal, which was open to the public until 31 March 2025, aims to harmonize US ​standards with the International Accounting Standards Board’s directives. The plan would require companies to disclose the ​basic conditions ​and conditions of the grants, thereby promoting ​comparability ​between the financial statements.

“Remaining this gap in GAAP must certainly be one of ​our priorities,” said Mr. Jones. ​Board members discussed the extent to which ​the proposal codifies existing practices, with some ​advocates of more normative disclosure requirements. Dissident Board member Christine ​Botosan expressed concern that the changes could perpetuate rather than eliminate diversity in practice.

Despite divergent views, Jones expressed optimism about the proposal, noting the interest of those who wish ​to shape its final form.

As AFSCA continues its work, 2025 promises to be a key year in promoting financial reporting standards. By actively engaging with stakeholders and committing to meeting new challenges, the Council aims to defend its mission of promoting transparency and accountability in the US financial system.