If you are interested in being considered as a panelist on the Financial Accounting Standards Board’s upcoming public roundtable on the disclosure framework and materiality, the registration deadline is February 27. Completing the registration form does not guarantee a spot on the panel, but will be used by the FASB to choose a balanced panel.
As stated in FASB’s January 12 press release: “To ensure that a variety of perspectives is received, the Board currently is seeking participation from preparers, auditors, investors, and others.”
A.M. session on 4 disclosure topics
The a.m. session on March 17 will focus on feedback on the proposed FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements (Chapter 8), and on the following four FASB proposals:
FASB’s press release states that comment letter respondents are eligible to participate in the roundtable sessions (in addition to filing the required registration form for consideration as a panelist). Comment letters received by the FASB are available to the public.
P.M. session on materiality
The afternoon session at FASB’s March 17 public roundtable will focus on feedback received on two proposals issued for public comment in September 2015, which would clarify the application of materiality in the FASB’s Conceptual Framework, and in a Proposed Accounting Standards Update (ASU). See: FASB’s materiality proposals: A big deal. Specifically, the proposals are:
FASB’s materiality proposals drew strong support and strong criticism – with those supporting the proposed adoption by FASB of the Supreme Court’s definition of materiality as an important simplification and driver of consistent understanding, and those opposing the proposal criticizing it as weakening the interests of investors and trying to fix a problem that didn’t exist.
This dichotomy of strongly held views on FASB’s materiality proposals is illustrated by two back-to-back comment letters filed on the proposed ASU on materiality, excerpted below:
Comment Letter No. 13, U.S. Chamber of Commerce
The Chamber strongly supports the Proposal and applauds the proactive leadership of FASB in defining materiality and resolving inconsistency between the well-established legal concept of materiality under the federal securities laws and the current usage of materiality as issued by FASB and the International Accounting Standards Board (“IASB”). Approval of the Proposal will lessen financial reporting complexity and ensure disclosure effectiveness by providing investors with decision useful information and facilitating capital formation in a way that helps businesses and their investors. We have urged both the Securities and Exchange Commission (“SEC”) and the Public Company Accounting Oversight Board (“PCAOB”) to align definitions of materiality for financial reporting to reflect the legal concept of materiality under the federal securities laws so that each entity is using a common definition of materiality and creating a level playing field for regulators and marketplace stakeholders. This is a necessary cornerstone for capital markets that best serve the interests of investors and issuers.
Comment Letter No. 14, AFL-CIO
We are deeply troubled by FASB’s proposals to redefine materiality and we believe the proposals should be withdrawn. … The existing FASB definition of materiality states that “Information is material if omitting it or misstating it could influence decisions that users make on the basis of the financial information of a specific reporting entity. …We strongly oppose redefining materiality based on a legal definition rather than as an accounting concept that has long been familiar to investors. …The proposed legal definition shifts the determination of materiality from information that “could influence decisions that users make” to a “substantial likelihood” that the disclosure will “significantly alter the total mix of information.” … We are also concerned that the proposed legal definition of materiality will insert the subjective opinions of attorneys into the disclosure decision-making process. …. If adopted, financial statement preparers will have far greater latitude to avoid making disclosures. … Providing less information in financial statements does not make the remaining disclosure more effective. To the contrary, investors are clamoring for more, not less, information in financial statements.
A couple of additional comment letters of particular note include: (many are noteworthy, but just a couple more are excerpted below):
Comment Letter No. 53, AICPA Financial Reporting Executive Committee (FINREC)
FinREC supports the proposed definition of materiality. We believe that the FASB’s effort is akin to a technical correction of GAAP. The proposed definition is consistent with the definition used by various U.S. regulators and the Supreme Court, and it is consistent with how we understand much of practice currently considers materiality. However, FinREC does not support stating that materiality is a legal concept. Instead, we believe the FASB should define the term…
Comment Letter No. 51, SEC Investor Advisory Committee (IAC)
The changes set out in the Proposals are not …clarifications but entail a significant and substantive alteration to the current definition [of materiality].The approach taken in the Proposals is explicitly designed to reduce disclosure and in doing so has the potential to adversely affect the quality of financial disclosure. …We believe that the Proposals need to be entirely reconsidered, with any future proposals preceded by the development of a more complete record that sets out the concerns giving rise to, and the consequences of, any change in the definition…[and] we encourage FASB to more clearly alert the public as to the significance of such changes.
Here is FASB’s Registration Form which must be filed no later than February 27 to be considered for selection as a potential panelist at FASB’s March 17 disclosure framework/materiality roundables.
Update your browser to view this website correctly.
Update my browser now