The Financial Accounting Foundation (FAF) has issued its 2021 annual report, detailing the past and projected standard-setting activities of the Financial Accounting Standards Board (FASB) and the Government Accounting Standards Board (GASB). In his message, FASB Chair Richard R. Jones said that FASB’s research agenda includes “projects on digital assets, intangibles, government grants, and accounting for financial instruments with environmental, social, and governance (ESG)-linked features and regulatory credits.” These projects were added as a result of a consultation process with more than 200 stakeholders, more than 70 of them investors or other financial statement users.  

According to Accounting Today, Jones and other officials from FASB and the Securities and Exchange Commission discussed some of those upcoming standards Thursday during a conference hosted by the University of Southern California’s Leventhal School of Accounting. “The single topic that drew the largest amount of responses was the accounting for digital assets,” said Jones. “[T]he feedback was very consistent, .... It was focused mostly on cryptocurrency and certain higher-profile cryptocurrencies and it was really asking if the indefinite-lived intangible model, which is what it falls into today, was that the best accounting model. I think it’s fair to say that model certainly wasn’t designed for something like Bitcoin. It was designed with very different assets in mind.” 

Summarizing the past year, the report listed the following key standards issued by FASB in 2021: 

• Reference Rate Reform (Topic 848): Scope 

• Franchisors—Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient 

• Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events 

• Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) 

• Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments

• Compensation—Stock Compensation (Topic 718): Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards (a consensus of the Private Company Council)

• Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers 

• Leases (Topic 842): Discount Rate for Lessees That Are Not Public Business Entities

• Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance 

The report also listed the following FASB proposed accounting standards updates: 

• Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method

• Leases (Topic 842): Discount Rate for Lessees That Are Not Public Business Entities

• Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

• Interim Reporting (Topic 270): Disclosure Framework—Changes to Interim Disclosure Requirements

• Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

• Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations 

GASB Chair Joel Black mentioned two related major projects of that board in 2021: The Financial Reporting Model Reexamination, which looks at what information financial reports should present in the future; Revenue and Expense Recognition, which considers how revenues and expenses should be recognized within the model. He noted that a third companion project, the Disclosure Framework, considers what information should be disclosed to allow stakeholders to gain a complete understanding of the model and related recognition concepts. 

The report listed the GASB highlights for 2021, including the following final statements and implementation guides:

• The Annual Comprehensive Financial Report 

• Implementation Guide No. 2021-1
Implementation Guidance Update—2021 

And the report listed the following GASB exposure drafts: 

• Compensated Absences

• The Annual Comprehensive Financial Report

• Accounting Changes and Error Corrections 

• Omnibus 20XX 

• Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements: Notes to Financial Statements (Revised Exposure Draft) 

The FAF is also marking its 50th anniversary this year. FAF Chair Kathleen Casey, in her message, provided some history, saying, “In 1972, a seven-person group was formed to study the establishment of accounting principles in the United States and to make recommendations for improving that process. … The Wheat committee, named for its chairman, former SEC Commissioner Francis M. Wheat, concluded there was an urgent need to establish a new and more independent organization to lead financial accounting standard setting in the United States. The first step recommended by the committee was the creation of the [FAF].” 

She added, “For 50 years, this structure—expert Boards operating independently, representing diverse perspectives, appointed and overseen by the Financial Accounting Foundation—has served investors and other users of financial statements well. Through its oversight of the standard-setting process and its own outreach, our Board of Trustees seeks to ensure that the FASB and GASB engage continuously with diverse stakeholder groups. Feedback from these groups is at the heart of the standard-setting process, informing the Boards’ decision making from the outset of a new project through implementation of new standards and beyond. This open, transparent process underpins the strength of Generally Accepted Accounting Principles, or GAAP.”