Susan M. Cosper

Susan M. Cosper, previously the technical director for the Financial Accounting Standards Board (FASB), was appointed as a FASB member on May 1, for a term that will run through 2024. As technical director, she was a driving force behind many landmark accounting standards, as well as the formation of the Private Company Council (PCC), an advisory body to the FASB on private company matters. She took the time to talk to The Trusted Professional about the transition from staff to board member, challenges to the financial accounting landscape, and the future of the accounting profession.

What motivated you to pursue the accounting profession, in general, and what motivated you to pursue your CPA, in particular?

In high school, I was fortunate to go to a school that had a very extensive accounting program. Back then, it was mostly about learning bookkeeping and journal entries, but it certainly piqued my interest. My parents had a small, family-owned business, and I was able to help them with some of the accounting, transitioning the business from a manual ledger-based system to an automated bookkeeping system. It was these kinds of experiences that gave me the broader  perspective that I could be a problem solver for a lot of companies.

You’ve been the FASB’s technical director since 2011 and have had a front-row seat for how the sausage gets made. How do you think this experience will inform your work as a board member?

I’ve had a lot of experiences in my career; when I was in public accounting, I worked with a wide variety of companies—public, private, not for profit, health care and more. As part of the FASB, I led the staff in developing the Private Company Decision-Making Framework for the PCC and the FASB, as well as the standards-setting processes that guide the staff in our research and communications. As a FASB member, it’s important to provide different perspectives from my experiences with a variety of stakeholders, because the decisions we make and the standards we set have to work for the system as a whole. So, I think it’s important for me to share these different perspectives when debating an accounting issue. 

What’s been the biggest change in the FASB since you first began there? How has it changed the most?

During my tenure as technical director, I would say that the biggest cultural change was the increased considerations of private company and not-for-profit concerns, and, proactively, garnering outreach and feedback from the private company and not-for-profit communities, to make sure we develop standards that can be applied by all stakeholders. It’s probably been the most significant cultural change since I’ve joined the FASB.

I think we’ve also had some process changes as well, which are not as readily apparent but have still had significant effect. So, for example, when we embarked on the lease accounting project, we started out with a scope addressing lessee accounting, and the board at the time, later broadened the scope to add lessor accounting. Subsequently, we reduced the scope by reminding ourselves, “What is the problem we’re trying to solve?” It wasn’t lessor accounting, but lessee accounting. From that experience, from a process perspective,  we’ve become very judicious in ensuring clarity on the scope of a project before we add it to the agenda. 

What motivated you to join the board? Why make this move?

So my motivation is pretty simple: I have passion for what we do here. I have passion for our mission and the very important role we play in the capital markets in ensuring their success. I joined to make sure what we do here continues to have impact and that we continue to create transparency for investors and contribute to the successful operation of the capital markets.

As the technical director, you and other staff spoke before the FASB board members countless times on numerous different issues. What do you think of being on the other side now? 

Well, I’ve only been in my role for a month, and had the opportunity to participate in two board meetings so far. In my staff role, our purpose was to provide all the information to the board to help them make an informed decision and to do so in an unbiased way. As staff, we may have liked certain alternatives, but our role wasn’t to decide. It was to make sure the board had all the information they needed to make a decision. What I like about being a board member is the opportunity to express my point of view, to share the rationale behind it, and to share with other members of the board the lens through which I can see an issue, so I can help inform their thinking as well.

Which challenges within the financial accounting landscape concern you most right now? Where would you like to see the FASB putting more attention than it is now?

I think a project that we are actually working on right now, which hasn’t gotten as much attention, is reference rate reform. It’s about how the London Interbank Offered Rate (LIBOR) is going away, what that means, and how it should be dealt with from a transition perspective. For larger financial institutions, it’s definitely on their radar screen, but for many other companies and smaller financial institutions, it’s not.  We need to educate them on these changes that are on the horizon and what it means for them as they transition to a new rate. This change will affect all companies (public, private, not-for-profits).  There are many agreements that are indexed to the LIBOR, so there will be a challenge in helping companies understand how it impacts them and how we, as standards setters, can facilitate the transition and, at the same time, provide useful information for investors.  

The FASB is currently quite busy guiding entities through the implementation of revenue recognition and leases. In the wake of these and other landmark standards, the FASB is less focused on big projects right now. But let’s dream a little bit. If the FASB were given full resources and backing, what is a project, a change, you’d really like to see happen one day, even if it’s years in the future?

Over the years as technical director, I’ve had the privilege of working on some of the projects you mention. For revenue recognition, the standard effectively harmonized the top line. Transactions that were economically similar will now be accounted for in the same way, whereas under previous accounting, they were not. We did a good job on the top line. But we still haven’t harmonized gross margin. What’s the major component of gross margin? Cost of sales is a significant component, and  is related to inventory costing methodologies. There’s a variety of inventory costing methodologies out there, and even for the well-known inventory methods, there are still application differences, so it seems like, from a transparency perspective for investors, it might be good for us to look at inventory costing, at some point.

Cryptocurrencies are increasingly working their way from the fringes of finance, yet regulators, standards setters and many others are still figuring out what to make of them. Generally, what has been your take on them so far? And also, can you envision the FASB ever taking this issue on in the future?

I think it’s hard to say right now. Certainly, the AICPA has a project under way where they’re developing audit and accounting guidance related to cryptocurrencies. We’re monitoring their efforts to see what comes of it. It’s certainly a topic we regularly speak about with our advisory committee and our councils to understand the issue. We want to make sure there is a problem to be solved before we add a  project on this to the agenda. At least from the conversations we’ve had, we haven’t seen pervasive use of cryptocurrencies by the broad base of companies represented on our advisory committees.

That  doesn’t necessarily mean companies aren’t transacting in it. For example, some nonprofits receive cryptocurrency as a donation. However, they tend to immediately liquidate it when that happens. They’re not actually holding the currency, and we don’t have other examples of companies holding cryptocurrency in significant amounts either. Certain investment companies have it, but they are recognizing and measuring it at fair value and adjusting it each period. So what we’re trying to understand before it becomes a project is whether there’s really a problem to solve. Do companies know how to apply the accounting? Does it work? Does it provide useful information for investors or other users? We’re hoping [that] through our monitoring efforts of the
AICPA’s initiative, it will help us understand this question.

In general, what do you think is the biggest challenge facing the accounting profession right now?

There’s a couple of ways you can answer that question. Certainly, technology continues to be a major area that we discuss at our advisory committees and councils, and certainly, there is a spectrum of the way companies use technology. You have these very sophisticated companies applying GAAP [generally accepted accounting principles] standards, and the very small private companies that might not have that level of sophistication in how they use the information in the financial statements. So we’re always having a dialogue on what we should be thinking about, and as you look at the profession as a whole, audit procedures are changing because technology is changing. We need to keep abreast of these changes.

What was the last really good book you read?

It was a book series, the Black Flagged series, by Steven Konkoly. It’s about retired CIA operatives working undercover on national security missions. If you like Tom Clancy books, you’ll like it.