AICPA Submits Comments on FASB’s Conceptual Framework Exposure Draft

August 27, 2014

Two American Institute of CPAs’ (AICPA) committees submitted comment letters in July in response to the Financial Accounting Standards Board’s (FASB) Exposure Draft of a Proposed Statement of Financial Accounting Concepts (SFAC), Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements [File Reference No. 2014-200].

The Exposure Draft states that FASB “intends to use the concepts developed as part of this project as a basis for establishing disclosure requirements in the future as well as evaluating existing disclosure requirements.”

The AICPA Financial Reporting Executive Committee’s (FinREC) comment letter stated, “FinREC supports the Board’s effort to develop a financial statement disclosure framework.  We agree with the stated project goals and believe that a sound disclosure framework has the potential to yield several benefits including more effective communication of information relevant to users and the elimination of redundant or irrelevant information from the notes to the financial statements.  While we do believe the Exposure Draft provides a comprehensive summary of the kinds of disclosures that may provide useful information to users of financial statements, it does not, by design, provide any guidance on how the Board should narrow the broad range of possibilities to the narrower set of required disclosures.  Accordingly, we believe that the proposed SFAC, as drafted, will be of limited practical use in helping the Board to distinguish information that should be included in financial statements from that which might be better provided by other means.”

FinREC recommended that FASB begin a process “to evaluate existing disclosure requirements, particularly with an eye for opportunities to eliminate redundant disclosures and reduce disclosures that do not provide value to users commensurate with the cost to provide that information.”

TIC Weighs In

The Private Company Practice Section’s Technical Issues Committee’s (TIC) comment letter to FASB stated that TIC is “generally supportive” of the Exposure Draft and expressed appreciation that it includes a number of improvements over the 2012 Invitation to Comment, Disclosure Framework.  For example,

  • The paragraphs that were added to describe the purpose and objectives of notes to financial statements and the types of information that would be considered appropriate and not appropriate for inclusion in the notes.
  • The exclusion of employee benefit plan disclosures from the scope of the proposed chapter.
  • The modifications made to the future-oriented decision questions.

TIC stated that the Exposure Draft “strikes an appropriate balance between the need for relevant disclosures and the limitations on disclosure posed by excessive cost or potential negative consequences to the entity,” but hopes that “disclosure reduction can be a byproduct of this disclosure framework.”

TIC noted it does not support the disclosure of alternative measurements.  TIC also requested that Chapter 8 include specific reference to the Private Company Decision‐Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies (the private company framework) and its interrelationship with the Exposure Draft.

Both comment letters responded to 10 specific questions raised by the Board in the Exposure Draft.