As the Financial Accounting Foundation considers a proposed strategic plan, ABA is recommending the organization consider ensuring that post-implementation reviews (PIRs) are conducted on a regular basis and that FAF takes a leadership role in helping bridge the gap between investor expectations and reporting on environmental sustainability.
FAF provides oversight of the Financial Accounting Standards Board and the Governmental Accounting Standards Board. The organization submitted a draft strategic plan for public comment in May, with the document spelling out FAF’s overarching goals. ABA submitted comments yesterday saying it supported the general direction of the draft plan but had two recommendations.
First, FASB should conduct regular PIRs of key accounting standards and update the reviews throughout an economic cycle, based on contemporaneous investor needs. As examples, ABA noted that PIRs conducted on the CECL standard and fair value requirement may elicit different outcomes based on the economic conditions during which the reviews took place. Second, FAF should engage with stakeholders, regulators and Congress to bridge the gap between financial accounting expectations and protocols and sustainability reporting.
“We are not advocating at this time that FASB (or a new board overseen by FAF) necessarily needs to issue sustainability reporting standards,” ABA said in its comments. “However, we believe the nascent state of sustainability reporting requires FAF to take a leadership role in helping stakeholders to bridge the gap of investor expectations between long-held financial reporting concepts and sustainability reporting.”