The Financial Accounting Standards Advisory Council (FASAC) convened for its quarterly meeting on December 5, 2024, to discuss developments in financial reporting and provide input on standard-setting activities. The meeting featured updates from the FASB chair and staff, alongside insights from representatives of the SEC, PCAOB, and AICPA Auditing Standards Board.
FASB Interpretive Process and Emerging Issues Task Force (EITF)
FASB staff presented updates on the reconstituted operating procedures of the EITF, sparking discussions among Council members about the task force’s current role. Questions arose regarding the types of issues addressed by the EITF and how its agenda decisions are communicated publicly.
Financial Key Performance Indicators (KPIs)
A significant portion of the meeting focused on Financial KPIs for business entities, as Council members discussed the FASB’s Invitation to Comment on the topic. Members emphasized the growing importance of KPIs like EBITDA and free cash flow (FCF) for investors and businesses but highlighted inconsistencies in how companies calculate and report them.
Investors advocated for greater transparency and consistency in KPI reporting, while members debated approaches to address the issue. Suggestions included:
Developing a narrow project to define common KPIs like EBITDA and FCF across all industries.
Allowing voluntary disclosure of KPIs by management outside financial statements.
Requiring disclosure of KPI-related information in financial statement notes to enhance transparency.
Some members recommended the Board consider the effects of recently issued standards, such as the new guidance on disaggregating income statement expenses, to determine if existing reporting improvements address stakeholder concerns.
Post-Implementation Review (PIR) Process
FASB staff provided updates on the PIR process, including findings from the recently completed revenue recognition PIR report and ongoing reviews of standards on leases and credit losses. Council members shared observations and inquiries about the effectiveness and outcomes of these reviews.
Looking Ahead
The discussions underscored the importance of aligning financial reporting with stakeholder needs and enhancing clarity and consistency in key metrics. The FASAC’s feedback will inform FASB’s ongoing efforts to address these critical issues in financial reporting.