Engaging in the Process: Giving Guidance to the Accounting Standard Setters

Engaging in the Process: Giving Guidance to the Accounting Standard Setters

The accounting standard-setting process includes public exposure of proposed changes and a request for interested parties – preparers, auditors, and investors, among others – to comment on the proposal. Responding to the various proposals issued by the Financial Accounting Standards Board (FASB) may seem daunting, but financial institutions that speak up can make a real difference.

The FASB seeks to understand the operational implications of most, if not all, of its proposals – and, as one would expect, entities that prepare financial statements are often in the best position to respond. FASB proposals include a list of questions for respondents. Respondents are invited to comment on all questions, but not every question must be answered, so it is acceptable for a comment letter to focus only on the questions relevant to preparers. The FASB invites comments from those who agree with the proposed guidance as well as from those who do not agree. Respondents are not limited to responding only to the specific questions and can provide comments on any aspect of a FASB proposal.

Comment letters need not be lengthy and should be constructive and supportive of the standard-setting process. Those who disagree with a proposal are asked to describe their specific reasons and provide alternatives when the respondent believes viable options exist. All received comments are posted on the FASB Web site for public view. The FASB really does consider the feedback and suggestions it receives, particularly from the preparers tasked with implementing the changes. Through this process, preparers have an opportunity to participate in the standard-setting process and help shape revisions to the standards they eventually will be required to follow.

ALLL Disclosures Proposal Comments

A recent issue of Financial Institutions Update described a FASB proposal that would significantly increase the allowance for loan and lease losses (ALLL) disclosures required of financial institutions. Crowe Horwath LLP responded to the FASB with a comment letter about the proposed changes, noting several areas of concern and suggesting ways the FASB’s objectives perhaps could be met more reasonably.

The FASB received 72 responses to the ALLL disclosures proposal. Responses were not all from financial institutions and represented a small portion of the public and private financial institutions that the proposed changes would affect. The feedback the FASB has received from this limited pool of respondents may very well not be representative of the views of the overall financial institution community.

Another Chance to Comment

Although the period for commenting on the ALLL disclosures proposal ended Aug. 24, 2009, the FASB recently released another proposal that also could have a significant impact on financial institutions. On Aug. 28, the FASB issued a Proposed Accounting Standards Update, “Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements.” The proposed changes include requiring information about a range of fair value measurements using alternative Level 3 inputs (sensitivity analysis), a greater level of disaggregated information, and more robust disclosures about valuation techniques.

Many of the questions in the proposal are directed to preparers, and therefore we encourage financial institutions to review this new exposure draft concerning fair value disclosures and respond to the FASB with any concerns. Comments are due Oct. 12, 2009. If you are unsure about how to submit your comments to the FASB or have other questions, feel free to contact us.

Contact Information

Sydney K. Garmong
Washington, D.C.
202.333.0375
sydney.garmong@crowehorwath.com

J. Edward Grossman
Lakeland, Fla.
863.603.4814
ed.grossman@crowehorwath.com

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