Connecticut CPA Magazine Excerpt - The FASB and the GASB: Meet the New Chairs

By Terri Polley

The Path to Chair

If one aspires to serve as chair of the Financial Accounting Standards Board or the Governmental Accounting Standards Board, here's a potential formula.  Start with a love of math. Add an affinity for problem solving. Multiply that by deep accounting knowledge and experience, plus a willingness to listen and improve. The result? A path to FASB and GASB chair.  

GASB Chair Joel Black says, “I liked math ... and accounting clicked for me.” First, he explored engineering (“I learned I didn't like science enough.”) and then actuarial science (“Though I never actually took a class in it ...”) before landing on accounting.  

In FASB Chair Rich Jones' case, “I took an accounting class in high school.” That led to an accounting major in college. While math is key, Rich adds that accounting “is really about problem solving. Here's a transaction: How do you reflect it? What's the answer?”  

Both Joel and Rich have extensive public accounting backgrounds. Rich spent his career with EY, having joined Ernst & Whinney out of college. (The firm later merged with Arthur Young & Co.) He describes his experience: “I was fortunate to work on a true cross-section of companies – large public, small public, private. In the off-season, I got to do things like due diligence. I even got to work on some governments.” He adds, with a smile, “Don't tell Joel.”

Rich eventually joined the national office of EY. His role as EY's chief accountant most prepared him for the FASB chair role because, “In a way, I touched all clients and could see the challenges they faced in complying with current standards as well as implementing new ones.”  

Joel began his public accounting career with KPMG and later joined Mauldin & Jenkins, where he became partner-in-charge of the audit practice. He also led their government professional practices group, covering more than 400 public sector clients.  

Because Joel's predecessors as GASB chair all had experience as state auditors, he sees his experience as both a challenge and an advantage. “I think there was a bit of a hump I had to get over,” he says, referring to possible expectations that the new GASB chair should have a state auditor background. What most prepared Joel for the role was “seeing so many different sizes and types of governments, from tiny, small towns to multiple state governments – that broad experience is really helpful in this role.”  

Leading During a Pandemic

Rich and Joel both began their chair terms on July 1, 2020, shortly after the start of the COVID-19 lockdown. With transition time built into the process, Rich notes that he started coming to the Norwalk offices a few weeks prior to the shut-down. He began a series of one-on-one meetings with each of the FASB staff, continuing virtually once in-person meetings came to a halt.  Similarly, Joel came to Norwalk before his term started, and conducted “walk-arounds” prior to the shut-down. He also made a point of meeting one-on-one with staff virtually several times prior to the office reopening, just to catch up with them.  

Both chairs describe these conversations as two-way. One purpose was to get to know the staff: What brought them to standard setting? What are their personal and professional goals? How can the FASB and GASB best develop them going forward? Another was to seek advice and listen: What suggestions do they have on how the FASB and GASB could improve their processes? What do they see as the direction of the organizations going forward?

Current Projects CPAs Should Know About

For GASB stakeholders, Joel notes that the implementation of Statement 87 on leases should be well underway and is important for governments to focus on. “This will be a big project for many governments, so they are hopefully spending time on that standard.”  

The other is Statement 98, which establishes the change in the name of the annual report to the Annual Comprehensive Financial Report. “This one is effective quickly and doesn't take a lot of work, except that you have to get used to saying and writing something differently than you have in the past.  And there's an important reason for that.” The latter change was prompted by GASB stakeholders raising concerns that the prior acronym sounds like a profoundly offensive term in certain cultures when spoken.  

The financial reporting model is another project on the radar of stakeholders.  Joel's perspective is that for most, the initial implementation of Statement 34 was a bigger change than will result from the current project to amend it, certain aspects of which are targeted to create consistencies around the reporting of governmental funds.  

At the FASB, Rich notes two categories of projects of current importance. The first stem from the post-implementation review process, and include revenue recognition, leasing, and credit losses. “I've been very impressed with our stakeholder participation. The FASB has made numerous changes as a result to provide better information to investors. We also heard from private companies having specific challenges, and they were phased for later implementation. We've had numerous standard-setting activities to improve those standards.”  

The second category is the FASB's active agenda. Rich says, “There's probably a little something there for everyone. For public companies, the projects on goodwill and on segment disclosures should rise to their attention. For all stakeholders, projects on hedge accounting would be of interest.  

Our standard-setting work on reference rate reform and the conversion of the marketplace off LIBOR  indexes would also be important.”  

He suggests that CPAs continue to read updates from the CTCPA. “To the extent members can provide input on any of our projects, we are eager to hear from them.”  

Environmental, Social, and Governance (ESG) is something that is, and has been, on the radar of both the FASB and GASB.  Rich underscores the point that the FASB's mission focuses on financial accounting and reporting.  

In that regard, various environmental matters are already embedded in financial reporting standards, like impairment of assets.  

On some issues, Rich says, “We're already there.” He points to a FASB staff educational paper on the website that describes the intersection of ESG matters with financial reporting. “Just like other evolving areas in the economy and on the regulatory front, we're monitoring them, and to the extent we need to take on standard setting in those areas, we would,” Rich adds.  

At the GASB, Joel notes that there hasn't been as big a call for ESG information in the state and local governmental environment compared to the private sector, but it's starting.  

Joel elaborates, “This is an oversimplification, but I see two buckets. One is how does the governmental entity impact the environment or society; the other is how are environmental issues or societal issues impacting the government itself. The latter could result in a financial reporting issue for the government, for which standards are already or may be developed.” (The GASB is close to finishing a staff paper expected to be posted to its website further exploring this issue.)  

Listening and Improving

A common theme for both chairs is continuous improvement. The GASB recently piloted a new process to make it easier for stakeholders to provide input. Joel notes, “We wanted to make the input process less daunting. You don't need to come up with a comment letter from scratch. We ask open-ended questions and we also ask specific questions.  You choose what to answer.”  

While the electronic feedback form makes it easier for those already engaged with the GASB to provide input, it is targeted to encourage other stakeholders to provide input who previously may not have. Feedback has been positive. “We told stakeholders that we're trying some new things,” Joel says.  “Everyone liked that.” Joel notes that the next opportunity for stakeholders to use the new form will relate to the request for comments on the risks and uncertainties disclosures project.  

At the FASB, with continuous improvement being top-of-mind, the Board changed its agenda-consultation process to ensure broad, diverse input.  Over six months, the FASB held discussions with more than 200 stakeholders to ask the open-ended question: What should be the FASB's priorities for accounting and financial reporting?

“That kind of open-ended dialogue served as the basis for the Invitation to Comment,” says Rich. “The ITC, issued in June of 2021, was our chance to go out even more broadly to our stakeholders.” The comment period closed in September.  “We were extremely happy with the feedback, receiving more than 500 responses. Some focused on one issue – one of the more prevalent ones is the accounting for digital assets – others focused on multiple issues.”  

The FASB will begin to discuss the agenda feedback in a series of meetings starting at the end of 2021 to decide whether to make changes to its existing agenda. “Anytime we broaden the group of people we do outreach with – expanding the tent – the better off we are,” Rich notes.

The Most Important Thing

Ironically, taking the reins as chairs of the GASB and FASB during a worldwide pandemic enabled more and faster relationship building with stakeholders, given the relative ease of scheduling virtual meetings versus traveling to meet in person. Their message is consistent: Participation in the standard-setting process is the most important thing. Both Joel and Rich continue to seek ways make participation easier.  As Rich succinctly sums up, “The hardest input to gauge is silence.”