FASB chair plans for new standards, semiannual reporting

Financial Accounting Standards Board chair Richard Jones is making plans as FASB readies a number of new standard-setting projects during the final year of his tenure as well as the likelihood of a new semiannual reporting option being approved by the Securities and Exchange Commission.Jones doesn't believe FASB will need to make many changes if the SEC ends up approving the option.

"Keep in mind that semiannual reporting occurs today every time a company files the second quarter Q, because the second quarter Q has six month results already in it," Jones said in an interview with Accounting Today. "It has the second quarter, but it also has that year-to-date six months."

He believes semiannual reporting is already occurring today and pointed out it would be optional. "My understanding of the SEC proposal is it wouldn't require solely semiannual reporting, but it would permit it," said Jones. "Someone could still file quarterly, and as a result, our standards, which today address quarterly as well as six-month and nine-month year-to-date financial reporting, are already there, so we have a good [starting] place."

Most FASB standards don't explicitly refer to quarterly reporting, but to interim reporting instead, he pointed out, so they could apply to semiannual reporting without requiring an adjustment.

"Our guidance is generally based on interim reporting as opposed to quarterly reporting," said Jones. "When we do refer to quarterly reporting, it's very often in areas like EPS and taxes, where you have to have a way because your primary accounting is based on the year-to-date results, a way to identify the results by quarter when you're in the second or third or fourth quarter. I think we're in pretty good shape, but we're going to look and make sure. To the extent that the SEC does go forward with a proposal, we will make sure that preparers and other stakeholders have the right standards to address that."

Some existing standards will still need to be tweaked, and FASB is preparing for that possibility. A team there has been looking at it for the past several months to understand if any changes need to be made.

The comment period on the semiannual proposal recently closed and the overwhelming majority of comments seem to be negative, according to an unofficial tracker from an Ohio State University accounting professor. However, the proposal is still likely to pass at the SEC. President Trump has been advocating for semiannual reporting since his first term, and SEC chairman Paul Atkins considers it to be part of his "Make IPOs Great Again" agenda. Atkins called on FASB to reexamine its standards when he announced the proposal in May.

"With respect to the financial statements required in interim reports, I also encourage the Financial Accounting Standards Board to evaluate potential amendments to its accounting standards, with the same goal of eliciting disclosure of material information and avoid compelling the disclosure of immaterial information," said Atkins. 

For Jones, the changes may be purely semantic. "If there were a need for us to change any words because we said quarterly when we need to say interim, for example, there may be a few," said Jones. "We're still looking. We have a pretty large volume of guidance. Should that change the standards we write? I think that's too early to tell. In other words, should there be a difference in what a semiannual financial is versus an interim financial today? No, we haven't necessarily heard that."

Fulfilling the agenda

In the meantime, FASB is working on a number of other projects on its agenda after soliciting its stakeholders for their input for the second time in Jones's term. 

"When I started my term, COVID was going on, and soon thereafter, we embarked on an agenda reset process where we did broad outreach with our stakeholders, comprehensively reset our agenda, and we actually wrapped those projects up," said Jones. "That was really what gave rise to the second agenda outreach initiative that we did in '25, where we put out a list of things that we'd heard from a broad group of stakeholders and got broad feedback on them."

Many of the items on the agenda are related to that agenda outreach process, while others are coming from recommendations by FASB's Emerging Issues Task Force, which dates back to 1984, but went through some recent changes. 

"We've had an EITF for years since the early '80s, but a couple years ago we reconstituted the EITF and made some changes to its operating procedures to give them more control over their own agenda, so they could raise issues that they were seeing emerging in practice, and propose them to our board with a potential project as well as a proposed solution," said Jones. "You've seen that pay dividends in some of these projects."

One of those projects came to fruition in April when FASB released an accounting standards update on paid-in-kind dividends. Jones predicts more of the agenda items will be in a similar position later this year. 

"I think you'll see between now and probably around November of this year, we will have brought back everything from that 2025 agenda consultation process back in front of our board for public deliberations, and that will effectively be the end of that," said Jones.  "That will certainly have a significant effect on our agenda for the coming year."

He considers all of the projects on the agenda to be priorities. "In a way, they all meet some level of priority because that's part of our agenda criteria," said Jones. 

Individual board members at FASB may have their own priority projects. "We have certain factors that we look at, but ultimately it's a judgment of the individual board members, and [for] all the projects on our agenda, effectively, our board made an evaluation that we could improve financial accounting and reporting for our stakeholders by doing standard-setting in those areas," said Jones. 

In addition to the EITF, FASB also receives recommendations from its Private Company Council. 

"That group serves two purposes," said Jones. "One is that they control their agenda. They can add private company standard-setting to their agenda and recommend it to the FASB with a proposed solution, but the other is that they really are our primary advisory group when it comes to private company issues. And so every project on our agenda, as we work through them, we have touch points with the PCC, and they give us input as to applicability in private companies. Are there any unique aspects to private companies and their stakeholders that we should be considering? The other part is they could originate a project, then it comes to us."

One project involving the PCC that's expected to lead to an exposure draft of a proposal in the fourth quarter involves the indexation of debt and equity. "That's an issue that pre-IPO private companies face and can be challenging," said Jones. "That's a board project that we're dealing with for all entities, public and private. It was certainly influenced by the fact that it's so important and so complex for those private companies, so that would be an example of how they're involved."

The PCC was also the primary driver on another FASB project involving subjective acceleration clauses and debt default disclosures. "They identified it as an issue," said Jones. "It was a concern to their stakeholders. It was an area where preparers and investors on the PCC were aligned in identifying it and addressing it as an issue. In standard setting, when you can get preparers, investors and lenders to agree, that's kind of like a home run." 

Other projects in the works include investment company reporting, hedge accounting and market-return cash balance plans. "Some of them are narrower, some are broader," said Jones.

Stablecoins as cash equivalents

One area of standard-setting that has been attracting interest are projects involving crypto assets, including a digital asset known as a stablecoin, whose value is pegged to a fiat currency known as a dollar, so the project is referred to generically as "cash equivalents," so it can refer to other types of crypto assets as well. Cryptocurrency investors have particular concerns about such projects after Congress passed the GENIUS Act last year, setting up a framework for stablecoin regulation.

"In areas like disclosure of cash equivalents, which also deals with stablecoins, that is an area that will be broadly applicable, and I think we will hear from a broad array of stakeholders," said Jones. "Some of the other areas, like accounting for commodities, tend to be a little more specialized, and I think we'll hear more from entities that have a commodity trading portfolio, as opposed to the general manufacturing companies, whereas cash equivalents would apply to all."

FASB has long had a definition of cash equivalents, but stablecoin is a new type of financial instrument that could function as a cash equivalent. "What our project does is focus on here's the existing definition, and here's the application of that definition in some fact patterns that are fairly common," said Jones. "I think that will be helpful for people because it kind of takes away the uncertainty. Stablecoins is kind of like private credit in the sense that whenever someone says it, you can't have a conversation until they tell you about the terms of it.With a stablecoin, the question comes about what does that mean? Do you have a right to cash? Is it a right to cash on demand? What's backing that right to cash? Is this more like a money market fund, or is it more like another type of simple digital asset that really is enclosed here. We certainly saw that there was an evolution in what was happening in the marketplace, and that people had questions about the application of our guidance to some of those transactions. Our hope is we can bring clarity and consistency and reduce the uncertainty in those areas. This is one of those areas that, coupled with the transfer of digital assets, where the President's Working Group On Digital Asset Markets recommended that they be referred to the FASB. That's a great sign that when issues of accounting and financial reporting come up, that people view us as the answer. Our due process and our thoughtful consideration and outreach with stakeholders is the ideal way to reduce uncertainty related to financial and accounting reporting."

Hedge accounting

FASB is working on some projects related to hedge accounting, including targeted improvements in accounting for interest rate risk hedging and net investment hedging. That will probably interest a narrower segment of stakeholders, but another one on the portfolio layer method for liabilities, which FASB is still deliberating, is likely to be more broadly applicable. "I think we're going to hear a lot of interest in that," said Jones. 

The comment period on that project closes August 17. "It really deals with some narrow, unique issues, versus the project that's on our agenda that we are still deliberating related to hedging for liabilities in a portfolio," said Jones. "That's really designed to broaden the ability to to recognize economic risk management in the financial statements. Our hedging rules grew up in a fairly restrictive manner, where hedging was a privilege, and you had to meet a very specific and stringent set of criteria to get into it. As a result, there were very often items that were economically hedging, but didn't qualify as hedging for accounting purposes, or it was too hard to qualify it for hedging for accounting purposes. When you look at that project on the portfolio layer method for liabilities, that's one of those areas where we're actually broadening potentially the criteria to qualify for hedge accounting, so that it can better reflect the economics of what's happening."

FASB's research agenda also includes an overall reexamination of hedge accounting in general, and that could turn into fundamental changes in the model.

Private credit disclosures

In May, FASB added a project on private credit disclosures to its technical agenda as the private credit market came under strain from investors.  

"That has been an item that we've been watching as part of our research for the last couple of years," said Jones. "Whenever I talk to somebody about private credit, the first thing I do is ask people what do you mean by it?"

When banks make loans, he noted, the loan is generally accounted for on an amortized cost basis as interest accrues. In contrast, the private credit market often follows investment company accounting and accounts for a loan as an investment, at fair value. 

"When they account for it at fair value, some of the disclosure requirements and some of the information that's provided about the loan at amortized cost by a bank is very different than the information that's provided for a loan that's accounted for at fair value in an investment company," said Jones. 

Part of FASB's outreach for the project involves understanding whether simply providing the fair value information on a loan for an investment company is enough, or whether certain information given to banks on loans at amortized cost basis is relevant and important for evaluating those loans. Some of the differences may relate to non-performing loans, or to paid-in-kind, or PIK, loans, where instead of paying interest, the interest accrues into additional principal. The additional disclosures could help an investor analyzing the financial statements of a private credit fund to better understand the valuations of the loans, whether they're accounted for on a fair value or amortized cost basis. 

Data infrastructure investments

In April, FASB added a project on data infrastructure investments as the growing costs of data centers used by technology companies came under increasing scrutiny amid the demands of artificial intelligence usage. In New York State, for example, Governor Kathy Hochul is considering a ban on data center construction, and even in conservative Palm Beach County, Florida, the county commissioner voted Wednesday to ban a new data center. 

"The public policy issues related to data centers are outside of our purview," said Jones. "We're simply focused on accounting and financial reporting for people to make capital allocation decisions."

The data center project is one of the emerging issues on FASB's research agenda. "If you think about a data center, they have to buy power, and depending on how that power purchase arrangement is structured, it could be a lease, it could be an executory contract, or it could be a derivative. And for some of those long-term power purchase arrangements, there have been questions raised around whether derivative accounting really is the most useful."

FASB's Emerging Issues Task Force has looked at that issue and is recommending the board take it on as a project. The FASB board members will be considering the power purchase arrangements issue at a future board meeting. 

A related issue involves data centers and the massive "hyperscalers" that work with them, including giants such as Amazon Web Services, Microsoft Azure and Google Cloud. The companies may in fact be one and the same.

"There may be the customer buying from the seller, and the customer selling to the seller in that prior transaction, so you may have transactions going back and forth," Jones explained. "We have guidance on consideration payable to a customer already, but that's another issue that the EITF has looked at and is recommending that the board take a look at, and that could also be applicable to that industry. As far as other items, we're certainly looking at the different transactions that are out there, and understanding if investors are getting the best information, as well as whether or not the accounting is best portraying the.economics."

Transferable tax credits

Another project on the agenda involves accounting for nonrefundable transferable tax credits, such as environmental tax credits. Last year's One Big Beautiful Bill Act phased out many of the tax credits for renewable energy sources that had been expanded under the Biden administration in the Inflation Reduction Act and the future value of those tax credits may have been reduced under the OBBBA. But again, FASB is dealing with the project from an apolitical lens.

"I have to stress it's accounting for nonrefundable transferable taxes," said Jones. "That "nonrefundable" word is really important because if it were refundable, it would be in government grant accounting. When it's nonrefundable, there's been a question in practice about whether or not the receiver of those tax credits should account for them under the income tax guidance or some other guidance, so there's diversity in practice there. What we're doing as part of our board deliberations is deciding whether or not there should only be one accounting there, and if so, what should it be? Should it be income taxes, for example, and clarifying that application. That is a very different project than our recently completed accounting for environmental credits."

He sees the environmental credits project as being purely about the accounting implications. 

"All that standard does is reflect when people are buying and selling these things, what accounting they should be doing," said Jones. "It doesn't encourage them. It doesn't put a thumb on the scale one way or the other. It simply recognizes that different governments around the world have put in place environmental credit regimes, and there are people buying them, there are people selling them, there are people that have to acquire them to turn them over to governments at different times, and there was diversity in practice in how they were being accounted for. We understood that and we recognized that, and while the growth of those types of programs may be different in different parts of the world, U.S. multinationals cover the world, and as a result, they have to address those accountings under U.S. GAAP. That was an area that we identified and saw there was an absence of GAAP on point. There was diversity in practice, and we thought it was important that we address it. But I will stress what our standard does is recognize that there are inflows and outflows of cash today related to those instruments, and some have to do accounting for that."

However, he doesn't foresee the probability of FASB expanding into sustainability reporting, as the International Financial Reporting Standards Foundation did when it established the International Sustainability Standards Board alongside the International Accounting Standards Board in 2021.

"That's outside our purview," said Jones. "Our mission is financial accounting and reporting for capital allocation purposes. There's lots of other things investors may consider, but that's beyond our charge."

The expanded mission of the IFRS Foundation has attracted pushback from some of the leadership at the Securities and Exchange Commission. 

FASB has been careful to expand its outreach to investors in response to pressure at the SEC, and Jones noted that FASB will soon be publishing its sixth annual investor outreach report.

Income tax disclosures

Last year, FASB's funding came under threat from a group of House Republicans who hoped to pressure the board to withdraw its income tax disclosure standard from 2023. That pressure has since faded after Congress passed subsequent spending legislation that omitted the provisions related to FASB's standards.

"It's helped that companies have adopted the standard," said Jones. "I think that people realize that our standard only applies to material information. It was effectively an expansion of existing disclosure requirements because there was already a disclosure requirement related to cash taxes paid. There was already an effective rate reconciliation disclosure requirement."

He noted that FASB developed the tax disclosure requirements while receiving input from people who make capital allocation decisions based on the earnings of a company.

"This additional information that's in our disclosure requirements has been very helpful in helping people to understand a tax provision and differences between deferred taxes and cash outflows," said Jones. "I think it's been very helpful that they've been adopted. I think it's also been helpful that people realize this is not country-by-country tax reporting. This is financial accounting and reporting based on material amounts, which is very different than what people discuss as country-by-country tax reporting. Whenever you mention taxes, it gets a lot of people's interest. But one of the things that's been really helpful is seeing how it's applied, and seeing the information that's provided, and realizing that is just a normal part of financial accounting and reporting."

Jones's term as FASB chair is set to conclude on June 30, 2027, and the Financial Accounting Foundation has been searching for a successor. Jones still has plans for the remainder of his term, if not beyond.

"I'd like to finish everything that we're working on," he said. "The FASB has been around for over 50 years, so when I look at the last year of my term, I'm going to continue and work with our board and move forward on our standard-setting projects. My goal will be to transition to my successor in a way that it's seamless to our stakeholders. That's certainly a priority. I'm proud of what we've accomplished over the last six years, and I want to finish my term strong, but part of it is making sure that the organization is positioned well to succeed for the next 50 years."