Addressing FEI members at a heavily-attended New Jersey Chapter meeting at The Manor in West Orange, on Tuesday, January 22, Robert H. Herz, chairman of the Financial Accounting Standards Board (FASB) told the group the “breather for a while” in FASB activities is coming to an end, and change is on the way.

The change he referred to is largely due to the U.S. moving to international financial reporting standards (IFRS) – “a threshold issue,” he said. (IFRS, in various forms, are currently being followed or planned for most of the rest of the world’s capital markets). Again, as in past discussions and as a speaker at FEI conferences, Herz stressed that he favors one set of consistent, high-quality accounting standards worldwide – with the emphasis on “high-quality.” It’s a good thing, he said, and he’s optimistic about the challenges ahead. However, in order to get from here to there, he said, it’s going to take changes that are “cultural, behavioral and institutional.”

Other subjects he touched on include current major FASB projects and activities – which are mostly being conducted in conjunction with the International Accounting Standards Board (IASB). Among those: Business Combinations – Purchase Method procedures; Non Controlling Interests; Conceptual Framework Improvements; Contingencies; Financial Statement Presentation; Lease Accounting; Liabilities vs. Equity; Pensions and OPEBs (FAS 158), Phase 2; Revenue Recognition; and Short Term International Convergence Projects.

Without IASB, FASB is working on Business Combinations, Not-for-Profit Entities; Codification of U.S. Literature; and Fair Value Option, Phase 2.

Among other projects and activities FASB is working on are: Derivatives and Hedging (Derivatives Disclosures, Application of the “Short-cut Method”, Re-look at Statement 133); Transfers of Financial Assets/Securitization (Re-look at Statement 140); Insurance (Financial Guarantee Insurance); Convertibles with Cash Settlement Features; Valuation Resource Group/Guidance on Applying Fair Value.

On other matters, Herz expressed optimism that both the U.S. Securities and Exchange Commission’s (SEC) Committee on Improvements to Financial Reporting (CIFR) and the U.S. Treasury’s Advisory Committee on the Auditing Profession (ACAP) will each “come up with a meaningful plan and a set of recommendations to improve the usefulness of reporting to investors and to reduce complexity for preparers and auditors.” He says he expects eXtensible Business Reporting Language (XBRL) to likely become mandatory at some point – at least for major companies. On a thoughtful note, he said he’s “not sure how it will revolutionize [reporting], but tech does change things,” and it will enhance reporting.

He also said while much focus is on public companies, private companies are responsible for the most employment growth, and FASB is considering accounting standards for private companies in the new converged environment. One possibility might be to build on what IASB is developing for small and medium-size entities (SMEs).

Finally, Herz reiterated that the changes – both in recent years, and to come – are due to improvement, simplification/reducing complexity, convergence (possible use of IFRS in the U.S.) and technology (XBRL), and that “our reporting system may be on the cusp of very major change.”

He invited input to FASB activities, through FEI involvement and other industry groups. “Constituent input and participation in our activities are welcome and essential to developing sound standards,” said Herz.