Does FASB's New Performance Reporting Project Address What Is Really Needed?
Larry Smith is a Senior Managing Director in FTI Consulting's Forensic & Litigation Consulting segment serving as a member of FTI Consulting's National Office, consulting with engagement teams and clients on complex accounting issues and as a testifying expert in litigation matters involving the application of GAAP. On June 30, 2017, Larry completed his second five-year term as a member of the Financial Accounting Standards Board.
From 2002 to 2017 I had the pleasure of working as a technical director and a Board member at the Financial Accounting Standards Board (FASB). During that time, the Board worked on a number of significant projects.
This article focuses on one specific project, performance reporting, and the recent Board decision about the direction of that project and its relationship to a current significant topic in financial reporting, non-GAAP performance measures.
Financial performance reporting is not something that FASB only recently considered as an area of generally accepted accounting principles (GAAP) requiring improvement. It has been the subject of various agenda and research projects for well over 15 years, including joint efforts with the International Accounting Standards Board (IASB).
In October 2008, FASB and IASB issued a Discussion Paper that asserted the wide array of reporting formats that are permitted under both GAAP and international financial reporting standards (IFRS) impede the ability of users to compare financial statements of different entities. Additionally, the paper asserts that the lack of specific guidance about the level of detail that should be presented in financial statements “creates difficulties for users who want to understand and analyze an entity's activities.”
Senior Managing Director