FAF drafts strategic plan for FASB and GASB, mulls ESG reporting

The Financial Accounting Foundation’s board of trustees, who oversee the Financial Accounting  Standards Board and the Governmental Accounting Standards Board, released a draft strategic plan Tuesday and is asking for input, while opening the possibility of expanding into sustainability reporting.

The draft plan includes the FAF’s mission and vision statements and describes six overarching goals for the organization. Among these are commitments to:

• Champion the value of independent standard setting;
• Sustain the relevance of the information generated by Generally Accepted Accounting Principles (GAAP);
• Demonstrate leadership in global financial reporting; and,
• Invest in technology to support more effective standard setting.

The draft plan also describes the organization’s commitment to diversity, equity and inclusion, and to ongoing dialogue with relevant parties about future developments in financial reporting around sustainability. Those goals could expand the FAF’s mission to environmental, social and governance reporting as its counterpart abroad, the International Financial Reporting Standards Foundation, has waded into the ESG and sustainability area with the new International Sustainability Standards Board it has begun overseeing alongside the International Accounting Standards Board.
Last week, the G7 finance ministers urged the ISSB to expand beyond climate reporting to broader social and nature issues (see story). So far, FASB hasn’t gotten directly involved in the sustainability area, but at a meeting earlier this month, the board members decided to ask FASB staff to do research on possibly adding a project on accounting for financial instruments with ESG-linked features to its technical agenda. The decision came in response to feedback from consultations on FASB’s agenda last year. 

Courtesy of GASB

While FASB may be hesitant to wade into the sustainability reporting area, the board of trustees overseeing it at the Financial Accounting Foundation may want to set up a separate standard-setting board as the IFRS Foundation did, although this seems unlikely since the various ESG standard-setters have already come under pressure from international financial regulators to align their differing standards.

The ISSB is currently in the process of consolidating several of the existing ESG standard-setters, the Value Reporting Foundation (which already merged together the Sustainability Accounting Standards Board and the International Integrated Reporting Council) and the Climate Disclosure Standards Board) under its umbrella by the end of June. However, the FAF may decide to play a role in the ISSB as well, as FASB has long been doing with the IASB through periodic consultations and an earlier effort to converge U.S. GAAP with IFRS. The Securities and Exchange Commission has proposed its own rule on climate-related disclosures by public companies in March and is receiving comments on it. The SEC is also expected to propose draft rules on ESG and sustainability claims by investment funds during a meeting this Wednesday to curb so-called greenwashing.

In the meantime, the FAF is looking for feedback from stakeholders and the public on its draft plan. “We are pleased to expose this strategic plan for public comment and see this as a vital part of our planning process,” said FAF chair Kathleen Casey in a statement Tuesday. “Stakeholder input is essential to the success of our organization and to our duty to sustain the integrity of the standard-setting processes of the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB).”

Interested parties can view and download the plan at this page on the FAF website. Comments can be sent through the site or by sending an email to fafstratplan@f-a-f.org.  The deadline for comments is July 22, 2022.