Question

how the new FASB proposal could affect the decisions of potential investors or lenders?

Answer 1

Whether valuing a company’s equity or determining whether a loan will be repaid, investors are critical to the standard setting process—as they are the consumers of the financial information that is based upon U.S. GAAP.

Despite the importance of investor views, there are many obstacles in reaching investors and figuring out how to secure decision-useful information in a cost-beneficial way:

• Analyzing companies and making capital allocation decisions is all-encompassing, leaving little time to consider seemingly banal details about accounting,
• Accounting proposals are often dense and technical, making it hard for non-experts to understand the implications of a new reporting rule, and
• Some analysts may resist providing opinions that may be at odds with the accounting policy personnel at their own institution, and because of the competitive nature of investing—some investors may be reticent to give feedback in front of other investors.