Those with a stake in the setting of accounting standards are telling the Financial Accounting Standards Board to make it a priority to work on a new approach to disclosures.

FASB's primary advisory group, the Financial Accounting Standards Advisory Committee, reported to FASB the results of a survey it conducted that gathered the views of a broad base of professionals -- both preparers and users of financial statements, as well as accountants, academics, industry organizations and others. FASB's ongoing project to write a new framework for disclosure requirements topped the wish list of priorities the group hopes to see FASB pursue.

Close behind, survey respondents also said they hope to see FASB make progress on, in priority order, hedge accounting, the conceptual framework that establishes a rulebook for how to write accounting standards, financial instruments with characteristics of equity. Pensions and financial statement presentation tied for fifth place. In citing their reasons for their prioritization, survey respondents said most often that accounting standards need to be simpler, that they need to provide better information, and that information provided by current standards doesn't always provide information that's useful.

FASAC gathered 105 responses to its 18-question survey, nearly half of which came from members of FASAC or other advisory boards, or FASB members themselves. “The essence of the message we got from the survey is we need to build a strong foundational basis for future standard-setting,” said FASAC Chairman Charles Noski, retired vice chairman of Bank of America, at a FASB conference last week discussing the board's future. “If the board and its constituency can reach agreement on that, the house or skyscraper built on that will be more resilient and more responsive.”

FASB Technical Director Sue Cosper said the board's dormant project on financial instruments with characteristics of both liability and equity is a good example of an initiative where the board needs to more clearly define its objectives and its scope. FASB initially planned to pursue new rules in this area jointly with the International Accounting Standards Board but put it on the back burner in favor of other priorities. The board issued a preliminary views document but did not propose a new standard. “We meed to go back and really understand what the problem is and what improvements we might be able to make,” she said.

FASB's recently departed chairman, Leslie Seidman, called the current rules on financial instruments that have characteristics of both liability and equity as “a patchwork held together with duct tape.” She said some of the rules are based on a notion of who has control over an instrument while other rules are based on who carries the risks and rewards associated with instruments. “It's a mess,” she said. Even investors don't agree on when an instrument should be removed from the balance sheet, she said.