FASB exploring AI's impact on financial reporting, controllers weigh in

The Financial Accounting Standards Board (FASB) is actively examining how artificial intelligence (AI) will reshape financial reporting, considering its influence on both corporate data preparation and investor analysis, Chair Richard Jones announced at a recent industry conference. The standard-setting body is scrutinizing whether existing accounting rules, particularly those for software development and intangible assets, require updates to account for significant AI investments.

Speaking at Financial Executive International's virtual 2025 Corporate Financial Reporting Insights (CFRI) conference on November 12, Jones outlined the FASB's dual approach to AI. "When we think of AI, we think of it in categories. One, it affects the standard setting we do. And the other piece is more internal, that's how we do standard setting," he stated. He emphasized that the primary focus for external stakeholders remains on the broad implications for financial reporting.

The FASB is conducting outreach with investors to understand AI's role in their processing of financial information. Jones noted varying perspectives, acknowledging, "some might say, 'well, investors with AI can process more data.' The other side of that is maybe it'll actually highlight the data they're using all the time, and if there's other data they're not using." He concluded that this aspect is "to be determined."

For companies preparing financial statements, the FASB is investigating AI's impact on day-to-day operations and its effect on the cost-benefit analysis of new standards. Jones raised key questions: "How is it affecting your day-to-day job, your ability to apply our standards? Is it having an effect on the cost as part of the cost-benefit analysis? Is it easier? Is it not?" He also questioned if AI would fundamentally alter preparers' ability to generate formal financial statements.

A significant area for potential standard updates involves substantial investments in AI technology. Jones highlighted a recently completed project on software costs as a response to modernizing accounting for agile software development methods. He explained that this initiative was "modernizing it based on how entities were actually developing software today," recognizing that a "significant portion of the investment" lies there.

Looking ahead, Jones identified the ongoing "research project on intangibles" as crucial. He clarified that the aim is not necessarily to place "more intangibles on the balance sheet," but rather to enhance "the disclosure of what R&D is and expenses and the investment that's being made by entities that may not meet the definition, accounting definition of R&D." The goal, he underscored, is to provide greater transparency for investors who are "so eager to understand the investment entities are making."