Financial watchdogs warn FASB: Current rules obscure tech, AI financials

Leading investors recently urged the Financial Accounting Standards Board (FASB) to update current disclosure reporting rules, warning that existing standards are obscuring critical financial details in the rapidly evolving sectors of technology investments and artificial intelligence (AI).

At a Nov. 20, 2025, meeting, the FASB's Investor Advisory Committee (IAC) raised concerns that gaps in financial reporting rules could lead to misleading information and hidden risks for investors.

"The rapid pace of innovation means companies are using and leasing a wide variety of assets with different useful lives," explained David Pizzimenti, senior equity analyst at Pioneer Investments, who highlighted IAC's views. "One of the other comments another member made was also around accounting for leases and data warehouses, et cetera. So, it's quite topical in the markets these days because of that pace and scale of innovation."

Pizzimenti underscored the vast scale of investments currently being poured into the technology space, involving complex relationships such as equity stakes, vendor financing and extensive leasing.

Expanding on the leasing issue, Ronald Graziano, director of accounting research at LSV Asset Management, pointed out that current disclosures often lack crucial details about the actual useful life of leased assets. He noted this creates significant ambiguity for investors trying to assess company financials.

"We do get the remaining contract life, but there's inconsistent or very little disclosure around the actual life of the assets that are being leased," Graziano stated. "Sometimes they'll say anywhere between one and 20 years and we may lease everything from furniture to warehouses or whatever. So, it's kind of vague. So that becomes more important as more of this investment is done through leasing."

Further deepening the transparency concerns, Brad Rexroad, principal at Assay Research, flagged a worrying trend in the AI sector involving "circular transactions" where companies artificially inflate revenue. He expressed significant concern about the lack of visibility in these deals, particularly when private companies are involved.

"My concern regarding these circular transactions that we're seeing be struck between AI participants...is the inflation of the value of that revenue," Rexroad cautioned. He further added, "A lot of these deals will fall into the threshold of materiality. And as such, the disclosure around these deals will not be apparent to investors...a lot of these companies are private. And so, there's no ability to provide a check on that." Rexroad emphasized his long-standing concern about materiality thresholds, often hiding crucial information from investors.