Letter to FASB on Financial Key Performance Indicators for Business Entities

Dear Mr. Day:

The American Bankers Association (ABA) welcomes the opportunity to comment on the invitation to comment exposure document - Invitation to Comment, Financial Key Performance Indicators for Business Entities ("the Exposure Document," or "ITC"). The ITC requests feedback on whether the Financial Accounting Standards Board ("FASB," or "the Board") should pursue a project related to financial key performance indicators (KPIs) and what approach the FASB should take if the Board was to pursue a project on KPIs. The ITC outlines two potential approaches:

Approach 1: Define and Require (or Permit) Disclosure of Common Financial KPIs
Approach 2: Require (or Permit) Disclosure of Financial KPIs Presented by Management Outside the Financial Statements

The ABA does not support a project focused on KPIs. In our view, stakeholders currently receive the information they need through the disclosure of non-GAAP measures, which are widely used and understood in the marketplace. Should the Board elect to pursue a project to define and incorporate financial KPIs within the GAAP framework, the ABA has concerns related to the approaches included in the ITC.

Neither approach represents a meaningful benefit to users. Common financial KPIs considered under Approach 1 are well understood and a FASB project would not provide new or meaningful information to investors. Approach 2 does not establish standardized KPI definitions and would not address the existing challenges and result in redundancy with information already provided outside the financial statements.

Codification of "non-GAAP" measures may create confusion regarding the well-established framework currently employed by the U.S. Securities and Exchange Commission (SEC) for non-GAAP disclosures. This framework includes clear requirements: entities must avoid potentially misleading metrics, provide a reconciliation to the most directly comparable GAAP measure, explain the usefulness of the non-GAAP metric, and ensure that GAAP measures are presented with equal or greater prominence.

The framework is well understood and up to date through SEC surveillance and enforcement. The SEC is further able to tailor its view to specific facts and circumstances in a rapidly changing environment. For private companies, the presentation of Financial KPIs is typically driven by specific stakeholders who not only request such measures but also define their calculation methodologies. These users already possess the information necessary to determine the relevant metrics. For example, a lender will require the specific information necessary to perform underwriting and monitoring activities based on the lender’s policies. These users are also able to monitor and adjust the information they require based on their changing needs.

Comparatively, the ABA is concerned that FASB will not have the necessary resources to perform the ongoing surveillance necessary to continually monitor and maintain an up-to-date list of financial KPIs. ABA has observed during Board deliberations on other projects, many FASB board members including the current chair, have clearly stated on several occasions a preference to avoid maintaining lists and that they "do not want to be in the business of calling balls and strikes."

While GAAP provides a firm base of consistent and robust financial information for users, investors greatly benefit from non-GAAP information tailored to specific industries or entities. Attempting to develop uniform definitions across all industries would introduce unnecessary complexity and could reduce the relevance of the resulting measures for end users. Thank you for considering these comments and I look forward to continued dialogue on this project. If you need additional information or have questions, please contact me ([email protected]; 202-663-5318).

Sincerely,

Joshua Stein