Former FASB chair defends his legacy as more than CECL
Russell Golden never set out to be a lightning rod for bankers.
Golden, who recently wrapped up 16 years at the Financial Accounting Standards Board — the last seven as chairman — thought he would have a short stay when he was hired as a senior technical adviser in January 2004.
His goal was to develop a few professional connections and deepen his knowledge of accounting to use at a future job, rather than spend more than a decade-and-a-half reshaping accounting policies and procedures for thousands of U.S. companies.
“I had every intention of going for a relatively short period of time, but I just kept getting promoted,” said Golden, who had to step down as FASB chairman because of term limits.
“I loved every minute of it,” he added.
Golden served on the FASB’s staff when it finalized controversial standards covering share-based compensation and fair value accounting. As chairman, he shepherded major overhauls to the accounting rules for leasing, hedging — and credit losses.
Indeed, among bankers, Golden will be remembered for overseeing the process that led to the implementation of the Current Expected Credit Loss standard, or CECL. The standard, approved by FASB in 2016, requires lenders to estimate lifetime losses when a loan is made.
CECL has drawn strong opposition from bankers and some legislators who are still trying to water down the standard — or have it repealed completely.
While Golden never intended to court controversy when he joined FASB, he has not shied away from it either, acknowledging many of the group’s decisions during his tenure generated “great interest in Washington.”
But Golden balks at viewing his legacy as the sum of the standards he helped launch. Looking back, he said the overarching goal was to make accounting more user-friendly.
“I felt it was important to try to reduce complexity and promote simplification,” Golden said. “For very complex underlying transactions, the accounting and disclosure are probably going to be complex. For a simple transaction, we didn’t have to make the accounting unnecessarily complex.”
Under Golden’s leadership, the FASB has taken significant steps to put those principles into action, eliminating extraordinary debt and — in one of the last acts under his stewardship — reducing the number of accounting models applicable to convertible debt.
“By going from five models to one, we will reduce the uncertainty, we will reduce the cost and we will improve compliance,” Golden said. “When I talk about reducing compliance and promoting simplification, that’s really what we meant, which was how to make it easier for an accountant to understand what’s expected.”
Along the way, he left a mark on the corporate world, especially banking, industry observers said.
The FASB has “certainly dealt with some important issues that have had a profound effect on business,” said John Schweisberger, a partner at Armanino, a Los Angeles accounting and consulting firm.
Golden led the FASB as “a very impactful time,” said Timothy Zimmerman, a certified public accountant and CEO at the $1 billion-asset Standard Bank in Murrysville, Pa. “A lot of things were changing.”
At times, CECL strained relations with bankers nearly to a breaking point. Zimmerman recalled a February 2016 meeting over CECL that had to be briefly halted after a shouting match broke out between FASB staff and community bankers.
It was Golden who settled everyone down by showing a willingness to listen.
“He stayed engaged,” Zimmerman added. “Over the next six or seven weeks they ended up making what we thought were some pretty good changes.”
Though Golden restored civility, efforts to get rid of CECL persist.
Bankers have scored some noteworthy victories. Federal Deposit Insurance Corp. Chairman Jelena McWilliams urged FASB in early March to let banks delay CECL indefinitely.
Congress later that month included a provision in the coronavirus stimulus package to give banks the option of delaying CECL conversion until the end of the pandemic-related national emergency or Dec. 31, whichever comes first.
The actions amounted to the most significant intrusion into FASB’s standard-setting bailiwick since 2009, when congressional pressure prompted the organization to revise its fair value accounting standard.
While many bankers appreciated the intervention, others have grown concerned that lawmakers and regulators have gone too far in their bid to blunt CECL.
“I don’t think it’s the government’s job to set accounting standards,” Zimmerman said. “We have good people working on that stuff.”
Golden said FASB went to great lengths to address concerns raised by CECL’s critics prior to implementation. The group remains “committed to working with stakeholders to see if there are additional changes that need to be made,” he added.
“I have prided myself, and I think the board has prided itself, on making sure anyone that wanted to participate could participate,” Golden said.
“If you go back to the beginning of the CECL project, you can trace some of the changes … to specific comment letters and specific discussion in round tables and in private meetings,” he added. “A lot of our stakeholders helped us get to where we are.”
Large publicly traded banks began their conversion to CECL in January. Golden said he is pleased with what he has seen of the rollout.
“We have seen that companies can apply CECL in an uncertain environment, which I think is a positive,” Golden said. “We need to see [more] trend information — that’s what investors are telling us and its one of the reasons we’re going [to meet with stakeholders] after the second and third quarters.”
Golden said he wants his time at FASB to be remembered for increased transparency, particularly when dealing with CECL. FASB formed an internal working group to identify implementation hurdles, and staff members have briefed hundreds of bankers in public meetings around the country. Outreach is expected to continue as the conversion date for smaller public and private firms approaches.
Golden said he learned from previous engagement efforts, including those for share-based compensation and fair value accounting, that were conducted privately. Doing so made it more difficult to educate stakeholders and secure buy in.
Having ongoing discussions about proposals “shows that we are willing to continue to make constant improvements to ensure that the standards work,” Golden added.
Since stepping down, Golden, 49, can finally revisit his plan from 2004 and leverage his experience at FASB to pursue a new career. For now, he is interested in providing advisory services or joining a board.
“I’ve been able to talk to some of my predecessors who have also served as the FASB chair and made successful transitions about what’s the best way to do that,” Golden said. “That’s what I’m looking to do.”
In his final weeks as chairman, Golden helped prepare his successor, Richard Jones, for the transition, which occurred July 1.
“I’ve had an opportunity to work with the new chairman … for a couple of months getting him ready to go,” Golden said. “He’s very committed to the success of the mission. I think he’s a great pick. He’ll do very well.”