September 21, 2021

VIA ELECTRONIC SUBMISSION

Ms. Hillary Salo
Technical Director, FASB
401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116

Re: File Reference No. 2021-004. Invitation to Comment: Agenda Consultation

Dear Ms. Salo:

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to respond to the invitation to comment (“ITC”) on the Financial Accounting Standards Board’s (“FASB’s” or “Board’s”) technical agenda. Our Committee members have significant expertise in the accounting matters faced by a wide range of financial institutions, and are happy to share our practical experience with the FASB Staff to help drive future standard-setting that focuses on matters where: (1) there is a pervasive need for improvement with identifiable scope; (2) solutions are technically feasible; and (3) the expected benefits exceed the expected costs associated with the change.

Detailed responses to the specific questions raised in the invitation are included in Appendix I, but we would like to highlight the following key items for specific consideration:

– Hedge Accounting – Phase 2: While significant progress has been made with regard to the hedge accounting guidance, we believe there remains a number of key items that require additional consideration, many of which being particularly pressing (see our responses to Question 5 for more information). As a result, we believe this should be a top priority for the Board.

– Digital assets: Given the growth in this asset class, as well as increased focus by various regulators, we believe the Board should prioritize a project that addresses both classification (i.e., as a non-intangible asset) and measurement (i.e., availability of the fair value option).

– Environmental, social and governance (“ESG”) related transactions: Although generally not yet material for our member firms, we expect this activity (e.g., loans or deposits with interest rates that vary based on the counterparty’s performance against certain defined ESG-related targets) to increase significantly in the short-term and, therefore, believe a project aimed at mitigating the need for bifurcation of embedded derivative and fair value measurement requirement should be a priority of the Board.

– Definition of a derivative: In addition to addressing the item immediately above, we believe the Board should also prioritize clarifying the accounting for amendments to derivatives, particularly as it relates to defining the “initial investment.” This is an area that creates meaningful complexity in practice.