June 30, 2025

Mr. Jackson M. Day
Technical Director
Financial Accounting Standards Board
801 Main Avenue
P.O. Box 5116
Norwalk, CT, 06820

Re: File Reference no. 2024-ITC100

Dear Mr. Day,

The Securities Industry and Financial Markets Association’s1 Accounting Committee (“SIFMA” or “the Committee”) welcomes the opportunity to comment on the Financial Accounting Standards Board’s (“FASB’s”) File Reference No. 2025-ITC 100 Invitation to Comment – Agenda Consultation (the “ITC”). The Committee consists of global financial institutions that operate across the full spectrum of the global capital markets. Committee members have extensive practical experience in the application of US GAAP to financial instruments and capital markets transactions.

The Committee appreciates the FASB’s efforts to align its agenda with the priorities of investors, users, preparers, and other stakeholders, and commends its recent success in improving the financial reporting for derivatives and hedge accounting to be published in the forthcoming Accounting Standards Updates (“ASU”). The Committee stands ready to be useful to the FASB in its future standard setting efforts related to the priority issues outlined herein as well as any other issues impacting its members.

Projects that SIFMA considers to be High Priority:

First, SIFMA requests the FASB add a project to improve Topic 860 as a high priority to be addressed on an expedited basis. As global financial institutions, we transact on a daily basis in the purchase and sale of financial assets in significant volume. Recognizing and derecognizing financial assets is fundamental to the business of our members and our response to Question 23, requesting targeted improvements to Topic 860, Transfers of Financial Assets, reflects our deep experience in applying all aspects of this standard. We believe the effective control framework underpinning the derecognition of financial assets is sound and performs appropriately for the vast majority of transaction types, and therefore the sections of Topic 860 that we recommend reconsidering are targeted. With that in mind, we believe the Participating Interests rule should be eliminated or improved. In our experience, it creates significant practice issues, diversity in practice, and often results in unintuitive conclusions for commonplace transactions. The conceptual basis for the rule is unstated in Financial Accounting Standard 166, and we question its effectiveness in meeting any implicit objective that may have guided its development. In addition, we also ask the FASB to eliminate Topic 860’s “lender gross up” in its entirety as it is inconsistent with the effective control framework and does not provide decision-useful information.

Second, the Committee asks that the FASB add a project that would provide a fair value measurement election for physical commodities traded or managed on a fair value basis by financial institutions. The Committee has been seeking fair value measurement for commodities inventories since prior to the FASB’s 2008 “Accounting for Trading Inventory—Potential FSP to Amend ARB 43” and ask the FASB to prioritize this project in order to eliminate the longstanding measurement inconsistency within our consolidated entities depending on the type of subsidiary that holds commodities inventories. Given the success of the application of fair value measurement through the fair value option to financial assets and of the application of fair value hedge accounting to commodities inventory, we believe that including a fair value option within the industry guidance for financial institutions would be a straightforward and expeditious project.

Third, we ask the FASB to highly prioritize the initiation of a project to further improve the hedge accounting model in order to allow for important risk management strategies to qualify for hedge accounting. We believe significant improvements can be made by modifying certain pillars of the model (e.g., specificity in cash flow hedging), eliminating certain hedged item designation prohibitions (e.g., interest rate risk in Held-to-Maturity Securities), and other limited amendments. ASC 2017-12 –Derivatives and Hedging (Topic 815): – Targeted Improvements to Accounting for Hedging Activities was very successful at improving financial reporting as well as providing expanded opportunities for sound risk management, and the same potential exists for this project.

The Committee considered each of these high priority recommendations carefully. As preparers of global institution financial statements, we are among the stakeholder types that have the greatest potential for bearing any negative impacts from unintended consequences and the costs of accounting change. We believe the benefits of the above suggested improvements outweigh the costs and risks.

We urge the FASB to weigh the potential for such consequences and costs carefully before initiating large projects not listed above. We do not see the same high benefits available for other larger projects mentioned in the ITC and are concerned about the potential for negative consequences. We would, however, be supportive of certain narrow, targeted projects as noted in our responses to the Questions for Respondents.

We also recommend that the FASB not take on projects where the chances of achieving consensus are low including revisiting the frameworks for goodwill or classifying liabilities and equity, as we describe in the attached appendix. In such cases, there is a significant potential for a protracted project and a lack of broad support for the outcome. Given that potential, the status quo is more than likely a satisfactory conclusion among imperfect alternatives.

Thank you for the opportunity to submit our detailed views expressed in the attached Appendix, and we are happy to answer any questions you may have.

Sincerely,

Laurin Smith
Managing Director, JPMorganChase
Chair, SIFMA Accounting Committee
[email protected]

Kevin A. Zambrowicz
Deputy General Counsel
SIFMA