FASB Addresses Questions About Hedge Accounting
At its February 14 meeting, FASB discussed technical questions that have arisen since the publication of an update to U.S. GAAP to simplify hedge accounting. The board issued Accounting Standards Update (ASU) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, to make one of the most complex areas of U.S. GAAP easier to understand and more applicable to a wider range of risk management strategies. The amended guidance eases some of the requirements to qualify for hedge accounting, which allows companies to match the terms of a derivative to the risk it is meant to hedge and then recognize the gains or losses from both items in the same period. The board also discussed its project to improve the disclosures that businesses must provide about their employee benefit plans, as well as its plan to make it easier for not-for-profit organizations to determine how to record the proceeds from grants and donations that have conditions attached to them.
Proposal to Allow Capitalization of More Cloud Computing Costs
FASB is primed to release for public comment a plan to clarify the accounting for costs associated with setting up business software packages that are managed in the cloud. The proposal, developed by its Emerging Issues Task Force (EITF), will not define the term “implementation costs.” In past discussions, FASB and members of the EITF have said that the costs to set up cloud-based contracts include items such as employee training, customization, installation, and coding. The board voted 5-2 to issue the proposal, with FASB members Christine Botosan and Marc Siegel voting against. “Using the Conceptual Framework, you actually are creating an asset by moving toward the cloud. If that’s the case, then what’s the best way to report that asset?” FASB member Harold Schroeder said. “I don’t think this is the most ideal approach that we’re taking. But it’s an approach that gives recognition to an asset that I do believe is being created.”
Australian Accounting Executive Named IFRS Foundation Executive Director
On February 7, the IFRS Foundation, the IASB’s parent organization, named Lee White the foundation’s executive director. White, who was CEO for the Chartered Accountants Australia and New Zealand (CAANZ), is expected to assume his post in April. The IFRS Foundation credited White for his role in merging the Institute of Chartered Accountants Australia and the New Zealand Institute of Chartered Accountants to form CAANZ in 2014. White succeeds Yael Almog, who had been executive director since 2012. “Lee’s wealth of leadership experience, varied practical background, and wide contact network make him the ideal candidate to lead the IFRS Foundation’s operations,” IFRS Foundation Chair Michel Prada said in a statement.