Fair Value Disclosure Rules Scaled Back
On March 7, the FASB published an update to U.S. GAAP to improve the information businesses disclose about the estimates and assumptions used to determine the fair values of assets and liabilities. A 6-1 majority of the board said the final amendments will be based on FASB’s 2015 proposed Accounting Standards Update (ASU) 2015-350, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. The accounting board believes the amendments will reduce costs for businesses while satisfying the needs of investors and analysts. “The disclosure effectiveness project is supposed to look at both reducing costs and improving the relevance of disclosures for users. And I think in this particular case, we’ve achieved the cost-reduction aspect,” FASB member Christine Botsan said. “We could have done more to enhance the disclosures users indicated would be quite useful to them. That said, on balance, we’re achieving the objective.” The updated disclosure requirements are effective for fiscal years and interim periods that start after December 15, 2019, although the changes can be adopted before the effective date. There would be no effective date difference between public companies and private companies, the board agreed.
Proposed Disclosure Rules for Government Assistance up for Debate Again
At its upcoming meeting, FASB plans to discuss its proposed disclosure rules for information about government-sponsored economic incentives. The board has proposed adding footnote disclosure rules about the types and the terms of assistance, including low interest loans, received from state and local governments and federal agencies for common incentives, such as the creation of new jobs or technology investments. But businesses and other critics of the proposed change fear the repercussions that would ensue following the public release of confidential information about government grants. Separately, FASB plans to meet with its Not-for-Profit Advisory Committee to discuss a range of topics, including the potential effect of the Tax Cuts and Jobs Act on not-for-profit entities, international not-for-profit issues, how organizations are implementing FASB accounting standards, and current FASB projects.
Proposed Implementation Guide Criticized over Disclosure Rule
A proposed implementation guide from GASB has prompted criticism from several groups that question how the board expects state and local governments to follow its disclosure guidance for tax abatements. According to GASB, its implementation guidance was intended to help governments determine when the forgiveness of property taxes should be classified as a tax abatement, but critics say that if the proposed implementation guidance is finalized, many abatements will escape disclosure. In particular, a piece of the guide suggests that certain tax increment financing deals, subsidies that are often used to fund public infrastructure, would be exempt from GASB Statement 77, Tax Abatement Disclosures. “We hope the GASB will revisit its original intent in issuing Statement 77: to bring out of the shadows previously undisclosed costs that have a significant impact on many governments’ fiscal health,” wrote one Washington policy group. “The GASB should close confusing loopholes rather than open new ones that would move us away from the goal of accessible, comprehensive reporting.”