Quarterly Disclosure Project to Resume
After a more than three-year hiatus, FASB resolved at its July 11 meeting to resume its project to improve the disclosures companies provide in quarterly financial statements. The board has been regularly discussing the overall disclosure project, but it has not considered quarterly disclosure requirements since it tentatively agreed in January 2015 to amend Accounting Standards Codification Topic 270, Interim Reporting. That amendment said that certain information is considered so important that it must appear in financial statement notes more frequently than once a year in the annual report, and that disclosures should appear in quarterly financial statements if there is “a substantial likelihood” that the updated information would be viewed by a reasonable investor as significantly altering the “total mix” of information available to the investor.
Private Company Council Seeks Simplification of Stock Compensation Standard
FASB’s Private Company Council (PCC) wants FASB to consider simplifying U.S. GAAP’s stock compensation guidance for private companies trying to determine the fair value of stock options granted to employees. PCC members said they wanted to reduce the costs of complying with the accounting standard without fundamentally changing it. Accounting Standards Codification 718, Compensation—Stock Compensation, requires companies to use fair value to determine the amount of stock compensation paid to employees and to report it as an expense, but the PCC wants FASB to develop an exemption for private companies that lets them determine a stock option’s grant date fair value by assuming that the option’s strike price and fair value are the same, unless other information disproves this assumption. The PCC request elicited a skeptical response from FASB. “There’s got to be a better way than saying, ‘Whatever management says is the strike price is automatically the fair value,’” FASB Chairman Russell Golden said. “That just can’t be the answer.”
Comments Sought on Classification of Financial Instruments
The IASB is soliciting public opinions about the financial statement classification of financial instruments. The board said it wants to assess the challenges companies face applying IAS 32, Financial Instruments: Presentation, when they are trying to classify instruments that include features of both debt and equity. The board is trying to determine whether it needs to clarify the standard or amend its substance. “Users have also expressed concerns about the limited information provided through presentation and disclosure about various features of these instruments,” the IASB said. “Even when the application of IAS 32 is straightforward, the absence of a clear rationale has prompted questions from stakeholders about whether the financial reporting consequences provide useful information about particular types of financial instruments with characteristics of equity.” The deadline for public comment is January 7, 2019.