FASB to Study Cost of Options in Accounting Standards
To help auditors and companies save money, FASB often gives private companies the option to adopt an accounting update a year after public companies do so. Recently, however, the board has heard that such options can cost auditors and companies more time and money than originally intended. Speaking at a liaison meeting between FASB and the AICPA’s Auditing Standards Board (ASB) at FASB headquarters in Norwalk, Connecticut, FASB Chair Russell Golden stated the board was in the early stages of examining the types of options FASB offers and whether procedural changes were necessary. Public companies have told the board that when FASB allows for options in an accounting rule, they cannot automatically take what they perceive to be the simpler method. “What I hear from public companies is, every time we give an option we add costs because their CEOs say, ‘I want you to run the numbers under both methodologies’,” Golden said. While Golden characterized the board’s research as preliminary, he noted one option under consideration by FASB was giving private companies extra time to adopt a new standard but eliminating the option to adopt rules early.
Hoogervorst Sees Uncertain Outcome for Reassessment of Goodwill Impairment
The IASB’s reassessment of goodwill accounting may achieve little more than reminding financial professionals of the difficulty posed by goodwill impairment and the lack of a reliable substitute, according to the board’s chairman, Hans Hoogervorst. “It may be that there is no better alternative, but in that case we should accept the current shortcomings of IFRS 3 [Business Combinations] with our eyes wide open,” Hoogervorst said in regard to the board’s reassessment of the standard. “Should the discussion paper lead to better awareness of the possible pitfalls of current accounting for goodwill, this would in itself be a positive development.” The board wants to hear public views about the prospects for improving goodwill accounting, including the possible reintroduction of goodwill amortization to its guidance, which was eliminated when IFRS 3 was published in 2004. The board has not announced a planned publication date for the discussion paper.
Economic Survey Finds Mounting Concerns about Trade Tensions, Higher Interest Rates
Business executives are growing more concerned that disruptions to international trade and rising interest rates will slow down the economy. According to an AICPA survey released on September 6, some 69% of business executives claimed they were optimistic about the economy over the next 12 months a drop of 5 percentage points from the previous quarter and 10 percentage points from the start of the year. Optimism about their own company’s outlook slipped a percentage point to 69%. Both rates remain strong from a historical perspective, the AICPA asserted. The percentage of business executives who expect their company to expand in the next 12 months remained unchanged from last quarter at 70%. Expectations for profit and revenue growth over the next 12 months rose after a slight decline in the previous quarter. Profit growth estimates rose to 4.3% from 4%, while revenue growth expectations grew to 5% from 4.8%. “It’s unusual to see a decrease in U.S. economic optimism when key performance indicators, such as profit and revenue, are perceived to be on the rise,” Arleen Thomas, a managing director with the Association of International Certified Professional Accountants, an AICPA affiliate, said in a statement. “Business executives are encouraged by the impact of federal tax reform and reduced regulation at home, but there is some concern about trade wars, interest rate hikes, and other factors that could contribute to a global economic slowdown.”