Proposal Would Clarify Accounting Rules for Share-Based Payments to Customers
On March 4, FASB published a proposal to reduce confusion related to how companies report share-based payments made to customers. The proposed accounting change clarifies that companies would use stock compensation accounting rules to measure and classify share-based payments made to customers. Accountants who have been analogizing to new “noncash consideration” guidance under revenue accounting rules should no longer do so, according to the proposal. If finalized, the changes would provide financial reporting consistency, which is important for providing comparable information to investors. Comments on the proposal are due by April 18.
Federal Reserve Chairman Says Credit Losses Standard Will Not Affect Economy
The banking industry has been making a concerted effort to get FASB to either delay the implementation or change a part of its Current Expected Credit Losses (CECL) standard. Federal Reserve Chair Jerome Powell, however, is not on their side. Banks believe the standard will have a procyclical effect, which means they will have to raise loan loss allowances during economic downturns, forcing them to curb the amount of money they can lend when customers need it most. This could mean more volatile levels of regulatory capital and an increased level of capital at all times. Powell, however, said the Federal Reserve does not believe the standard is procyclical. “We are aware of those concerns, and we will be watching to see whether there is any such effect,” Powell said during a hearing of the House Financial Services Committee on February 27, 2019. “We don’t expect that there will be such an effect.”
Proposed Guide Addresses Implementation Questions on Lease Accounting
The GASB has issued a draft implementation guide to help state and local governments apply the new standard on accounting for leases. The guide, ED 3-24, provides answers to questions about GASB Statement (GASBS) 87, Leases, which was published in June 2017. The standard classifies leases as financing arrangements that give the customer the right to use the leased asset and requires governments that are lessees to report a liability for the contract and an intangible asset representing the right to use the item being leased. The standard becomes effective for financial reporting periods that begin after December 15, 2019, but can be adopted before the effective date.