U.S. Chamber of Commerce Asks for Revision of Implementation Process
The U.S. Chamber of Commerce has asked FASB to follow a process that includes revising its implementation procedures for private companies and smaller public companies on rules for revenue recognition, leases, credit losses, and insurance, four of the board’s most significant and impacting standards. “We have heard concerns from a number of market participants regarding the implementation of each of these standards, which we believe necessitates an analysis and review of implementation procedures,” Tom Quaadman, executive vice president of the Chamber’s Center for Capital Markets Competitiveness, said in a May 20 letter addressed to both FASB Chairman Russell Golden and SEC Chief Accountant Wesley Bricker. The organization suggested five steps that would allow banks and investors to interact with FASB and the SEC to “quickly identify and address issues,” including enabling a two-year phasein from the public company effective date for implementation. The standard takes effect in 2020 for public companies and 2021 for private companies. The rules introduce a current expected credit loss (CECL) model—a significant change in approach to making allowances for losses on loans and debt securities. A FASB spokesperson said on May 22 that the board welcomes “the continued interest and suggestions from stakeholders and others as CECL implementation moves forward.”
Proposal to Update Taxonomy on SEC Disclosures, Income Tax Simplification Issued
On May 6, FASB’s XBRL team issued for public comment Proposed Taxonomy Improvements for a Proposed Accounting Standards Update in Response to the SEC’s Disclosure Update and Simplification Initiative and Proposed Accounting Standards Update Simplifying the Accounting for Income Taxes (Topic 740). These proposals would update the GAAP taxonomy to include Proposed Accounting Standards Update (ASU) 2019-600, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Proposed ASU 2019-700, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The taxonomy is a dictionary of electronic terms that companies use to submit an electronic financial statement to the SEC. Once tagged with a taxonomy, financial reports can be analyzed rapidly and cost effectively. This enables analysts and investors to access digital, fully machine-readable company financial statements. Companies have until June 28 to comment about whether the changes would be suitable and whether there are additional taxonomy improvements needed on the topics, a May 23 announcement states.
GASB Issues Proposal to Clarify Accounting for Subscription-Based IT Arrangements
On May 21, GASB issued a proposal aimed at creating consistency among state and local governments in reporting cloud computing and similar subscription-based IT arrangements (SBITA). Use of those arrangements has surged in recent years, but because there is no specific GASB standard to address them, accountants analogize to various other rules. Some analogize to lease accounting, others to the concepts for elements of financial statements, and still others to a FASB standard on intangible assets. These reporting differences hinder the ability of financial statement users to obtain comparable information to determine whether a municipality is being efficiently managed. Exposure Draft (ED) 38, Subscription-Based Information Technology Arrangements, defines a SBITA as a contract that conveys control of the right to use a SBITA vendor’s hardware, software, or both, including IT infrastructure, for a period of time in an exchange or exchange-like transaction, according to the main tenets of the proposal. If finalized, the rules would be effective for fiscal years beginning after June 15, 2021. Early application would be encouraged.