FASB Issues Proposed Taxonomy Changes to Reflect Reference Rate Reform

FASB has proposed changes to the 2020 U.S. GAAP financial reporting taxonomy to reflect guidance that facilitates the effects of the phaseout of the London Interbank Offered Rate (LIBOR) and the shift to other rates, according to a September 13 SEC release. The proposed taxonomy update is one of several that have been released throughout the year as new FASB rules are proposed or issued; this latest batch of updates are specific to Proposed Accounting Standards Update (ASU) 2019-770, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. FASB proposed the changes on September 5 to help companies navigate the global market-wide reference rate transition period. The proposal provides exceptions for applying GAAP to contract modifications and hedging relationships affected by rate reform. The guidance would apply only to contracts or hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to rate reform. Companies should submit comments by October 7.

FASB Reissues Proposal to Simplify Classification of Balance Sheet Debt

FASB has revised and reissued a 2017 proposal that would enable companies to provide creditors or investors with a clearer picture of the nature and type of debt they carry—figures that reduce quarterly profits. The board reissued the proposal for public comment on September 12 after revising areas related to unused long-term financing arrangements, such as a line of credit. If finalized, the changes could result in some companies having to reclassify certain types of debt arrangements from “noncurrent” to “current” (or vice versa) on balance sheets. Whether debt is classified as noncurrent or current can weigh against covenant terms or a company’s ability to meet its financial obligations during an economic downturn. Investors and creditors study these figures to determine the financial health of a company. “With these revisions, the FASB believes the proposed ASU further clarifies the guidance for balance sheet classification of debt and would provide more consistent and transparent information to financial statement users,” FASB Chairman Russell Golden said in a statement.


AICPA Guide Offers Auditors Help on FASB’s Credit Loss Accounting Standard

The AICPA has issued a practice aid to help auditors when they communicate with management and audit committees on FASB’s new credit loss accounting standard. The guide, Allowance For Credit Losses—Audit Considerations, summarizes key provisions of FASB’s Accounting Standards Codification (ASC) Topic 326, “Financial Instruments—Credit Losses,” and addresses key considerations when auditing the allowance for credit losses related to loans. “This Practice Aid is intended to provide auditors with information that may help them improve the effectiveness and efficiency of their audits and practices,” Jason Brodmerkel, AICPA Senior Technical Manager for Accounting Standards and AICPA Depository Institutions Expert Panel, said in a statement. “It is based on existing professional literature, the experience of members of the AICPA Depository Institutions Expert Panel, the AICPA Insurance Expert Panel, and information from AICPA member firms.”