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FASB News
Chief accountants: proposed revisions to income tax disclosure rules too costly to prepare.
Chief accountants and controllers from some of the nation’s largest companies have told FASB that it should backpedal on a proposal that would require them to disclose more details about their income tax payments overseas. The potential changes would be costly to prepare, and some of the resulting information could confuse investors, a technical committee of Financial Executives International (FEI) told the board. “We’re trying to understand what this is giving that we didn’t have. Who really needs this information?” Thomas E. Roos, senior vice president and chief accounting officer at UnitedHealth Group Incorporated, said on behalf of the FEI’s Committee on Corporate Reporting (CCR). “A change isn’t needed—this seems to be inconsistent with what I think is the rate simplification effort we’ve been going through to try to keep it simple and straightforward.” The board issued the proposal in March 2019 to revise an earlier draft developed in 2016, prior to the passage of the Tax Cuts and Jobs Act of 2017. Among other items, the revisions would require companies to provide more detailed information about the taxes they pay by federal, state, and foreign jurisdiction, so that investors would have additional information about net cash flows related to income taxes.
Most private companies have not adopted new revenue rules; are unlikely to adopt lease rules on time.
Most private companies have not yet started to adopt new revenue accounting rules that took effect in January 2019 for that sector, nor do they plan to adopt lease accounting by its 2020 effective date, according to advisory discussions by FASB’s Private Company Council (PCC). The PCC’s survey revealed that only 1% of private companies have completed adoption of Accounting Standards Codification (ASC) Topic 606, “Revenue from Contracts with Customers”; 10% have made significant progress, 37% have recently started, and 52% have not yet started. The adoption lag might be due to change fatigue stemming from controllers and CFOs juggling multiple demands, PCC members said during a June 24 meeting. “I think the change fatigue is more encompassing than just that GAAP changes; it’s going to be whether it’s the tax, regulatory changes, technology, everything,” said Jeremy Dillard, the technical standards partner with CPA firm SingerLewak LLP in Los Angeles. “Most of the clients I’m dealing with in the middle-market space—the controllers and the CFOs are juggling multiple demands; they’re trying to keep up with all of those changes.” Topic 606 was issued in 2014, and was effective in 2018 for public companies and 2019 for private companies. The standard eliminates hundreds of pieces of industry-specific revenue guidance and replaces them with a principles-based, five-step model for reporting revenues earned from certain types of contracts. The rules took more than a decade to develop.
IASB News
Proposal to amend and defer insurance accounting rules issued.
On June 26, the IASB proposed to amend its first comprehensive insurance standard and defer the effective date from 2021 to 2022. Insurers will incur some costs, but the changes would enable investors to better understand their operations, the board said. “Moving to IFRS 17 is a big task, and this proposed package of targeted amendments will help insurers in their ongoing implementation of the new standard,” IASB Chairman Hans Hoogervorst said in a statement. IFRS 17, Insurance Contracts, was issued in May 2017. The proposal would amend that standard in areas related to acquisition costs, profit from investment services, risk mitigation, reinsurance contracts held, and presentation of insurance contract assets and liabilities, as well as provide options for transitioning. Companies should submit comments on the proposed revisions by September 25.
GASB News
Rules for retirement savings plans that allow tax deferral of wages being revised.
State and local governments can now weigh in on a proposal aimed at requiring them to apply pension accounting rules to some retirement plans offered by tax-exempt organizations that provide more flexibility than traditional benefit plans, including Internal Revenue Code (IRC) section 457 plans. These plans are popular forms of retirement savings that allow employees to defer the taxation of wages to a future year. If finalized, the changes would enhance the relevance, consistency, and comparability of accounting and financial reporting by pension plans, including section 457 plans, and by the governments that provide benefits through those plans, GASB said. Government entities have until September 27 to comment on the changes.
