FASB Begins Deliberations on Gifts in Kind
FASB began discussions on November 6 to develop presentation and disclosure rules for gifts in kind, a type of nonmonetary charitable donation that was recently the subject of a California bill vetoed by Governor Gavin Newsom over alleged valuation abuse of the prices of donated pharmaceuticals. Nonprofit organizations are required to follow the same fair value measurement guidance as other entities, but the fair value guidance in Accounting Standards Codification Topic 820, “Fair Value Measurement,” does not specifically address restrictions on geographic distribution and how they affect the determination of the principal or most advantageous market, according to a FASB summary. Some regulators are concerned that inflating the fair value measurement of donated pharmaceuticals increases a nonprofit’s revenue and program expenses, which would make the organization appear larger and more efficient in its use of resources than a smaller nonprofit or a nonprofit with lower values for its gifts in kind received. FASB added a project to its agenda in August to provide accounting guidelines that would eliminate such confusion.
Legislative Push Against Credit Loss Rules Reignites Concerns about Independent Standards Setting
Recent efforts by U.S. legislators to push FASB to stop studying the economic impacts of new credit loss accounting rules interfere with the independence of standards setting critical to the success of U.S. capital markets, Jeffrey Mahoney, general counsel of the Council of Institutional Investors (CII), told Thomson Reuters on October 30, 2019. “The purpose of accounting is, in part, to report economic activities and events of companies in a high-quality manner that meets the needs of the markets and the investing public. And most investors, other market participants, and policymakers agree that it’s best to have independent experts in the private sector promulgate accounting standards free from undue influence,” Mahoney said. “It’s generally on behalf of a lobbyist for a large bank or corporation who is trying to override the independent standard setter’s technical decisions or judgments to obtain a short-term benefit for the bank or corporation that may be detrimental to the efficiency of the markets and in conflict the needs of the investing public.” Mahoney’s comments highlight a longstanding hot-button issue in accounting circles: whether politicians should be allowed to weigh in when warranted on the accounting standards setting process.
GASB Anticipates Full Agenda Ahead for 2020
GASB’s work on revenues and expenses, disclosure frameworks, and financial reporting models—its “big three” topics that represent the foundations of governmental reporting—will extend into 2020, according to a joint GASB/FASB webcast on November 1. State and local governments will see a preliminary views document by June on GASB’s work to improve revenues and expense reporting. The project is aimed at developing a comprehensive model for classifying, recognizing, and measuring revenues and expenses. GASB recently made strides in determining the classification of revenue expense transactions, GASB Senior Research Manager, Dean Mead, said during a webcast. In addition, the board has restarted deliberations on recognition and measurement issues. The board has also advanced discussions on its work to improve the effectiveness of note disclosures in government financial reports; an exposure draft will be issued by February 2020. The guidance will help entities determine “whether a particular piece of information is essential,” Mead said. Finally, an exposure document on the financial reporting model will also be issued by June 2020. In general, this project is aimed at enhancing the effectiveness of the model by providing information that will help financial statement users assess a government’s accounting, as well as addressing certain application issues.