FASB Updates Codification to Incorporate SEC Staff Views on Credit Loss Rules, Leases Deferral
FASB has issued a new accounting standard that updates GAAP to include interpretive guidance on applying credit loss rules and on the lease accounting effective date deferral. The update incorporates SEC Staff Accounting Bulletin (SAB) 119, which was issued in November 2019 and aligns SEC staff guidance with Accounting Standards Codification Topic 326, “Financial Instruments—Credit Losses,” the new provisions for reporting expected losses from loans. It describes the methods and supporting documentation SEC staff accountants would normally expect registrants to prepare and maintain in order to support estimates of current expected credit loses for loan transactions. The guidance applies to registrants that are creditors in loan transactions that have a material effect on the registrant’s financial condition.
GASB Looks to Bring Clarity on City, State Budget Spending
By the middle of this year, the general public will get a preliminary view of GASB’s project on revising the way that governmental entities report revenues earned and expenses generated—items that play a critical role in determining whether state and local governments’ annual budget goals are met. State and local governments provide a variety of services, including public safety, education, and road repairs. They do so by collecting income taxes, sales taxes, or property taxes, and some also charge user fees. Municipal divisions, for example, send out bills for clean water, electric utilities charge for electrical services, and state universities charge tuition for higher education. Potential changes from GASB will enable the public to better understand whether enough revenue is being collected to cover a government’s expenses, or whether it is charging too much for services it provides, according to a February 4 GASB podcast.
Old Rules for Government Employees’ Accrued Vacation, Sick Leave Being Revised
GASB plans to revise the accounting rules for the accumulated vacation and sick leave of government employees, items that have been inconsistently recorded as liabilities by state and local governments. The work will focus on revising 1992’s GASB Statement 16 as it relates to accrued leave benefits that are not covered, such as paid time off; the existing options for measuring sick leave liabilities; and the usefulness of required notes to the financial statements for decision-making and assessing accountability. The board will examine the definition of compensated absences for accounting and financial reporting purposes and consider whether a revised definition should be adopted that could incorporate the accounting for certain types of leave other than vacation and sick leave. An exposure document on the topic is not expected until the first quarter of 2021.