No New Definition for Joint Ventures
A majority of the FASB said it was best not to revise the definition for joint ventures—a move they considered earlier this year, but rejected on July 22—over fears that even a single tweak in wording could bring on other reporting issues. “Any effort to come up with a true definition I think would lead to change in practice and I can’t justify in my own mind why we would need to change practice,” FASB member Harold Schroeder said. “I’m not sure what problem we would be solving there.” Board members conceded that the current joint venture definition is challenging to apply, particularly because of how it is described in the GAAP codification, but felt the project should focus on developing the accounting rules. The board is in ongoing discussions to develop specific accounting rules for reporting about contributed monetary and nonmonetary assets when a joint venture is initially formed.
Revisions to Segment Reporting Will Bring Clearer View of Expenses
Public companies might have to provide better information about the expenses they incur in segments of their operations, disclosures investors have been clamoring for years. Details about significant operating segment expenses would enable investors to get better insight about which portions of a company’s business divisions are profitable or which are losing money, according to FASB’s July 15 discussions. The board discussed potentially developing a principles-based disclosure requirement that would require public entities to “disclose significant segment expense categories by reportable segment.” That requirement could be based on the perspective of information regularly provided to the chief operating decision maker (CODM) or based on other alternatives. “Intuitively I understand why additional information on significant expenses could be relevant to investors, [but] I don’t see that as a reason though to abandon the CODM approach,” FASB Chairman Richard Jones said. “I’d look for the staff to present that as a means of seeing what information would be provided and what issues would be associated with it.”
Seven More Issues Uploaded to Coronavirus Reporting Toolbox
The GASB added five new issues and made revisions to two items in its “Emergency Toolbox,” the web page it developed to make it easier for state and local governments to find coronavirus-related accounting rules. The Emergency Toolbox was established in April to help state and local governmental entities quickly identify the GASB’s authoritative guidance that could be relevant to the COVID-19 crisis. The provisions were not included in GASB Technical Bulletin 2020-1, “Accounting and Financial Reporting Issues Related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Coronavirus Diseases,” which was issued in June. To manage the resulting workload, commenters told the board they have had to do workarounds, including reshuffling the work responsibilities of much of their finance staff to meet operational obligations. The five new uploads to the toolbox are related to the following: disclosures related to outflows of resources; donated inventory; nonexchange transactions; classification of transactions not specifically addressed in Category A or Category B authoritative literature as either operating or nonoperating revenues and expenses; and property tax revenues