Accounting Principle for Identifying Benchmark Interest Rates Expected
An accounting principle to aid banks and other corporations in identifying permissible benchmark interest rates from the various new rates are emerging from rate reform will be forthcoming, according to recent FASB discussions. FASB said it would develop a principle for benchmark interest rates that companies would be able to use for fair value hedging, an accounting treatment for unlocking fixed-rate debt so that it can be converted to a floating rate that fluctuates with a benchmark interest rate. The work to develop such a principle might not be easy, however, board discussions signaled. FASB considered developing a principle years ago but ditched the effort because of the cost. “I would prefer the principles-based route,” FASB member Gary Buesser said. “There clearly wasn’t a principle in developing that list, and therefore having some foundation for what you do going forward to me is a much better path than going through and reevaluating every proposed benchmark interest rate[, which] would become a difficult process for the board.”
Investor Advocates Push Back on FASB’s Rejection of Project on Disclosures of Customer Accounts
Some practitioners hope FASB will rethink its recent decision not to add a disclosure project about companies’ customer accounts, work they said would provide investors with better information about a company’s future cash flows. New rules would compel senior executives to have a more customer-focused business approach, as opposed to a focus on short-term profits that pump up a stock price, investor advocates said on August 7. “It is to get the rules changed about disclosures so that the information companies disclose is reliable and serves the purpose of informing investors, and ultimately so that leadership teams–CEOs, boards, senior management–feel accountable for growing the value of the customer base, not just pumping up a stock price,” said Rob Markey, vice-president, partner, and director at Bain & Company, Inc.. Currently, GAAP does not require the quality and quantity of customer relationships to be disclosed.
Four Finance Executives Appointed to IFRS Interpretations Committee
Senior finance executives from the United States, France, South Africa, and Brazil were appointed to the IFRS Interpretations Committee, the body that works with the IASB to ensure that International Financial Reporting Standards (IFRS) are correctly interpreted. Jon Nelson, vice president and corporate controller at Fiat Chrysler Automobiles in the United States, Sophie Massol, head of group accounting policies at AXA in France, Donné Sephton, head of advisory services at FirstRand in South Africa, and Renata Bandeira, the accounting and tax director at GOL Linhas Aéreas Inteligentes in Brazil, were appointed to a three-year term, effective July 1, the IFRS Foundation announced on August 10. With these additions, the committee comprises 15 members, including Sue Lloyd, who chairs the group. Lloyd is vice chair of the IASB, the standards-setting body that develops IFRS for more than 140 jurisdictions worldwide. The last IFRS Interpretations Committee meeting took place in June; the next meeting will take place in mid-September.