FASB News
Companies Worry Proposal on Franchise Fees Would Unravel Rules
A September 2020 proposal from FASB would compromise revenue accounting rules, introducing industry-specific guidance the rules were developed to do away with, some companies told the board in November comment letters. The proposal was issued in an attempt to ease the costs privately owned franchisors face when accounting for initial franchise fees “What has been described as a practical expedient in the Exposure Draft is actually introducing an exception to principles in ASC 606,” accounting firms Wipfli LLP and Mind the GAAP, LLC, said in a joint November 5 letter to the board. “This exception would introduce divergence in applying Topic 606 for similar transactions across various industries, which contradicts one of the main reasons why Topic 606 was promulgated.” A practical expedient is an alternative aimed at producing a more cost effective way of achieving the same or a similar accounting objective. “We do not believe that the practical expedient will result in cost savings for nonpublic franchisors,” Wipfli and Mind the GAAP said. Other companies said they were also concerned that one sector was getting special treatment while other sectors face their own challenges with the standard.
No Conceptual Basis for Other Comprehensive Income
FASB has affirmed there is no conceptual basis for other comprehensive income (OCI), an account many companies like because it enables them to bypass presenting potentially very wild swings in assets and liabilities through the income statement. The FASB’s OCI decision was specific to discussions on Proposed ASU 2016-300, Concepts Statement No. 8—Conceptual Framework for Financial Reporting—Chapter 7, Presentation, which was issued in August 2016. The proposal generated 17 comment letters. The discussion was part of board re-deliberations on a 2016 proposed concepts chapter on presentation of financial information. FASB’s concepts statements are non-authoritative guides it uses to develop accounting standards. It is impossible to identify a consistent set of circumstances in which components of comprehensive income should be reported in OCI, according to the discussions. “I view it as there is no single conceptual basis for why the board has in the past used OCI. I think sometimes it is a pragmatic solution,” FASB Vice Chair James Kroeker said.
IASB News
Head of Germany’s Accounting Board to be Next IASB Chair
Andreas Barckow, current president of the Accounting Standards Committee of Germany (ASCG), will replace Hans Hoogervorst as chair of the IASB when he vacates the post next year, the IFRS Foundation announced on November 12. Barckow takes the helm at the global rulemaking board on July 1, 2021. Hoogervorst, a former Dutch finance minister, is leaving the post due to term limits. His second five-year term ends in June 2021. During Hoogervort’s tenure, the IASB published major new accounting standards on insurance contracts, leases, financial instruments, and revenue recognition, among many more topics. Barckow has been an active participant in numerous advisory bodies to the IFRS Foundation and the IASB, including membership of the IASB’s Accounting Standards Advisory Forum and the IFRS Advisory Council. He also previously served as the lead technical partner for accounting matters in the German member firm of Deloitte in Frankfurt. Barckow’s other roles include president of the European Financial Reporting Advisory Group (EFRAG), since March 2015. “I am deeply honored to be appointed as the next IASB Chair, to lead the standard-setter into its third decade. I look forward to working with my colleagues on the Board and the staff to meet the exciting challenges ahead,” Barckow said in a statement.
