FASB News

EITF Limits Scope of Proposal on Forwards, Options

FASB should limit the scope of an October 2020 proposal to freestanding equity-classified written call options that remain in equity, according to March 11 discussions by a board task force. The guidance should take effect for fiscal years after December 15, 2021, and interim periods within, the Emerging Issues Task Force (EITF) said. The date would apply to both public and private companies, as opposed to private companies having an extra year to implement, the EITF unanimously agreed. “I’d be fine going to one date if it would simplify it, and I don’t think there’s a lot of learning,” Paul Beswick, a partner at Ernst & Young LLP, said. “In many cases companies end up consulting anyway so having one date will simplify it and you’ve got a great option that it’s prospective so I think it all goes together and makes sense.” Companies would adopt prospectively to modifications or exchanges occurring on or after the effective date of a final update. Early application, including early application in an interim period as of the beginning of the fiscal year that includes that interim period, is permitted for all entities.

IASB News

Hoogervorst: Accounting Rules Could Face Similar Pressure as Prior Financial Crisis

Outgoing IASB Chair Hans Hoogervorst said he is more worried now than 10 years ago when he joined the board because of the perilous state of the global economy where “money has never been cheaper.” When the economic stress finally erupts, “do not be surprised if accounting will come under pressure again, as it did in 2008,” he said in a March 9, 2021, speech at the International Accounting Forum for Accounting Standards Setters (IFASS). That is exactly the point when proper accounting matters the most, Hoogervorst said. “It is in the low tide of a crisis that you can see who is swimming naked,” he said. “And it is the job of accounting to tell the naked truth, no matter how unappealing this might be.” Hoogervorst said that investors today have to pay to lend their money to highly indebted governments and “junk bonds carry very low yield that were once reserved for triple-A rated companies.” As a result, debt has exploded. Worldwide total debt-to-GDP ratio is over 355% and growing, according to a Reuters report. “Never in economic history has so much debt been accumulated. At the same time, free money has driven asset prices through the roof.” Hoogervorst observed that the world is in the midst of a severe COVID-19 recession and rising unemployment, stock prices and housing prices are still breaking record after record. “The global economy is totally distorted, and I suspect many a central banker wakes up in a cold sweat at night, thinking about all the risks lurking in plain sight,” he said. “No one really knows exactly how this will end—I doubt it will be pretty.”

Trustees Seeking Candidates for Advisory Forum

The IFRS Foundation has announced that it is seeking nominations for membership of the Accounting Standards Advisory Forum (ASAF), a panel of national accounting rulemakers whose views help in the development of high-quality standards. The ASAF was established in 2013 by the IFRS Foundation, the trustee organization with oversight responsibility of the IASB. The IASB is the London-based standard-setting body that develops international financial reporting standards (IFRS) for more than 140 countries. The ASAF comprises 12 non-voting members, represented by 12 individuals, plus the chair. The chair or the vice-chair of the board acts as the chair of the ASAF. Membership will be on the basis of organizational representation, the trustee organization said. Candidate organizations are required to select a single designated individual who will be their representative on the ASAF. Nominations and applications are due by April 30, the organization said. Submissions should be emailed to Katherine Maybin at [email protected]