Companies Say Proposal on Acquired Revenue Earning Contracts Would Ease Accounting Costs

T-Mobile US Inc., Cisco Systems Inc., IBM Corp., Pfizer Inc., and others said that a December 2020 FASB proposal would simplify the recognition and measurement of revenue-generating contracts acquired in business combinations and ease accounting costs. The proposal would also provide for consistent financial reporting outcomes for investors, companies said in March 2021 comment letters to FASB. “We believe the proposed amendments would reduce the cost of accounting for a business combination under US GAAP and provide for more consistent financial reporting outcomes,” T-Mobile’s accounting team wrote on March 16. FASB developed the proposal last year to clarify the reporting of revenue-earning contracts that are accounted for in accordance with ASC Topic 606, “Revenue from Contracts with Customers,” when acquired in a business combination. The proposal aims to remove accounting differences among companies that have bubbled with respect to the recognition of an acquired contract liability, as well as payment terms and their effect on subsequent revenue recognized by an acquirer. These differences hinder comparability, making it difficult for investors to make informed decisions.

Rulemakers Discuss Consolidation of Charitable Foundations

FASB is working on a proposal that would clarify an issue related to whether a for-profit sponsor should consolidate a charitable foundation. The board met on March 24 to “discuss staff research and outreach and decide whether to proceed to a draft of a proposed Accounting Standards Update for vote by written ballot,” according to an FASB alert. There are many types of nonprofit entities that could be formed by a for-profit entity, including charitable foundations that make grants for educational, research, or other purposes. Some for-profit entities may sponsor charitable foundations that are tax-exempt under IRC section 501(c)(3), which they utilize to conduct their charitable giving, instead of making contributions to unaffiliated nonprofits. There is no specific accounting rule today on this issue, according to a board summary. As a result, entities analogize either to proposed consolidation guidance that was not finalized by the board or to aspects of ASC 958-810, “Not-For-Profit Entities—Consolidation.” Those analogies have led to accounting differences among entities in the determination of consolidation.


IFRS Foundation Forms Working Group for New Sustainability Board

The IFRS Foundation has announced that it formed a working group to undertake technical preparation for a potential international sustainability reporting standards board under its governance structure. The working group will “accelerate convergence in global sustainability reporting standards focused on enterprise value” and “will provide a forum for structured engagement with initiatives focused on enterprise value reporting,” the foundation announced. The first meeting of the working group is expected to take place in April with updates published on the foundation’s website. The move is the latest step by the trustees of the IFRS Foundation to establish a new board that would develop standards on environmental, social, and governance (ESG) matters alongside the IASB. The IASB is the accounting rulemaker that develops international financial reporting standards (IFRS) for more than 140 countries. Plans for the new board will take shape by November, according to recent discussions among the trustees.