General ESG Matters Won’t be Added to Core Mission
At a recent trustee meeting, FASB Chair Richard Jones signaled that the board does not plan to add sustainability matters to its core financial reporting mission, but will stay abreast of developments on that front. “As the trustees know, we have a very close working relationship with the IASB, focused on financial accounting reporting, and that’s our mission and that’s what we’re focused on,” Jones said at the November 16 Financial Accounting Foundation (FAF) quarterly meeting. “That being said, we certainly will watch the international developments carefully.” His remarks were in response to a question posed by FAF trustee Timothy Christen about how the FASB viewed its role in terms of working with the new International Sustainability Standards Board (ISSB), the body established in early November by IFRS Foundation trustees. The IFRS Foundation also holds oversight responsibility for the IASB, the board that develops IFRS standards.
Staff Proposes Taxonomy Updates on Troubled Debt Accounting Rules, Disclosures
On November 23, FASB proposed to update the U.S. GAAP Financial Reporting Taxonomy so that it includes pending revisions to accounting for troubled debt restructuring (TDR) and vintage disclosure requirements. Specifically, the proposal would update the taxonomy to include proposed Accounting Standards Update (ASU) 2021-006, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which was issued by FASB last week. ASU 2021-006 proposes to remove TDR accounting rules from the current expected credit loss (CECL) standard for lenders that have already adopted the provisions. The board also proposed to clarify vintage disclosure rules—the presentation of financing receivable information by year of origination. Those submitting comments on the proposed taxonomy updates should address whether they agree with the taxonomy changes, and if not, the reason for the dissent, according to release notes text. Respondents should also opine on whether additional taxonomy improvements are needed and explain what should be added. Comments are due by December 23.
Proposal Aims to Fill Gaps in Disclosures for Supplier Finance Arrangements
The IASB has issued a proposal to add teeth to disclosure rules for supplier finance arrangements, a popular collaborative funding method that investors say lacks transparency. The use of supply chain finance has increased, as companies view it as a way to optimize working capital and recover from the effects of the pandemic. The proposal would require companies to disclose information that would enable investors to assess the effects of the company’s supplier finance arrangements on its liabilities and cash flows. Today, the disclosures have gaps that make it hard for analysts to understand the information companies provide, thereby rendering it less useful. And with the growth in usage of such arrangements some investors fear that a company’s financial health can deteriorate rapidly if these arrangements are withdrawn. “Investors require more detailed disclosures about companies’ supply chain finance arrangements as these funding practices are becoming increasingly common,” IASB Chair Andreas Barckow said in a statement. “The proposed requirements are designed to give investors the information they need to assess the effects of such finance arrangements on a company’s liabilities and cash flows.”