Developing More Rules on Government Incentives Raises Tricky Questions
Government grants are often “in the eye of the beholder,” and therefore developing recognition and measurement accounting rules could prove to be challenging, FASB Chair Richard Jones said while speaking at a recent conference. “Is it that you received funds or assets or is it that you somehow had a reduced liability?” are two very different questions the topic raises, Jones said on December 7. “And that issue right there—and depending on how you want to scope government grants makes it a fairly quick project, or a very long project,” he said. “Because in general we’re good at accounting standards where you make journal entries, not accounting standards where you don’t and we want to force a journal entry in.” His remarks were in response to a question at the 2021 AICPA & CIMA Conference on Current SEC and PCAOB Developments about whether the board’s recently issued standard on government incentive disclosure rules would change were it to tackle the actual reporting rules next. Government incentives are typically thought of as tax and other abatements companies receive to establish a business in a locality. There is no explicit accounting standard in U.S. GAAP for reporting and measuring government incentives, and therefore some accountants have said this is an area the board should address.
Insurance Standard to Align Accounting Upon Adoption
The IASB has published a narrow amendment to its broad insurance accounting standard so that companies can avoid recording a mismatch when they adopt the provisions in two years. The standard tweaks IFRS 17, Insurance Contracts, so that companies can avoid initial classification differences that may arise in the comparative information that insurers present when they apply both IFRS 17 and IFRS 9, Financial Instruments. The significant temporary accounting mismatches that arise upon adoption of the standards can make the change in accounting more difficult to communicate to investors, the board has said. The issue stems from the fact that many insurers will first apply IFRS 9 and IFRS 17 at the same time on or after January 1, 2023. Under the change, insurers get an option for the presentation of comparative information about financial assets.
Four New Members Appointed to IASB Investor Advisory Panel
Four new members have been appointed to the Capital Markets Advisory Committee (CMAC), the panel that advises the IASB on investor perspectives, the IFRS Foundation announced on December 14. Joining the CMAC in 2022 are: Enitan Adebonojo, a senior forensic equity analyst and executive director at CFRA; Jacques de Greling, a director and telecoms team head at Scope Ratings; Kenneth Lee, an associate professorial lecturer at the London School of Economics and Political Science; and, Xiao Bo Ge, CEO and executive director at Guolian Securities, as well as chairman of Guolian International and director of Zhong Hai Fund Management. All of the appointments take effect from January 1, 2022, for three years with the option to renew each appointment for three additional years, according to the announcement. The CMAC is an independent advisory body established to provide the IASB with regular input from an international community of users of financial statements. The panel consists of members with extensive practical experience in analyzing financial information who are established commentators on accounting matters in their own right or through the representative bodies with which they are involved.