Advisers Want Balanced Financial Performance Reporting Project
A FASB project to require more details about a company’s financial performance in the income statement requires careful balance so investor needs do not overwhelm the accountants who have to prepare the information, board advisers said. The topic—disaggregation of financial performance information—was flagged by investors as one that should be a top priority on its technical agenda next year. But financial statement preparers are hesitant. “Keep in mind the potential impact on smaller reporting companies and companies who are public companies but required to provide this information—companies where the definition of materiality can vary pretty widely,” said Jessica Doran, chief financial officer of Pzena Investment Management and a member of the Small Business Advisory Committee (SBAC). “As the board considers the scope of this information, especially cash flows, keep in mind the range of companies this would impact and the potential work involved and think about that compared with the value that I do think it can provide to investors—so a little bit of a balance,” said Doran.
Private Companies Need Lease Accounting Webinar to Help Adoption Efforts
FASB should hold a webcast next year to review its lease accounting standard for private companies that are struggling to adopt the guidance, the Private Company Council (PCC) said. As was done when Topic 606, Revenue from Contracts with Customers, had to be adopted, the board should hold one last webcast to provide a review of the leases rules, said Jeremy Dillard, partner with SingerLewak LLP, and PCC Chair Candace Wright during December 17 discussions. Accounting Standards Update (ASU) 2016-02, Leases, was issued in 2016 to require the full magnitude of long-term lease obligations to be recorded on balance sheets, a historic first in U.S. financial reporting. It takes effect in 2022 for private companies. Public companies had to adopt the changes in 2019. “A lot of the private companies are going to adopt this in their year-end December 31, 2022 financials,” Dillard said. “Maybe we can do a final webcast sometime in ’22 to help them wrap their hands around this thing so it’s as simple as it can be for them.” The PCC is the body that works with the FASB to develop accounting modifications and exceptions for private companies in the United States.
IASB Seeking Research Papers on Intangible Assets
On December 13, the IASB, in partnership with two European journals, issued a call for research papers on the accounting for intangible assets, the theme of its 2023 Research Forum. The board, Accounting in Europe, and European Accounting Review, are holding the joint forum to “stimulate interaction between academics and non-academics, including standard-setters, investors, regulators, auditors and preparers of financial statements.” The papers will help inform the standards-setting activities of the IASB, which is considering a project on the topic. The 2023 IASB Research Forum is scheduled to take place in early November 2023. Authors of selected papers will be invited to present their work, the board said. Submissions must be made by March 31, and papers will be selected by June 30. Especially of interest to the board are intangible assets on the following topics:
- Recognition and measurement internally generated assets: internally generated versus intangible assets acquired in business combinations, new types of intangible assets (such as cryptocurrencies, emission rights, cloud computing);
- Disclosure in financial statements: internally generated and unrecognized assets, research and development expenditures;
- Other information sources: management commentary, sustainability reporting;
- Related projects: pollutant pricing mechanisms, cryptocurrencies.