Advisers Taking ‘Wait and See’ Posture on Joint Venture Project
FASB’s private company advisers will wait until the board completes its proposal on joint ventures before giving input on the topic, according to recent discussions. In coming months, the board plans to propose that a joint venture would adopt a new basis of accounting upon formation—the equivalent to identifying a newly formed joint venture as the acquirer. The joint venture would recognize and initially measure its assets and liabilities at fair value, consistent with the guidance in ASC Topic 805, Business Combinations. Joint ventures are typically business arrangements whereby two or more parties pool their resources. They are popular among pharmaceutical companies, many of which utilize them to develop and market certain types of products, conduct research, and perform clinical trials. Companies that enter into joint venture agreements can share risks and rewards in developing a new market, product, or technology, to combine complementary technology knowledge or to pool resources in developing production or other facilities. “It’s important for us to stay on top of this as the board moves down the road to potentially issue the [exposure draft]—that we’ll be able to discuss and provide comment at that point,” Private Company Council (PCC) Chair Candace Wright said during a December 17 meeting. FASB is close to issuing a proposal, but it wants to vet its decisions to date with external reviewers first, according to a FASB staff analysis during the meeting.
New FASB Scholar Award Launched to Generate Interest in Accounting Research
FASB said it established the Emerging Scholar Awards, a new program to generate academic research that will inform the board on its rulemaking efforts. The winner was Derek Christensen, a doctoral student at the University of Wisconsin–Madison, the board announced on December 14. His dissertation will consist of three papers that directly address important issues related to lease accounting standards. Academic research helps FASB assess the significance and pervasiveness of a perceived problem in U.S. GAAP and identify and assess potential feasible solutions, according to a board summary of its efforts. ASC Topic 842, Leases, is currently under the FASB’s post-implementation review (PIR), its process to determine whether a new standard is working as intended. The standard took effect in 2019 for public companies, but it takes effect in 2022 for private companies. “Insights provided through high-quality academic research like yours are a critical input to the standard-setting process,” FASB Chair Richard Jones said in a congratulatory statement to Christensen. “On behalf of all the members of our Board, I’d also like to commend each of the 2021 nominees. Your work is of great importance to our process and we wish you much continued success.” The FASB Emerging Scholar Award program was initiated by FASB member Christine Botosan in 2021.
Advisers to Weigh in on Post-Implementation Reviews
On January 11, the IFRS Advisory Council will provide the IASB with input on how to approach outcomes of the post-implementation reviews (PIR) it is conducting on various standards, according to meeting papers. The IASB plans to conduct PIRs of International Financial Reporting Standard (IFRS) 9, Financial Instruments, IFRS 15, Revenue from Contracts with Customers, and IFRS 16, Leases. A PIR is an process used by the IASB to assess the effect of a new accounting standard on investors, preparers, auditors, and regulators and to determine whether it worked as the board intended. PIRs are done in phases. Phase 1 deals with the initial identification and assessment of matters for the IASB to examine, drawing on discussions with advisory groups and other interested parties. The board also issues a Request for Information (RFI) to seek information on matters identified and any other information relevant to the PIR. Under Phase 2, the IASB considers comments from the RFI along with information from additional analysis and other consultative activities to determine whether to take action, and when. The board has already started Phase 1 of the PIR process for the classification and measurement rules under IFRS 9. The standard specifies how a company should classify and measure financial assets, financial liabilities, and some contracts to buy or sell non-financial items.