FASB News
Private Companies Misjudging Effort Needed to Adopt New Lease Accounting Rules
Some private companies have misjudged the amount of backwork that FASB’s new lease accounting guidance under ASC Topic 842, Leases, requires and could run into adoption issues this year. According to accounting professionals, private manufacturing and real estate companies that do not already have a central repository of leases defining their true lease inventory have still not begun the heavy lifting needed to adopt the rules, which take effect this year. “What we have seen is a lot of companies don’t truly understand the complexity and the level of involvement required for a successful adoption,” Jon Eilertsen, BDO, Accounting and Reporting Advisory Services partner, said on February 14. “Recently, we’ve seen a lot of decentralized companies who have a variety of lease types—whether it’s real estate leases, vehicles, copiers, printers, where they have complex leases that require a significant level of attention,” he said But “with the pandemic and all of the resulting changes in priorities and internal staffing bandwidth that have taken place, companies and their management teams have delayed their adoption steps.” A critical component of the standard addresses embedded leases that companies might not be aware that they carry, which under prior rules might not have mattered as much, Eilertsen said. The guidance, was issued in 2016 to require the full magnitude of long-term lease obligations to be reported on companies’ balance sheets for the first time. The rules took effect in 2019 for public companies; they take effect this year for private companies after having been deferred twice.
IASB News
Composition of Accounting Standards Advisory Forum Changed
The IFRS Foundation announced changes to the composition of the Accounting Standards Advisory Forum (ASAF), a technical advisory body to the IASB. Changes were made in Europe to replace the Financial Reporting Council, and Organismo Italiano di Contabilità, with the UK Endorsement Board and the Accounting Standards Board of Germany. The ASAF’s new composition will last for three years, from 2022 to 2024, the trustee organization said. The objective of the ASAF is to “provide an advisory forum where members can constructively contribute towards the achievement of the IASB’s goal of developing globally accepted high-quality accounting standards,” according to a board summary. ASAF comprises 12 non-voting members, represented by designated individuals, and is chaired by either the chair or vice-chair of the IASB. In order to ensure a broad geographical representation and balance of the major economic regions in the world, the 12 members are from the following geographical regions: one from Africa; three from the Americas; three from Asia-Oceania; three from Europe (including non-EU); and two at-large members appointed from any area of the world, subject to maintaining an overall geographical balance.
The new ASAF board composition comprises the following organizations:
- Africa: Pan African Federation of Accountants;
- Asia-Oceania (including one at large): Asian-Oceanian Standard-Setters Group; Accounting Standards Board of Japan; Accounting Regulatory Department, Ministry of Finance PRC; and Korea Accounting Standards Board;
- Europe (including one at-large): European Financial Reporting Advisory Group; Autorité des Normes Comptables; UK Endorsement Board; Accounting Standards Committee of Germany;
- Americas: Group of Latin American Accounting Standard Setters; Canadian Accounting Standards Board; U.S. Financial Accounting Standards Board (FASB)
GASB News
Accounting Rules for Digital Assets Monitored for Cities, States
GASB has started early monitoring efforts on the accounting for digital assets for state and local governments and could tap into FASB’s research efforts on the topic, chair Joel Black told board trustees. The board would likely address digital assets if there are sufficiently prominent issues emerging in the governmental arena, Black said at the February 15 Financial Accounting Foundation (FAF) meeting. The topic surfaced on GASB’s radar because the board has been getting steady questions on how digital assets should be reported in certain fact patterns. “Questions we’re getting are—an estate which might have unclaimed properly and they have this digital asset, what do they do with it,” he said. “Or they have a confiscated asset that’s being held by a court for some period of time, what do they do with that? How do they value it? How do they account for it?” GASB develops GAAP for state and local governments throughout the United States.
