FASB News
Advisors offer tepid approval on board developing rules for government grants.
FASB’s main advisory body said the board should advance its efforts to address the reporting on government grants for businesses, but this endorsement was lukewarm. An accounting standard would be useful, as U.S. GAAP does not specify how to recognize, measure, and present grants received from a government—but the topic is not that pressing, according to discussions by the Financial Accounting Standards Advisory Council (FASAC), a panel of 35 senior executives from various business demographics. “It’s not material to a lot of companies. So we just undertook a lot of work to gather what that was because it happens everywhere but little itty bitty amounts,” said Lara Long, vice president, chief accounting officer at AGCO Corp. The discussion comes as FASB added a project to its research agenda in 2021 on government grants, a follow-on to disclosure rules it issued on the topic after years of effort.
Investors await disclosure rules on income taxes paid.
FASB Chair Richard Jones reassured advisers that a proposal the board plans to issue next year on income taxes paid would enable investors to understand more about a company’s global tax position. “For a U.S. company, to the extent that there’s a material driver of their overall tax rate below the U.S. statutory rate, that will be illustrated on a jurisdiction-by-jurisdiction basis,” he said at the Dec. 6 Financial Accounting Standards Advisory Council (FASAC) meeting. “And so what we’ve chosen to do is to use the effective rate reconciliation to highlight those jurisdictions that increase and or decrease the effective rate, versus the statutory rate,” he said. His remarks were in response to a FASAC member’s observations that questioned whether the proposal would go far enough for investors. Cash taxes that companies pay represents a blind spot for investors, lacking transparency into how worldwide operations affect a company’s tax rate, as well as the legislative risks and opportunities. Today, investors rely on current disclosures of the rate reconciliation table, as well as total income taxes paid in a cash flows statement to evaluate a company’s risks or opportunities.
IASB News
Keeping accounting rules converged is beneficial to global capital markets.
Convergence with U.S. accounting standards is “still an important consideration” for the IASB although formalized talks have concluded, Chair Andreas Barckow told an industry conference in Washington, D.C. Over the years, the IASB’s focus has shifted from jointly developing solutions to keeping international financial reporting standards (IFRS) converged with U.S. GAAP, he said on Dec. 12 at the 2022 AICPA & CIMA Conference on Current SEC and PCAOB Developments. “We achieve that by bringing the two boards together for education and information-sharing sessions, by talking regularly to our colleagues at FASB at all levels, and by alerting each other of new information and developments arising,” he said in a speech. “I hope that you all agree with me in seeing the great benefit this brings to global capital markets.” Barckow cited accounting standards on business combinations, consolidations, fair value measurement, leases, revenue recognition, and segment reporting, as a few important areas where the standards are globally converged—but he pointed to financial instruments and insurance contracts as areas where they were not able to achieve full compatibility. The issue of convergence is one that consistently is broached at accounting conferences, and one that is of interest to multinational companies that use both IFRS and U.S. GAAP.
Audit Practice News
Remote auditing continues to be hot topic.
Almost three years into the remote auditing of financial statements, accounting firms are still learning about the best way to provide audit that involves both in-person and remote work. Shortly after the U.S. professional workforce went remote in 2020 due to COVID-19, audit firms quickly shifted to remote auditing—with zoom and drones. Such remote work was a buzzy topic at the time, but it “definitely continues to be a hot topic” today, said Sara Lord, chair of the AICPA’s Auditing Standards Board, which sets the auditing standards used by auditors of private companies. Lord, chief auditor of RSM US LLP, made her remarks at the 17th Annual Audit Conference hosted by the Baruch College Zicklin School of Business in New York on Nov. 29. Remote auditing has been “not harder than I expected it to be, as I feel like we’ve gotten through the pandemic, [which] required remote working for masses of people,” Lord said. “And I think what we found is that there’s a lot that can benefit from doing remotely: we can work together collaboratively. I don’t know if there’s very many people in this room who are going to their office every single day and having meetings. We’ve learned how to do a hybrid environment for that.”
