2023 Financial Reporting Taxonomies Finalized
The SEC has accepted the 2023 U.S. GAAP Financial Reporting Taxonomy (GRT) and the 2023 SEC Reporting Taxonomy (SRT), FASB announced on March 21. The 2023 DQC Rules Taxonomy (DQCRT) was also finalized, the board also said. The taxonomy is a list of computer-readable tags in Extensible Business Reporting Language (XBRL) that allows companies to precisely label financial data in financial statements and related footnote disclosures. This in turn enables investors to easily access and analyze the reports. Under the 2023 GAAP Taxonomy, new elements have been included for accounting standard updates such as: derivatives and hedging–portfolio layer method; troubled debt restructuring and vintage disclosures; fair value measurement of equity securities subject to contractual sale restrictions; and disclosure of supplier finance program obligations. It also includes updates previously finalized in the 2022 Q3 Supplemental GAAP Taxonomy for an SEC release related to business development companies that submit financial statement information using Inline XBRL. Similarly, the 2023 SRT includes 24 new elements for which the underlying recognition and measurement are not specified by GAAP but are used by GAAP filers. Most of the new elements are for Staff Accounting Bulletin (SAB) 121 on obligations to safeguard crypto assets. Modified documentation labels and modified references are also included.
Veteran Prosecutor Appointed as Enforcement Director
The PCAOB named Robert Rice as director of the Division of Enforcement and Investigations effective March 31. He has more than 30 years of experience in litigation and investigations. Rice most recently served as special counsel in the United States Attorney’s Office for the District of New Jersey. He also served as chief counsel to then-SEC Chair Mary Jo White. Rice will be joining the PCAOB at a time when it has significantly increased efforts to enforce rule violations. “The PCAOB is using every tool in our enforcement toolbox to ensure there are consequences for putting investors at risk and bad actors are removed. Bob’s decades of experience holding wrongdoers accountable will be invaluable to our continued efforts to keep investors protected,” said Chair Erica Williams in a statement. Acting Enforcement Director Mark Adler will retire once again from the PCAOB. He originally retired in March 2020 but came back to head up the division on a temporary basis when previous Enforcement Director Patrick Bryan left in September 2022. Bryan was hired as chief of the division when William Duhnke was PCAOB chairman. “Mark’s contributions to the PCAOB and to investors have been extraordinary, and we offer him gratitude and best wishes for his next chapter,” Williams said.
Board Exploring How Climate Risk Should be Reflected in General Purpose Financial Statements
The International Accounting Standards Board (IASB) said it would explore how general-purpose financial statements can better communicate information about climate-related risks, efforts that differ from the disclosure rules the International Sustainability Standards Board (ISSB) has developed. The IASB’s project will be narrowly scoped and research should get to the root issues, which are not yet clear, according to the IASB’s March 20 discussions. “You’ve laid out some of the symptoms that’s been brought to our attention but those are just symptoms, those are not the root issues, IASB member Robert Uhl said. “The inconsistencies that might be there, the insufficient disclosures that might be there—well they might not be there too,” he said. “I mean it might be materiality, it might be different facts and circumstances, it might be an enforcement issue, application issue, it also might be something that’s missing in the standards, so I think in order for us to be disciplined on this project and to keep it narrow I think identifying those root issues is going to be key.” The climate-risk topic landed on the IASB’s radar due to feedback from its Third Agenda Consultation, according to a staff paper. This feedback indicated that there may be: 1) inconsistent application of IFRS accounting standards to climate-related risks; and 2) insufficient information disclosed about climate-related risks in the financial statements. Requests from users of financial statements on this topic came to the IASB prior to the November 2021 establishment of the ISSB, which plans to issue S2, Climate-related Disclosures, by June this year. The IASB expects its work will deal with issues that are outside of the scope of ISSB’s S2 disclosure rules, the discussions revealed.