Newly Issued FASB Accounting Rule Offers Simpler Way to Report Federal and State Tax Credit Investments

Accounting guidance that was specifically developed for reporting low-income housing tax credit (LIHTC) investments has been expanded to include more federal and state tax credit investment programs. FASB has published a narrowly drawn accounting standard that enables other tax credit programs beyond LIHTC investments to qualify for using the proportional amortization method, a simple model that allows the initial cost of the investment to be spread out in proportion to the tax credits and other tax benefits allocated to an investor. Prior to the change, only LIHTC investments could use the proportional method, requiring investments that earn income tax credits and other income tax benefit through other tax programs to instead use the equity method, which accountants say is complex and does not fairly represent the economic characteristics or profitability of such investments. The rule, which was issued as Accounting Standards update (ASU) 2023-02, Investments—Equity Method and Joint Ventures (Topic 323), Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, a Consensus of the Emerging Issues Task Force, responds to feedback FASB received that the change will provide “investors and other allocators of capital with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits,” the board said. The change comes at a time when more entities that are starting to make tax equity investments to meet environmental, social and governance (ESG)-related objectives and, for certain regulated entities, to meet their Community Reinvestment Act goals.

Staff Propose GAAP Taxonomy Updates on Accounting and Disclosure of Crypto Assets

Taxonomy users can now weigh in about proposed updates for accounting and disclosure of crypto assets in the U.S. GAAP Financial Reporting Taxonomy, according to a March 27 FASB alert. FASB staff added potential elements and other references to the taxonomy for “Proposed Accounting Standards Update—Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets,” and are seeking input about whether the updates would work effectively. Specifically, respondents should submit comments about whether or not they agree with the potential changes, according to the announcement. Those who disagree should explain why. If additional improvements should be made, respondents should also explain what those changes should be. The taxonomy enables companies to file financial statements electronically. It is a list of computer readable financial reporting labels coded in Extensible Business Reporting Language (XBRL) that is designed to make financial information easier to analyze. Comments should be submitted to xbrled@fasb.org by June 6, indicating Reference No. 2023-ED200.


Practice Aid on Crypto Accounting Updated

A working group of the AICPA that developed a practice aid related to crypto accounting and auditing has once again updated its response to a question about how entities should account for crypto lending and borrowing arrangements. The latest revision was made in February, and the AICPA issued the updated guide on March 23. The working group first published questions and answers to crypto lending and borrowing in January 2022 and has updated it a few times since. The guide was revised in January 2023 following a position taken by the SEC’s Office of the Chief Accountant (OCA) during a conference hosted by the AICPA in December 2022. The SEC staff’s views came amid a series of crypto implosions and scandals last year. Q&A 25 gives a simple example of a lender lending 100 units of crypto asset ABC for a term of six months to a borrower. The borrower will pay a fee in total of six units of ABC for borrowing ABC during the six-month loan period, paying one unit of ABC each month in arrears during the term. The working group notes that this is typically known as an interest payment. At the end of the six months, the borrower is required to deliver 100 units of ABC back to the lender.