Staff Propose Updates to U.S. GAAP Taxonomy on Profits Interest Awards
FASB staff members are seeking public input on introducing recently proposed guidance for profits interest awards into the U.S. GAAP taxonomy, the board announced on May 11. The taxonomy is a list of computer-readable tags in Extensible Business Reporting Language (XBRL) that allows companies to label the financial data in financial statements so that they can be filed electronically. Staff members are seeking input about the operability of new elements and labels for tagging proposed Accounting Standards Update (ASU) 2023-ED300, Stock Compensation (Topic 178): Scope Application of Profits Interest Awards. The profits interest proposal was issued by FASB on May 11 to provide an example illustrating how to account for profits interest awards—a form of compensation to employees in return for goods or services. The proposal aims to reduce reported complexity and eliminate accounting differences across businesses by clarifying whether profits interest and similar awards should be accounted for as a share-based payment arrangement within the scope of Topic 718, “Compensation—Stock Compensation.” Improvements to the taxonomy result from ASUs and other GAAP Taxonomy improvement projects. These improvements are included in the Development Taxonomy after completing appropriate due process steps and when they are effective (or early adoption is permitted) for the next annual update. Comments should be submitted by July 10 to firstname.lastname@example.org.
Morrow Reappointed to Third Term to Head FASAC
Michael Morrow was reappointed as chair of the Financial Accounting Standards Advisory Council (FASAC) to serve for a third term, the Financial Accounting Foundation (FAF) board of trustees announced on May 11. Morrow will start his third two-year term on Jan. 1, 2024, and will be eligible to be considered for reappointment in 2026, the FAF stated. He was appointed to the FASAC in January 2019 and has served as chair since 2020. The 35-member FASAC advises the Financial Accounting Standards Board (FASB) on strategic and technical issues, project priorities, and other matters that affect the development of U.S. Generally Accepted Accounting Principles (GAAP). The panel meets four times annually with the board. “Mike has brought a unique vantage point to the FASAC over the past five years,” FAF Chair Edward Bernard said. “He is well respected among his peers and brings to this role diverse insights based on his broad experience advising companies involved with manufacturing, technology, financial services, and consumer products.” Currently, Morrow serves as the audit committee chairman of Cabot Corporation, a Fortune 1000 global chemical company, where he has served on the board of directors since 2017. A CPA, he worked for PricewaterhouseCoopers for nearly 40 years and held numerous leadership and governance positions within the firm. He advised a wide range of clients, including many Fortune 100 companies across several sectors, as well as private companies and nonprofit organizations.
Project on Audit Quality Indicators Moves to Standards-Setting Agenda
The PCAOB will consider issuing a proposal on key audit quality indicators (AQI) in the coming months of this year, according to the staff’s latest update to the standards-setting and research agendas, published on May 16. It fulfills the current board’s goal of not having its research projects on the agenda for more than a year. And the AQI project—renamed Firm and Engagement Performance Metrics—was revived in the fall of 2022 after some members in the Investor Advisory Group asked the PCAOB leadership to complete the project. It was started about a decade ago under different board members. After the staff had studied it, the PCAOB issued a preliminary rulemaking document in 2015 but set it aside because of strong resistance from auditors. “The PCAOB is pursuing one of the most ambitious standard-setting agendas in its history, and the updates reflect the solid progress that we are making to carry out that agenda,” said PCAOB Chair Erica Williams in a statement. She became chair in January 2022, and since then the PCAOB has been working on many projects in a shorter-time frame than most of her predecessors.