FASB News
Proposed Disclosure Rules on Income Taxes to be Finalized
FASB has unanimously voted to finalize the proposed disclosure rules on income taxes, touting the benefits for investors in understanding the changes in tax legislation and global tax risk of businesses. After more than three hours covering dozens of issues, the board affirmed the most significant aspects of Proposed Accounting Standards Update (ASU) 2023-ED100, “Income Taxes (Topic 740) Improvements to Income Tax Disclosures,” which was issued last year to improve disclosure rules around the rate reconciliation table and cash taxes that companies pay in both the United States and foreign jurisdictions. Public companies will be required to report under the new guidance for the fiscal years beginning after December 15, 2024—in other words, starting in 2025 for a calendar-year public company. Interim reporting will be required for the following fiscal years—that is, starting from the first quarter of 2026. The standard takes effect one year later for privately held companies. But both public and private companies will have the option to adopt the guidance early. In general, board members expressed satisfaction with passing the rules, stressing that the changes are important to those who make investments in the U.S. capital marketplace. “We’re read all the comment letters,” FASB Chair Richard Jones said. “We went through those trying to make sure we had something operational and then we were focused on providing that most relevant information to those allocators of capital while being mindful of the cost that is borne to provide that information and I think we have the right balance here.”
Public Roundtable on Revenue Recognition Standard to be Held in November
FASB will hold a public roundtable in November on the accounting standard for recognizing revenues earned from customers, FASB Technical Director Hillary Salo recently told the board’s trustees. The board is in the process of finalizing plans for the roundtable which is aimed at getting feedback “from a broad range of stakeholders on our revenue recognition guidance,” Salo said at the August 21, 2023, Financial Accounting Foundation Standard-Setting Oversight Committee meeting, which was livestreamed. “We’re continuing to work through our process; we’ve actually completed our relevant academic research,” she said. The roundtable is specific to Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), and comes as the board has been conducting a post-implementation review (PIR) of the standard, which was published in 2014. A PIR is FASB’s process to determine whether a major new standard is working as intended. The standard replaced hundreds of pieces of industry-specific guidance with a principle–based five step model for reporting revenues earned from customers. The rules were developed jointly with the IASB to provide users of financial statements with better information about the nature, amount, timing, and uncertainty of revenue—one of the most important measures used by investors when assessing a company’s performance and prospects.
PCAOB News
Oxford Professor Hired as Chief Economist
Oxford University Professor Martin Schmalz was named PCAOB chief economist and head of the Office of Economic and Risk Analysis (OERA), the board announced on August 28. The announcement comes more than a year after the PCAOB’s last chief economist, Nayantara Hensel, left in July 2022. Michael Gurbutt, who served as OERA acting director, will resume his role as the office’s deputy director of economic analysis and operations. “Dr. Schmalz brings extraordinary expertise to the PCAOB’s work to deliver strong economic and risk analysis that informs our work to protect investors. We are thrilled to have Dr. Schmalz on board, and grateful he will have the knowledge and experience of Mike Gurbutt at his side,” said PCAOB Chair Erica Williams in a statement. “Mike’s steady leadership has been essential to OERA during this transition, and we thank Mike for his continued dedication to the mission of protecting investors.” At Oxford, Schmalz was a professor of finance and economics at Saïd Business School, serving as the Academic Area Head for the Finance, Accounting, Managerial Science and Economics faculty group. Previously, he was an assistant professor of finance at the University of Michigan’s Stephen M. Ross School of Business. “I am delighted to join the talented team in the Office of Economic and Risk Analysis alongside Mr. Gurbutt as we work to help the PCAOB protect investors,” Schmalz said in a statement.
