New Segment Accounting Rules Have Big Implications for Non-GAAP Measures

CPAs are thinking about FASB’s new segment reporting rules that take effect this year, mindful of the implications the rules hold for using non-GAAP measures when reporting on earnings. A non-GAAP measure is an accounting term that refers to a number that is not calculated in accordance with how Generally Accepted Accounting Principles (GAAP) say they are to be reported. Although these measures may provide more information to investors, if not calculated in accordance with GAAP, they will be subject to SEC rules and external audit—a notable development. The FASB standard requires public companies to disclose at least one measure of segment profit or loss that is most consistent with the consolidated financial statement or GAAP. The standard also allows public companies to disclose more than one measure of segment profit or loss such as a non-GAAP measure if it is used by the chief operating decision-maker (CODM). An example is: if management uses gross profit, as well as Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) as the measures of segment profit or loss. Non-GAAP measures are popular with CFOs because they enable them to provide a more complete picture of their business operations. Critics have said that such measures encourage companies to paint a rosier picture of their financial performance than the standard rules developed by FASB.


ISSB Publishes Educational Material on Applying SASB Standards to New Sustainability Rules

The International Sustainability Standards Board (ISSB) on February 19, 2024, published educational material on how to consider industry-specific SASB standards when applying general sustainability disclosure rules that took effect last month. Currently, SASB standards are used by over 3,000 companies and investors in over 80 jurisdictions around the globe. The board “heard that industry specificity is important for sustainability disclosures,” ISSB member Elizabeth Seeger told a board webcast. “Some of the key reasons are sustainability-related risks and opportunities vary greatly by industry; and investors generally analyze companies and portfolios through an industry lens,” she said. “Focusing on industry-specific topics and metrics is also more likely to yield more comparable information which is critical for investors’ decision-making.” The educational material maps how SASB standards fit into S1, General Requirements for Disclosure of Sustainability-related Financial Information, which took effect on January 1. It includes questions to ask when identifying metrics and developing disclosures. SASB standards are organized by industry, enabling a company to identify sustainability-related disclosure topics and metrics applicable to its business model and operations. Each SASB standard contains, on average, six disclosure topics and 13 metrics.

New Appointments Seated on IFRS Advisory Council

The IFRS Foundation has announced the appointment and reappointment of 15 members to the IFRS Advisory Council, including two new organizations and their representatives. The new appointments are: Alta Prinsloo, chief executive officer of the Pan African Federation of Accountants (PAFA); and Bangsil Lee, vice president, head of ESG strategy at SK hynix Inc. The other 13 members are reappointments and newly appointed members of previously appointed organizations. All of the appointments are for three years starting on January 1, 2024, according to the announcement. The advisory council is a core body that provides strategic advice to the IFRS Foundation Trustees, the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB). Members include investors, financial analysts and other users of financial statements, as well as preparers, academics, auditors, regulators, professional accounting bodies, and standard-setters. Fifty-one organizations from across the world are represented on the advisory council, with 57 individual members. Three additional organizations are official observers.