Discussions to Overhaul Accounting Rules for Software Costs Continue

FASB has scheduled a meeting for March 20 to continue to draft a proposal aimed at modernizing and simplifying the accounting rules for software costs for all businesses. The changes could result in more transparent information in financial statements about software costs that can impact earnings. Next week’s meeting “will discuss the results of staff research and project direction,” according to a March 14 board alert. Deliberations are still in the early stages of overhauling rules that were developed in the 1980s, when software was prescriptive. Those accounting provisions don’t work well in today’s agile technological environment that is still rapidly changing, including the greater use of Artificial Intelligence (AI). A proposal could be issued for public comment later this year that would cover a full suite of provisions to address “recognition, measurement, presentation, and disclosure of costs to internally develop or acquire software.” The project is focused on software costs that a company incurs to purchase, internally develop, or modify software. These costs stem from the variety of ways software is used by businesses, including to support their operations; facilitate services to clients; sell to customers through on-premise license or cloud computing arrangements; and integrate into tangible products. The coming changes will therefore impact all companies, discussions to date have revealed.


 ‘Slightly Lower’ Priority Placed on New Projects, Keeping Two-Year Agenda Flexible

The International Sustainability Standards Board (ISSB) has given a “slightly lower” priority to issuing more standards over the next two years, agreeing instead to focus on the global implementation process of its two landmark sustainability disclosure rules. The board also wants to be flexible to quickly address emerging issues that could arise while it is supporting the adoption efforts of IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2, Climate-related Disclosures, according to the discussions. The standards took effect in January. ISSB staff have been precise in asserting the flexibility the board may need in the future because “we are not standards setting in a vacuum—where the space that we occupy is not where there is like 25 years of literature available,” Chair Emmanuel Faber observed. It is “literally developing as we deal with it ourselves and many others are developing at the same time,” he said. “And so I think it’s critical indeed that we have that flexibility although that strong sense of direction at the same time.” The “flexible” board will be able to quickly support the International Accounting Standards Board (IASB) on any of its projects or activities, the full board agreed. The work plan won’t specify “a level of focus for the core activities of interoperability, connectivity with the IASB and stakeholder engagement as all are fundamental to and incorporated in the work encompassed in the ISSB’s other activities.”

Tighter International Accounting Rules Proposed to Scrutinize Corporate Takeover Promises

Listed companies will have to give investors more detailed information on whether takeover deals live up to their initial promise to spare markets unexpected goodwill write-downs, proposed revisions to international accounting rules showed. The International Accounting Standards Board (IASB), whose standards are used in over 140 countries, said its proposals are out to public consultation and  would come into force around 2027. The proposed changes broaden an existing accounting rule on business combinations, namely IFRS 3, to bring a greater level of detail and comparability, IASB Chair Andreas Barckow told Reuters. “We want to put all companies that engage in acquisitions in the same spot, saying you have to provide a single note that lays out the rationale, why you’ve entered into this, how you’re going to assess the performance of that entity, which metrics do you use, and then as we progress year-after-year, compare your initial view to the effective results.”