FASB News

Narrow Proposal on Accounting for Software Costs Issued

FASB has unanimously voted to issue a proposal aimed at modernizing accounting for software costs in targeted areas, seeking to provide more transparency in financial reporting. The proposal will clarify capitalization of certain types of software costs, aiming to reduce unnecessary complexity and costs for financial statement preparers. Companies will have the flexibility to implement the new guidance in a way that suits them best, with the proposal requiring prospective application with a retrospective option. This means that companies can choose to apply the new guidance to all software costs incurred after the effective date or opt for a retrospective approach. The board plans to release the proposal later this year with a 90-day comment period. “This project has been a bit of a journey,” FASB member Susan Cosper said, addressing the process toward getting to a targeted proposal. “I think sometimes you have to go down that journey to understand what truly is important in terms of change,” she said. “I do think that what we learned from our outreach efforts about the level of capitalization was key to that discussion.”

IASB News

Revised Management Commentary Rules Will Boost Corporate Transparency

The International Accounting Standards Board (IASB) has taken a major step towards enhancing corporate transparency, unanimously approving a revised framework for management commentary that will provide investors with a clearer picture of a company’s ability to create value and generate cash flows. The revised framework will be issued in the first half of 2025, according to June 19 discussions. “The timing is really good for what is happening around us with people doing more reporting of sustainability or other sorts of reporting,” board member Ann Tarca said. The decision responds to growing demands from the board’s stakeholders for more comprehensive information on the factors that affect a company’s long-term performance. Management commentary, also known as management’s discussion and analysis (MD&A), is a section of a company’s annual report or other periodic financial report that provides an overview of the company’s financial performance and position. It is a narrative section that complements the financial statements and provides context, analysis, and insights into the company’s results, trends, and future prospects. While IFRS standards don’t require companies to prepare a management commentary, many securities regulators do, and the revised framework would provide a valuable resource for both regulators and companies, IASB members said.

Call for Research Papers on Accounting Standards

The IASB said it is seeking research papers to inform its efforts to improve accounting rules. The IASB, which sets accounting standards for more than 140 countries, is calling for academic research papers to present at its 2025 Research Forum, to be held in conjunction with Accounting Horizons and Paderborn University in Germany on November 6–7, 2025. The board is seeking papers on three key areas: its current projects, the costs and benefits of using IFRS, and the impact of changes in the financial reporting environment. Researchers are invited to submit papers on topics such as cash flows and related matters, intangible assets, and emerging issues relevant to the IASB, the board announced. The IASB is also seeking evidence on the costs and benefits of using IFRS, including their impact on transparency and comparability of financial information. The IASB is particularly interested in research on the impact of changes in the financial reporting environment, including the effects of new standards, increased disclosure requirements, and the use of new technologies, according to the announcement. Submissions should be made through the Accounting Horizons website by March 31, 2025.