FASB News
GAAP Codification Improvements to be Deliberated
FASB is set to convene on September 18 to deliberate on improvements to the U Accounting Standards Codification, as well as hold meetings with industry groups to discuss matters of mutual interest. At the FASB meeting, members will scrutinize issues to be included in the next Codification Improvements update, according to a board announcement. The board will also weigh transition issues, cost-benefit considerations, comment period, and whether to proceed to drafting a proposal. The codification improvements project, which started in 2010, aims to make ongoing but minor changes to clarify or correct unintended consequences in the codification that don’t have a significant impact on current accounting practice. Several updates have been issued under this project, in 2012, 2014, 2015, 2016, 2017, 2018, and 2020. The objective is to eliminate the need for periodic agenda requests and allow for continuous updates and improvements to the codification, the body of U.S. Generally Accepted Accounting Principles (GAAP). The meeting comes on the heels of a liaison meeting with the Institute of Management Accountants (IMA) on September 16, where FASB members will meet with the IMA’s Financial Reporting Committee (FRC) to discuss “matters of mutual interest.”
Lease Accounting Rules Get a Mixed Grade from Nonprofits
Nonprofits have given mixed reviews to FASB’s lease accounting rules, which have been in effect for some time, with transparency benefits cited by some and limited improvement seen by others. The rules, which require companies to recognize operating leases on their balance sheets, are designed to give investors a more comprehensive view of a company’s financial health. But FASB’s Not-for-Profit Advisory Committee (NAC) discussions on September 10 revealed that the provisions don’t necessarily provide better information about nonprofits. “It’s not an improvement per se in terms of the balance sheet presentation, it’s just different and we’ve adjusted to it,” said Andrea Kantor, managing director, not-for-profit at Webster Bank. Kantor also noted that organizations may be “missing an opportunity” in utilizing the information provided by the new rules. Conversely, Robert Dobbins, Managing Director at S&P Global Ratings, views the FASB rules as a positive development. “I think we’ve always viewed operating leases more as debt-like anyway, and so in bringing these previous operating leases to the balance sheet, it sort of brings alignment to our analytical view and treatment,” he said.
IASB News
Companies Lagging on Industry-Based ESG Disclosures Risk Being Left Behind
Investors are increasingly demanding robust and comparable environmental, social, and governance (ESG) information to make informed decisions, and companies that fail to adopt industry-based sustainability disclosures risk being left behind, according to a panel of experts on a recent International Sustainability Standards Board (ISSB) webinar. “Robust ESG information is critical for identifying long-term industry winners and losers,” said Jessica Ground, Global Head of ESG at Capital Group. “SASB standards provide material information that supports better decision-making, and their adoption is crucial for achieving global comparability, which is essential for global investors.” The panel, which included Ground, Katharina Bryan of Amazon, Mark Vaessen of KPMG, and ISSB member Verity Chegar, emphasized the benefits of adopting industry-specific standards, such as the Sustainability Accounting Standards Board (SASB) standards. SASB standards comprise 77 industry-specific standalone disclosure standards, aiding in identifying sustainability factors relevant to financial performance. Over 3,700 companies from more than 80 jurisdictions report using SASB standards. By adopting industry-based disclosures, companies can provide more targeted and relevant information, reducing the burden and cost of reporting, panelists said. Investors, in turn, benefit from comparable and material information, enabling them to make more informed decisions. “Sector standards really help that comparability, but not at the expense of relevance,” said Mark Vaessen, KPMG’s Global Head of Corporate and Sustainability Reporting. Vaessen also noted that moving from voluntary to mandatory standards increases focus on disclosure quality and helps avoid greenwashing by ensuring completeness.
