FASB News
FASB Seeks Input on Standardizing Non-GAAP Financial Measures
FASB is taking aim at the confusing array of non-GAAP financial measures that companies use to report their performance, seeking to bring order to a system that has long frustrated investors and analysts. In a move to improve transparency and comparability across companies, the board issued an Invitation-to-Comment (ITC) 2024-ITC100, “Financial Key Performance Indicators for Business Entities,” as part of research efforts to standardize certain non-GAAP financial metrics commonly reported in earnings releases. The board is seeking input on how to define and report financial key performance indicators (KPI), which are based on financial results but do not follow Generally Accepted Accounting Principles (GAAP) financial statements. The lack of consistency in non-GAAP measures has long been a thorn in the side of investors, who struggle to compare performance across different companies. Unlike GAAP measures, which are governed by strict accounting rules, non-GAAP measures can be defined and reported differently by each company, making it difficult for investors to get a clear picture of a company’s financial health. FASB’s ITC is a significant step towards addressing this issue and could have far-reaching implications for the way companies report their financial performance. By standardizing non-GAAP financial metrics, companies would be required to provide more consistent and comparable information, making it easier for investors to make informed decisions. The ITC is open for feedback until April 30, 2025.
IASB News
New Guide Aims to Simplify Sustainability Reporting for Companies
The International Sustainability Standards Board (ISSB) has released a comprehensive guide to help businesses navigate its sustainability disclosure standards, aiming to simplify the process of reporting on environmental, social, and governance (ESG) metrics. The guide explains how to identify and disclose material information about sustainability-related risks and opportunities that could impact a company’s financial prospects. Specially, the document shows how to apply the ISSB’s IFRS S1 and IFRS S2 provisions, which focus on sustainability-related financial information and climate-related disclosures. The guide uses hypothetical scenarios and examples to illustrate how companies can apply the requirements, emphasizing the importance of connectivity and interoperability with other standards and addressing the interaction with local laws and regulations. The guide is broken down into three main chapters: Definition of Material Information, Sustainability-related Risks and Opportunities, and Identifying and Disclosing Material Information. The guide stresses the importance of aligning with other standards, such as the European Sustainability Reporting Standards (ESRS) and Global Reporting Initiative (GRI) Standards, to ensure comprehensive and consistent sustainability reporting.
PCAOB News
PCAOB Issues First Edition in Series of ‘Audit Focus’ Guides for Auditors of Smaller Companies
The PCAOB has published the first edition in a series of staff guides for auditors of smaller public companies. The inaugural guide is “Audit Focus: Critical Audit Matters”. Audit Focus “aims to provide easy-to-digest information to auditors, especially those who audit smaller public companies,” the PCAOB said. “With an eye toward protecting investors and improving audit quality, each edition of Audit Focus reiterates applicable auditing standards and staff guidance and offers reminders and good practices tailored to PCAOB-registered auditors of smaller public companies.” The guide was in part issued as PCAOB inspections continue to observe “a large number of deficiencies” related to CAMs.
