EDs/consultation papers

Updates from FASB

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December 2023

FASB seeks input on a new chapter of its conceptual framework

Recently, FASB proposed new chapter of its Conceptual Framework – Proposed Statement of Financial Accounting Concepts, Concepts Statement No. 8, Conceptual Framework for Financial Reporting – Chapter 6: Measurement relating to the measurement of items recognised in financial statements.

The proposed chapter would establish concepts that FASB would consider in developing standards of financial accounting and reporting. It provides concepts to consider when choosing a measurement system for an asset or a liability recognised in general purpose financial statements. It describes:

Two relevant and representationally faithful measurement systems – the entry price system and the exit price system and
Considerations when selecting a measurement system.

The comment period is open up to 20 March 2024.

To access the text of the new chapter, please click here

There are no updates in January 2024

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July 2024

Proposed Accounting Standard Update (ASU) on derivatives scope refinements

On 23 July 2024, the Financial Accounting Standards Board (FASB) published a proposed ASU to address the following:

Issue 1 – Derivative scope refinements

Due to the broad and evolving interpretation of the definition of a derivative, many types of contracts are evaluated and potentially accounted for as derivatives, including certain research and development funding arrangements and bonds in which interest payments may vary based on ESG-linked metrics.

This leads to challenges in applying guidance in FASB Accounting Standards Codification Topic 815, Derivatives and Hedging.

The proposed ASU aims to:

Reduce the cost and complexity of evaluating whether contracts are derivatives
Better portray the economics of those contracts in the financial statements
Reduce diversity in practice resulting from changing interpretations of the existing guidance.

Issue 2 – Scope Clarification for a Share-Based Payment from a Customer in a Revenue Contract

The proposed ASU clarifies the applicability of Topic 606, Revenue from Contracts with Customers related to accounting for share-based payments, such as warrants or shares received from a customer that are consideration for the transfer of goods or services. It aims to provide investors with more comparable information and would reduce accounting complexity and related reporting costs for preparers and auditors.

The proposed ASU is open for comments till 21 October 2024.

To access the text of the ASU, please click click here

There are no updates in August 2024

September 2024

FASB Seeks Public Comment on Proposed Clarifications to Share-Based Consideration Payable to a Customer

The Financial Accounting Standards Board (FASB) has recently published a proposed Accounting Standards Update (ASU) to improve the accounting guidance for share based consideration payable to customers in conjunction with selling goods or services. The proposed changes are expected to improve financial reporting results by requiring revenue estimates to more closely reflect an entity’s expectations. The proposal would affect the timing of revenue recognition for entities that offer to pay share-based consideration (for example, equity instruments) to a customer (or to other parties that purchase the entity’s goods or services from the customer) to incentivize the customer (or its customers) to purchase its goods and services.

The FASB is currently inviting feedback on the proposed ASU till 14 November 2024

To access the text click here

FASB Seeks Public Comment on Proposed Improvements to Hedge Accounting

The Financial Accounting Standards Board (FASB) has recently published a proposed Accounting Standards Update (ASU) that would clarify certain aspects of the guidance on hedge accounting and address several incremental hedge accounting issues arising from the global reference rate reform initiative. During the FASB’s 2021 agenda consultation project and other outreach, stakeholders expressed concerns that, in certain circumstances, the current guidance increases the risk of not being able to apply hedge accounting for otherwise highly effective hedging relationships, which results in less decision-useful information for investors. Stakeholders also identified some areas of hedge accounting guidance requiring further updates to address the effects of reference rate reform on hedge accounting.

The amendments in the proposed ASU would enable entities to apply hedge accounting to a greater number of highly effective economic hedges, thereby improving the decision-usefulness of information provided to investors.

The FASB is currently inviting feedback on the proposed ASU till 25 November 2024

To access the text click here

There are no updates in October 2024

November 2024

FASB Stakeholders invited to share their views on financial key performance indicators

The Financial Accounting Standards Board (FASB) has released an Invitation to Comment (ITC) seeking feedback on financial key performance indicators (Financial KPIs). This is a part of FASB’s research project to explore potential standard setting for Financial KPIs.

Financial KPIs are financial measures derived from numbers in financial statements but not presented in GAAP financial statements, such as EBITDA, free cash flow, organic sales growth, and adjusted net income.

The feedback that is being sought inter alia includes whether Financial KPIs should be standardised, and whether they should be disclosed in GAAP financial statements.

The ITC is open for submission till 30 April 2025.

To access the text of the ITC pleaseclick here

FASB seeks public comment on proposal to improve interim reporting guidance

The FASB has issued a proposed ASU aimed at enhancing the clarity and navigability of interim reporting disclosures. This proposed ASU seeks to provide clearer guidance and improve the usability of interim financial disclosures without changing the fundamental nature of disclosure obligations. The proposed amendments are as follows:

Applicability: Confirm that Topic 270- Interim reporting guidance applies to all entities providing interim financial statements and notes under GAAP.
Comprehensive list: Establish a detailed list of required interim disclosures in Topic 270.
Disclosure principle: Introduce a principle requiring disclosure of post-fiscal year-end events and changes with a material impact, modeled after a previous SEC principle.
Guidance improvement: Enhance guidance on the content and format of interim financial statements.

Stakeholders are invited to review and comment on the proposal by 31 March 2025.

To access the text of the proposed ASU, please click here

FASB seeks public comment on proposal to add guidance on accounting for government grants by businesses

The FASB has issued a proposed ASU to establish authoritative guidance on accounting for government grants received by business entities.

The proposed ASU would leverage the guidance in IAS 20, Accounting for Government Grants and Disclosure of Government Assistance with respect to:

Recognition, measurement and presentation: Establishes guidance for recognition, measurement and presentation of government grants related to an asset and related to income.
Disclosure requirements: Mandates disclosures about the nature of the grant, accounting policies, and significant terms and conditions

Stakeholders are invited to review and comment on the proposal by 31 March 2025.

To access the text please click here

FASB Seeks Public Comment on Proposal to Clarify Guidance for Identifying the Accounting Acquirer in a Business Combination

The FASB has released a proposed ASU aimed at improving how the accounting acquirer is identified in business combinations under Topic 805.

The proposed ASU aims to standardize the process for determining the accounting acquirer in equity interest exchanges, which can significantly impact the combined entity's financial statements. It also seeks to align the requirements for identifying the accounting acquirer in variable interest entity (VIE) acquisitions with the existing requirements applicable to non-VIE transactions. This alignment is expected to enhance the comparability of financial statements for similar transactions.

The comments on this proposal closed on 16 December 2024.

To access the text please click here

FASB Seeks Public Comment on Targeted Improvements to Internal-Use Software Guidance

FASB has issued a proposed ASU to revise the guidance on accounting for software to improve operability of recognition guidance considering different methods of software development.

The proposed ASU would eliminate references to sequential development stages in Subtopic 350-40, Intangibles—Goodwill and Other—Internal-Use Software and introduce the following two criteria for capitalising software costs:

Management's authorization and commitment to funding the software project, and
Probability that the project would be completed and software would be used for its intended functions – referred to as “probable to complete recognition threshold”

For the probable to complete recognition threshold companies would also need to consider any significant uncertainties in the development activities.

Additionally, the proposed amendments would require companies to report cash paid for capitalized internal-use software costs as investing cash outflows in the statement of cash flows.

The proposal is open for comments till 27 January 2025.

To access the text of the proposed amendment, please click here

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