Regulatory updates

Recently, the Financial Accounting Standards Board (FASB) proposed an ASU intended to improve Generally Accepted Accounting Principles (GAAP) by adding illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as a share-based payment arrangement within the scope of Topic 718, Compensation – Stock Compensation.

The ASU is open for comments up to 10 July 2023.

To access the text of the ASU, please click here

Under current Generally Accepted Accounting Principles (GAAP), if a purchased financial asset has experienced a more-than-insignificant deterioration in credit quality since origination, it is accounted for under the Purchased Credit Deteriorated (PCD) model (referred to as the gross-up approach), with no credit loss recorded on acquisition. However, in other cases, it is accounted for in a manner consistent with an originated financial asset (referred to as non-PCD accounting). Under non-PCD accounting, a day one credit loss is recorded in addition to any credit discount reflected in the fair value of the acquired assets.

Investors and preparers of financial information highlighted that the aforementioned accounting process is complex and they would instead prefer to apply a single accounting model to recognise credit losses for all purchased financial assets.

In this regard, on 27 June 2023, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU), Financial Instruments – Credit Losses (Topic 326): Purchased Financial Assets. The proposed ASU would address the concerns raised by the stakeholders by requiring that all acquired financial assets, (with certain limited exceptions), would follow the existing gross-up approach.

The comment period is open up to 28 August 2023.

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

Recently, FASB issued a proposed ASU, Income statement – Reporting comprehensive income – expense disaggregation disclosures (subtopic 220-40): Disaggregation of income statement expenses , to provide investors with more decision-useful information about a public business entity’s expenses.

The proposed ASU would require public companies to provide detailed disclosure of specified categories, underlying certain expense captions in the interim and annual periods, including employee compensation, depreciation, amortisation, and costs incurred related to inventory and manufacturing activities in the appropriate expense captions of the income statement.

The amendments in the proposed ASU do not change or remove the existing expense disclosure requirements and also do not change requirements w.r.t. presentation of expenses on the face of the income statement.

The proposed ASU is open for comments up to 30 October 2023.

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