Regulatory updates

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

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

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

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 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