By Denise Lugo
The FASB plans to issue a consultation document mid-next year to obtain public feedback about priority areas the board should address in its future accounting rulemaking efforts, board Chair Richard Jones told a virtual financial reporting conference on December 8, 2020.
Starting this month, the board will begin to conduct outreach with its advisory and other stakeholder groups to understand priority areas they think it should address, Jones said at the AICPA’s Conference on Current SEC and PCAOB Developments 2020.
And by next spring, the FASB will analyze and share that feedback with the Financial Accounting Standards Advisory Council (FASAC), its main advisory body, for its views, he said. “Based on what we hear we will develop an invitation-to-comment or discussion paper sometime in the middle of next year,” said Jones. “Based on what we would have learned, we will be in a better position to decide where to prioritize our focus and focus our efforts.”
The last consultation document the FASB developed of this kind was in 2016. “I believe it’s time to do it again,” he said.
The FASB’s technical agenda currently includes 33 active and eight research projects, plus post-implementation review (PIR) of accounting standards for leases, credit losses, and revenue recognition. The board’s priorities since March have been on addressing COVID-19 related emerging reporting issues, but it has been eyeing other topics for next year.
Jones reiterated remarks he made at Financial Executives International’s November conference that post-pandemic, the FASB will continue to be cognizant of the environment in which its stakeholders operate, and take speedy action when needed to provide clarity and relief. He also continued to stress the board’s focus on listening for input, and making the case for change prior to issuing new rules.
Among top FASB priorities for 2021 will be segment reporting and goodwill accounting, two topics that could potentially be controversial. Segment reporting is a top priority for financial statement users, and the FASB is considering a model that relies on how the top decision maker in a company views segments, Jones said. Related to goodwill, the board is learning toward a goodwill amortization with an impairment model.
The board also has intangible assets on its research agenda to determine whether to do more standard-setting work.
Board to Issue Three Documents This Month
Separately, the FASB plans to issue a final accounting standard on its rate reform proposal, and two proposals this month, according to an update provided by FASB Technical Director Hillary Salo at the conference.
The board’s plans can change, but it aims to publish the following:
- Proposal on goodwill triggering events: to provide private companies and not-for-profit entities that only report GAAP compliant financial statements on an annual basis, with an option to perform the identification and evaluation of a triggering event for goodwill impairment purposes only as of their annual reporting date. A company that elects this alternative would not be required to monitor for goodwill impairment triggering events during interim periods, but would instead evaluate the facts and circumstances that exist as of year end to determine whether it is “more likely than not” that goodwill is impaired. The board hopes to issue final rules on the proposal at the end of the first quarter in 2021.
- Proposal on the recognition and measurement of revenue contracts with customers that are acquired in a business combination: Current GAAP provides guidance on when to recognize and how to measure assets and liabilities in a business combination but it doesn’t provide specific guidance related to contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for under Topic 606, Revenue from Contracts with Customers. The proposal would provide guidance on how to recognize and measure those contract assets and liabilities not acquired in a business combination. The rules are aimed at reducing accounting differences among companies and inconsistencies related to the recognition of an acquired contract liability as well as payment terms and their effects on subsequent revenue recognized by an acquirer.
- An ASU on proposed scope refinements to Topic 848, Reference Rate Reform, to include certain derivative instruments that use rates that will not be discontinued. Board discussions on whether to finalize the proposal will take place on December 9.
For in-depth analysis of the FASB’s revenue recognition standard, please see Catalyst: US GAAP — Revenue Recognition, also on Checkpoint.
Additional analysis of the revenue standard can be found on Checkpoint in the Accounting and Auditing Update Service and the SEC Accounting and Reporting Update Service [SARU No. 2014-21] (June 2014): Special Report: Comprehensive Coverage of the New U.S. GAAP Revenue Recognition Requirements.
This article originally appeared in the December 9, 2020 edition of Accounting & Compliance Alert, available on Checkpoint.
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