Four Projects to Watch at the FASB

While the FASB’s current technical agenda does not include landmark projects like revenue recognition and lease accounting, the Board is working on several projects that may significantly impact company reporting.  Four projects to watch are:

Segment Reporting Improvements

On October 6, 2022, the Board issued a proposed Accounting Standard Update to ASC 280 – Segment Reporting, that would expand segment disclosure requirements for public business entities.  While the new standard would not change how operating segments are identified or aggregated, it would require:

    • Disclosure, on an annual and interim basis of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss,
    • Disclosure, on an annual and interim basis, of an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the significant expenses disclosed under the significant expense principle and each reported measure of segment profit or loss, and
    • Disclosure of all annual information about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods.

In addition, the proposed ASU would clarify that multiple measures of segment profit or loss may be disclosed in certain circumstances and require all current and proposed disclosures for a public entity that has a single reportable segment

Enhanced Income Tax Disclosures

The Board’s tax project has evolved over time and is now focused on two key disclosure areas for public business entities:

    • The effective tax rate reconciliation, and
    • Cash paid for income taxes.

The FASB’s deliberations have focused on providing detailed information in each of these areas.  The proposed disclosures for the effective rate reconciliation include addressing eight specific categories and related qualitative disclosures.  For taxes paid the proposals focus on providing disaggregated information about taxes paid by jurisdiction.  Developing appropriate disclosures, particularly for companies that operate in multiple tax jurisdictions could be challenging.  In March of 2023 the FASB issued this Proposed ASU and you can read more in this Tentative Board Decisions document.  The Proposed ASU would also require certain new disclosures for private entities.

Disaggregated Expense Disclosure

This project is now focused on “improving the decision usefulness of business entities’ income statements through the disaggregation of any relevant expense line items.”  As you can read in this Tentative Board Decisions document, it is likely a proposed standard would focus on disclosures about selling expenses, costs capitalized to inventory, employee compensation, depreciation, amortization and other details.  In March 2023, the Board directed the FASB staff to draft a proposed ASU and decided on a 90-day comment period.  This new standard would apply to public business entities.  Companies may face challenges to accumulate this information and provide appropriate controls for these disclosures.

Accounting and Disclosure for Crypto Assets

While this project may not affect as many companies as the three discussed above, for companies that hold crypto assets its impact could be significant.  This project would require that crypto assets, as defined by the Board, would be accounted for at fair value with unrealized gains and losses recognized in income.  This would be a major change from the existing indefinite lived intangible asset accounting model currently applied to these assets.  You can read more in this March 23, 2023, Proposed Accounting Standards Update and this Tentative Board Decisions document.

While these projects are in process companies can certainly provide their thoughts and input to the Board.  In addition, given how each of these projects would present challenges to gather information and build appropriate controls, putting them on the planning horizon now likely makes sense.

The board is working on several other projects, and you can find the Board’s current Technical Agenda here.

As always, your thoughts and comments are welcome!

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