When I write my blogs, I’m typically providing you with some sort of SEC update, so I thought with this post I’d give some love to the FASB. It’s perfect timing, as the FASB has released a flurry of proposals over the last six weeks or so. So, what has the FASB been up to? Let’s check it out.
On September 29, the FASB issued ASU 2022-04, Liabilities – Supplier Finance Programs: Disclosure of Supplier Finance Program Obligations. Supplier finance programs, which are also referred to as reverse factoring, payables finance, or structured payable arrangements, allow a buyer to offer its suppliers the option for access to payment in advance of an invoice due date, which is paid by a third-party finance provider (or intermediary) on the basis of invoices that the buyer has confirmed as valid. Due to the lack of explicit disclosure requirements about these programs and the fact that the buyer party could present these obligations in the same line item as accounts payable on the balance sheet, this ASU was issued. ASU 2022-04 now requires the buyer to disclose both qualitative and qualitative information (at least annually) such as:
- Key terms of the program (e.g., payment terms, assets pledged as security, etc.)
- Outstanding confirmed amounts, including a rollforward of these amounts at year-end
- Where outstanding amounts are presented in the financial statements
ASU 2022-04 is effective for all entities for fiscal years beginning after December 15, 2022; however, the rollforward disclosure is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted!
There have been other various proposed ASUs and exposure drafts that the FASB has released since October 1, including:
- On October 6, the FASB proposed ASU 2022-ED100 – Segment Reporting: Improvements to Reportable Segment Disclosures. Disclosed segment information is critically important in understanding a company’s various business activities (and is one of the more popular areas of SEC comment letters!). The FASB issued this proposal in order to improve disclosures and address requests from investors for more detailed information about a reportable segment’s expenses. One specific proposed disclosure includes “significant segment expenses that are regularly provided to the [CODM] and included within each reported measure of segment profit or loss (collectively referred to as the ‘significant expense principle’).” Comments are due by December 20, 2022. Note that once the FASB receives and considers feedback, they will establish an effective date.
- On October 18, the FASB issued an exposure draft (ED), 2022-ED200– Conceptual Framework for Financial Reporting – Chapter 2: The Reporting Entity. This ED would create a new chapter (Chapter 2) within the Conceptual Framework and would provide a framework for matters relating to the identification of a reporting entity. The ED describes a reporting entity as a “circumscribed area of economic activities that can be represented by general purpose financial reports that are useful to existing and potential investors, lenders, and other resource providers in making decisions about providing resources to the entity. This Chapter also proposes that combined or carve-out financial statements could represent a reporting entity if they meet certain criteria. Comments are due by January 16, 2023.
- On October 27, the FASB proposed ASU 2022-ED300– Business Combinations – Joint Venture Formations: Recognition and Initial Measurement. Currently, there is no authoritative guidance on how a joint venture should recognize and initially measure assets contributed and liabilities assumed. This proposal would require that a joint venture apply a new basis of accounting upon formation and would require the venture to recognize and initially measure its assets and liabilities at fair value (with certain exceptions that are consistent with the business combinations guidance). Comments are due by December 27, 2022. Note that once the FASB receives and considers feedback, they will establish an effective date.
- Lastly, at its board meeting on October 12, the FASB decided to require companies that hold crypto assets to measure those crypto assets at fair value, in accordance with ASC 820, and that any increases/decreases in fair value would be recognized in OCI. Currently, most crypto assets are accounted for as intangible assets in accordance with ASC 350. More to come on this topic!
As always, please feel free to contact us with any questions or if you’re interested in any of our update trainings, where we provide all sorts of updates as it relates to both the FASB and SEC! Happy updating!
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This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.