US accounting rules maker seeks to advance projects on tax, crypto and spending in 2023

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The Financial Accounting Standards Board in 2023 wants to get closer to finalizing key rules, ranging from companies sharing more details about cryptocurrency holdings to breaking down certain expenses on income statements. The result: a wave of extra work for companies, more detail for investors, and more accurate accounting.

The US accounting rule maker launched new projects in 2022 following consultation on the agenda with investors and other stakeholders in 2021, its first in five years. This has led the FASB to incorporate more investor views and fast-track some existing projects. It has also led to efforts to establish new accounting and disclosure requirements for public and private companies.

FASB Chairman Rich Jones said he plans to bring many of these projects closer to the finish line in the new year. The board has at least three main projects, two on spending disclosure and one on income tax disclosure in 2023, according to Jones.

The shift to finalizing projects comes as the FASB faces political and investor pressure. The Securities and Exchange Commissions’ Investor Advisory Board, a group of investors, academics and financial advisers, suggested in September that an advisory board be created to ensure the FASB remains politically independent.

Accountants and investors argue that a new U.S. minimum tax that will take effect in January risks politicizing accounting rules and could encourage companies to distort financial results. The FASB welcomes outside advice to help shape its standards, Jones said.

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The FASB will likely finalize a rule in 2023 requiring public companies to begin itemizing significant expenses incurred by their business divisions, Jones said. The board released a proposal in October and plans to consider public feedback in the new year.

Verizon Communications Inc. said in December that disclosing major expenses by segment would not be meaningful to its investors. Our investors have not expressed a need for additional information about our segments’ reportable expenses beyond what is already disclosed, said Mary-Lee Stillwell, vice president of accounting and external reporting, in a December 12 letter to the FASB. Verizon declined to comment further.

The board is also moving forward with a separate project in which companies would itemize additional expense categories, potentially including labor costs, as line items on the income statements. The FASB expects to propose a rule based on the draft in the first half of 2023 and could vote on a final standard later in the year, depending on public comment, Jones said.

According to Mr Jones, another major project which could be finalized in 2023 would require companies to provide more tax details. In November, the FASB voted to propose requiring public and private companies to itemize the income taxes they pay to federal, state and foreign authorities for the year to date in quarterly and annual financial reports.

The FASB is also working to establish clear accounting and disclosure rules for companies holding bitcoins and other cryptocurrency assets. The proposed rules, which the FASB plans to publish in the first half of 2023, would affect a smaller number of companies than some other drafts because only a handful of non-crypto companies hold crypto.

The FASB’s stated mission is to establish rules that provide investors with information about corporate finances to enable them to make capital allocation decisions. Investors generally seek more disclosure, while companies often express concern about compliance costs and oppose disclosing details in areas such as business lines or taxes for fear of revealing too much to their competitors.

The tax proposal is likely to prove particularly controversial, said former FASB chairman Dennis Beresford. Many companies probably think it might disclose certain business practices they wouldn’t want their competitors or, frankly, other tax authorities to know about, said Beresford, now an executive-in-residence at the University of Georgias Terry College of Enterprise.

The FASB’s program holds promise for shareholders, said David Gonzales, senior accounting analyst at ratings firm Moodys Investors Service, noting that, I would say, over the past year there has been a marked shift toward investor issues.

In the past, the FASB has lost some of its focus on investors towards the end of the standard-setting process, for example, by not requiring enough disclosure from companies, Gonzales said.

The FASB places a heavy emphasis on investor input, Jones said, adding that political pressure hasn’t necessarily increased since he became chairman in 2020 amid scrutiny from board lawmakers. directors on its new rule on credit losses. We engage with our elected officials, he said. They have an important role in our economy.

The slowing economy will also be on the FASB’s radar, Jones said. To the extent that we see something emerging, where we need to move quickly to make an improvement to GAAP to provide better reporting, we are ready to act, he said, referring to generally accepted accounting principles.

Write to Mark Maurer at [email protected]

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