November 5, 2022
By now, public companies have implemented all the major new accounting standards. Private companies are in the process of implementing the new lease and CECL standards if they have not already implemented them. These new accounting standards changed the accounting world over the last 5 years and spurred the growth of technical accounting consulting. Prior to this, the changes to goodwill accounting and share-based compensation also had major impacts. There literally was not enough supply of technical accounting resources to keep up with the demand. However, after these are all implemented and U.S. GAAP and IFRS is now largely converged in these areas (with some exceptions), where does that leave the technical accounting profession?
Don’t get me wrong, there will always be a need for technical accounting. There are areas that will always have more complexity, including business combinations, VIEs, derivatives, debt and equity, impairments, revenue recognition, and segments. However, these are very specific to the company or client.
The following are some of the projects on the FASB technical agenda:
– Accounting for and Disclosure of Crypto Assets
– Accounting for and Disclosure of Software Costs
– Accounting for Environmental Credit Programs
– Financial Instruments- Credit Losses (Topic 326)- Acquired Financial Assets
– Joint Venture Formations
– Leases (Topic 842): Common Control Arrangements
These are currently in initial deliberations. The Joint Venture Formations project has an exposure draft out for comment, due December 27, 2022. Although these projects will affect many companies, they are very specific to certain industries and will not have the same global impacts as the other standards.
In the near term, I see a bit of a lull in technical accounting compared to the last couple of years. There is still the implementation of the new lease standard and CECL for private companies. Crypto is an interesting area that will continue to grow. I, myself, would like to get more exposure to this area. With the impacts of COVID and the current market volatility and geo-political tensions, there will be more focus on impairments and perhaps restructuring. ESG has also been a focus area lately, and the SEC has been very active in issuing guidance around disclosures in this area. Whether ESG initiatives will spur any changes to accounting remains to be seen.
However, technical accounting is not something that can be easily automated like other areas of accounting. A company’s facts and circumstances are often so unique, that the guidance doesn’t specifically address the company’s situation and judgment will need to be applied. Auditors will continue to push companies to have technical accounting resources. Therefore, there will always be demand for technical accounting.
