April 1, 2023
The first quarter of 2023 was relatively quiet from a standard issuance perspective. However, the FASB made progress on several projects, including releasing the long-awaited exposure draft for crypto assets. In addition, a number of new accounting pronouncements became effective this quarter. Public companies will need to disclose the adoption impact of these accounting pronouncements in their Q1 Form 10-Q filings.
On a lighter note, the FASB turned 50 this year. The FASB is also actively monitoring how investors use artificial intelligence (AI). Regarding the popularity of ChatGPT and AI, I’ll leave you with this quote from Richard Jones, the FASB Chair, to the Financial Accounting Foundation:
“No, we’re not going to use it to write our standards – I would just note that,” he said. “But I think it is important and that’s part of our continuous outreach with investors in understanding their ability to process data, how they’re processing data, how do we get the most important data information in our investment capital allocation decisions.”
Final Accounting Standards Issued
- In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements, which provides a practical expedient for private companies and not-for-profit entities that are not conduit bond obligors to use the written terms and conditions of a common control arrangement to determine whether a lease exists and the classification of and accounting for that lease. The standard also requires that leasehold improvements associated with common control leases be amortized over the useful life to the common control group regardless of the lease term, and transfers between entities under common control be accounted for as an adjustment to equity. ASU 2023-01 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted.
- In March 2023, the FASB issued ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, which permits reporting entities to elect to account for their tax equity investments using the proportional amortization method if certain conditions are met. The standard also requires that all tax equity investments accounted for using the proportional amortization method use the delayed equity contribution guidance in paragraph 323-740-25-3. Entities are also required to disclose information about their investments that generate income tax credits and other income tax benefits from a tax credit program. ASU 2023-02 is effective for public business entities beginning in fiscal years after December 15, 2023, including interim periods within those fiscal years. It is effective for all other entities beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted.
Accounting Standards Effective in Q1 2023
Calendar year-end public companies that are not Small Reporting Companies:
ASU 2021-01 | Reference Rate Reform (Topic 848): Scope |
ASU 2022-06 | Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 |
ASU 2018-12 | Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long Duration Contracts |
ASU 2019-09 | Financial Services—Insurance (Topic 944): Effective Date |
ASU 2020-11 | Financial Services—Insurance (Topic 944): Effective Date and Early Application |
ASU 2022-05 | Financial Services—Insurance (Topic 944): Transition for Sold Contracts |
ASU 2021-08 | Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers |
ASU 2022-01 | Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method |
ASU 2022-02 | Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures |
ASU 2022-04 | Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations |
Calendar year-end public Small Reporting Companies:
ASU 2016-13 | Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
ASU 2017-04 | Intangibles—Goodwill and Other (Topic 350) |
ASU 2018-19 | Codification Improvements to Topic 326, Financial Instruments—Credit Losses |
ASU 2019-04 | Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments |
ASU 2019-05 | Financial Instruments—Credit Losses (Topic 326) Targeted Transition Relief |
ASU 2019-10 | Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates |
ASU 2019-11 | Codification Improvements to Topic 326, Financial Instruments—Credit Losses |
ASU 2020-03 | Codification Improvements to Financial Instruments |
Calendar year-end nonpublic companies:
ASU 2016-13 | Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
ASU 2017-04 | Intangibles—Goodwill and Other (Topic 350) |
ASU 2018-19 | Codification Improvements to Topic 326, Financial Instruments—Credit Losses |
ASU 2019-04 | Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments |
ASU 2019-05 | Financial Instruments—Credit Losses (Topic 326) Targeted Transition Relief |
ASU 2019-10 | Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates |
ASU 2019-11 | Codification Improvements to Topic 326, Financial Instruments—Credit Losses |
ASU 2020-03 | Codification Improvements to Financial Instruments |
ASU 2021-01 | Reference Rate Reform (Topic 848): Scope |
ASU 2022-02 | Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures |
ASU 2022-04 | Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations |
ASU 2022-06 | Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 |
Exposure Drafts
The following exposure drafts were issued in Q1 2023 and are open for comment:
Exposure Draft | Summary | Comment Deadline |
Proposed Accounting Standards Update—Income Taxes (Topic 740): Improvements to Income Tax Disclosures | Rate Reconciliation Public business entities would be required on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. Income Taxes Paid All entities would be required to disclose the year-to-date amount of income taxes paid disaggregated by federal, state, and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid. Other Disclosures All entities would be required to disclose income (loss) from continuing operations before income tax expense (benefit) disaggregated 1) between domestic and foreign and 2) by federal, state, and foreign. | 5/30/23 |
Proposed Accounting Standards Update—Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets | Entities would be required to subsequently measure crypto assets at fair value with changes recognized in net income each reporting period. Entities would also be required to present (1) crypto assets measured at fair value separately from other intangible assets in the balance sheet and (2) changes in the fair value of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. For annual and interim reporting periods, entities would be required to disclose:
For annual reporting periods only, entities would be required to disclose:
| 6/6/23 |
Taxonomy Updates
- The FASB issued proposed GAAP taxonomy improvements for a proposed Accounting Standards Update—Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The comment period ends May 30, 2023.
- On March 21, 2023, the FASB announced that the SEC had accepted the 2023 GAAP Financial Reporting Taxonomy and the 2023 SEC Reporting Taxonomy (collectively referred to as the “GAAP Taxonomy”). In addition, the FASB also finalized the 2023 DQC Rules Taxonomy (DQCRT), which together with the GAAP Taxonomy, are collectively referred to as the “FASB Taxonomies.”
Meetings
The following summarizes the various meetings with the FASB. Full recaps and more details can be found at FASB.org.
- The FASB met on January 11, 2023 to continue deliberations on the disaggregation of income statement expenses and decided on the types of costs incurred when disaggregating expenses, the disaggregation categories required, the definition of employee compensation, the disaggregation of residual expenses incurred, and disclosure of selling expenses.
- The FASB met on January 18, 2023 to discuss the accounting for and disclosure of software costs and accounting for investments in tax credit structures using the proportional amortization method.
- The FASB met on February 1, 2023 to discuss the accounting for and disclosure of crypto assets and the Hedge Accounting project.
- The FASB met on February 15, 2023 to discuss common control arrangements for leases and decided on the terms and conditions to be considered for applying Topic 842: Common Control Arrangements, the accounting for leasehold improvements, and the effective date.
- The Financial Accounting Standards Advisory Council (FASAC) held its quarterly meeting on March 7, 2023 and discussed the definition of derivatives, emerging accounting issues and changing business practices, and the role of the EITF.
- The Not-for-Profit Advisory Committee (NAC) met on March 23, 2023 to discuss the implementation of recent standards, updates on other current projects, and recent trends, concerns, and observations.
- The FASB met on March 29, 2023 to discuss the Conceptual Framework: The Reporting Entity and affirmed its decisions on features of a reporting entity, consolidated financial statements, parent-only financial statements, portions of a larger entity, and combined financial statements.
