March 30, 2024
In the first quarter of 2024, the FASB issued two Accounting Standard Updates, including the final standard clarifying accounting guidance related to profits interest awards. Several accounting pronouncements also became effective this quarter. Public companies will need to disclose the adoption impact of these accounting pronouncements in their Q1 Form 10-Q filings. In other news, Jackson Day was named the FASB Technical Director, and the FASB website has undergone a revamp.
Final Accounting Standards Issued
· In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, which improve current GAAP by adding an illustrative example to demonstrate how an entity should apply the scope guidance to determine whether a profits interest award should be accounted for in accordance with Topic 718. ASU 2024-01 is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted.
· In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements, which removes references to various Concepts Statements. Generally, the amendments are not intended to result in significant accounting change for most entities. ASU 2024-02 is effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025. Early adoption is permitted.
Accounting Standards Effective in 2024
Calendar year-end public business entities:
Guidance | Effective Date |
ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures | Effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Annual disclosure beginning with 2024 10-K.
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ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force) | Effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Quarterly disclosure beginning with Q1’24 10-Q. |
ASU 2023-01, Leases (Topic 842): Common Control Arrangements | Effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Quarterly disclosure beginning with Q1’24 10-Q.
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ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations | Amendment requiring rollforward information is effective for fiscal years beginning after December 15, 2023. Annual disclosure beginning with 2024 10-K.
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ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions | Effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Quarterly disclosure beginning with Q1’24 10-Q.
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ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity | For smaller reporting companies, the ASU is effective for fiscal years starting after December 15, 2023, including interim periods within those fiscal years. Quarterly disclosure beginning with Q1’24 10-Q.
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Calendar year-end nonpublic companies:
Guidance | Effective Date |
| ASU 2023-01, Leases (Topic 842): Common Control Arrangements | Effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Quarterly disclosure beginning with Q1’24 10-Q.
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| ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging — Portfolio Layer Method | Effective for fiscal years beginning after 15 December 2023, including interim periods within those fiscal years. Quarterly disclosure beginning with Q1’24 10-Q.
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| ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers | Effective for fiscal years beginning after 15 December 2023, including interim periods within those fiscal years. Quarterly disclosure beginning with Q1’24 10-Q.
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ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity | Effective for fiscal years starting after December 15, 2023, including interim periods within those fiscal years. Quarterly disclosure beginning with Q1’24 10-Q.
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Exposure Drafts
The following exposure drafts were issued in Q1 2024:
Exposure Draft | Summary | Comment Deadline |
Proposed Statement of Financial Accounting Concepts No. 8—Conceptual Framework for Financial Reporting—Chapter 6: Measurement | This chapter provides guidance on how items recognized in financial statements should be measured and when a specific measurement system should be applied. There are two relevant and representationally faithful measurement systems: the entry price system and the exit price system. The prices used in these measurement systems are defined as follows: Entry price: The price paid (the value of what was given up) to acquire an asset or received to assume a liability in an exchange transaction Exit price: The price received (the value of what was received) to sell an asset or paid to transfer or settle a liability in an exchange transaction.
| 3/20/24 |
Proposed Accounting Standards Update—Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments (a consensus of the Emerging Issues Task Force) | The proposed Update clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. Under the proposed Update, for a settlement of a convertible debt instrument to be accounted for as an induced conversion, an inducement offer is required to provide the debt holder with the consideration (in form and amount) issuable under the conversion privileges of the instrument, at a minimum.
| 3/18/24 |
Taxonomy Updates
The FASB issued two proposed Taxonomy Implementation Guides (Guides) based on the 2024 GAAP Financial Reporting Taxonomy. The first proposed Guide, Leases under Topic 842, includes a new example that illustrates the modeling for disclosures reporting information about leases not yet commenced. The second proposed Guide, Financial Services—Investment Companies (Including SEC S-X Schedules for Business Development Companies), includes a new example that illustrates the modeling for the disclosure of financial support that an investment company is contractually required to provide to its investees but has not yet provided. The comment period for these guides ended February 19, 2024.
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 31, 2024 to continue deliberations on the disaggregation of income statement expenses ASU and affirmed its proposal that would require an entity to disclose the disaggregation of relevant expense captions. The Company also discussed the accounting for environmental credit programs, including the liability recognition, measurement and other matters.
- The FASB met on February 7, 2024 to discuss the application of the cash flow hedge accounting guidance under Topic 815 to forecasted purchases or sales of commodities and other nonfinancial items.
- The FASB met on February 28,2024 to continue deliberation on the proposed ASU, Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest Awards and discuss proposed ASU, Financial Instruments – Credit Losses (Topic 326)- Purchased Financial Assets.
- The Financial Accounting Standards Advisory Council (FASAC) met on March 5, 2024 and discussed highlights on current hot topics, accounting alternatives and changes in accounting principles, and FASB project updates.
- The FASB met on March 20, 2024 to discuss the direction of the Accounting for and Disclosure of Software Costs project.
- The Not-for-Project Advisory Committee (NAC) met on March 26, 2024 to discuss the implementation of recent standards, selected FASB projects, and recent trends, concerns and observations.
- The FASB met on March 27, 2024 to continue deliberations of the disaggregation of income statement expenses ASU and accounting for environmental credit programs.
