Bloomberg Tax reported that the Financial Accounting Standards Board’s (FASB) top priority for 2025 is identifying which issues to deal with next. The choice would be based on feedback from companies that follow its rules and readers of their financial statements, the board’s chair noted.
The FASB intends to pursue an overarching agenda consultation next year after last launching a formal request for agenda feedback back in 2021. That last round motivated the board to take on projects that are now in progress covering areas including accounting for software costs, government grants as well as environmental credit programs, Bloomberg Tax stated.
The board will tackle the agenda process with a series of continuing efforts to fill gaps in the U.S. rulebook governing financial reporting. according to Bloomberg Tax.
“We have a robust set of accounting standards,” FASB Chair Richard Jones stated in an interview. “But there is a continuous improvement and maintenance element to this to make sure that they are always fit-for-purpose.”
According to Bloomberg Tax, the FASB establishes standards for public, private and nonprofit companies that follow U.S. generally accepted accounting principles (GAAP). Financial statement preparers, investors, analysts and academics, among other professionals, have a stake in the FASB's work.
Over the last year, the FASB published several updates to GAAP. It also closed out its decades-long initiative to complete its internal handbook that lays out foundational financial reporting ideas.
Jones stated that his 2025 priorities also cover pursuing the FASB’s proposals on government grants and derivatives, as well as moving ahead on its research inquiries into accounting for intangible assets and financial performance metrics, Bloomberg Tax reported.
The FASB announced on Dec. 19 that it’s looking for high-level input on whether to modernize its decades-old rules for recording intangible or nonphysical assets like patents and trademarks, according to Bloomberg Tax.
Current FASB guidance covers accounting for specific types of intangibles like software, as well as standards for expenses like research and development. The board wants to find out if it should develop a single model or target subsets of intangibles.
A revamp of rules for intangibles would be a considerable change similar in extent to the board’s lease standards and revenue rules, stated Ron Graziano, director of accounting and tax research at LSV Asset Management.
Not like the patents or customer relationships that companies acquire by purchasing another entity, internally generated intangibles mostly do not show up on firms’ balance sheets, he noted.
Although some expenses simply help firms “keep the lights on,” others related to intangible assets could result in future cash flows, Graziano stated. Increased disclosure about those distinctions would help investors, he stated.
In November, the FASB solicited comments on whether it should launch another formal project to better define certain company performance metrics that the U.S. rules do not cover, which are known as non-GAAP measures.
Metrics like these usually show up in corporate earnings reports. However, companies do not have a standardized method to calculate financial data points such as free cash flow, adjusted net income, and earnings before interest, taxes, depreciation and amortization.
These metrics can be an “important way for the company to tell their story,” Shripad Joshi, a managing director at S&P Global Ratings, stated at a Dec. 5 Financial Accounting Standards Advisory Council meeting.
Still, companies could adjust the data points to a more positive picture of their performance, Joshi stated at the meeting. He advocated for more stringent guardrails.
The FASB staff members want to know from stakeholders which “financial key performance indicators” should be standardized, according to the comments request.
There are hundreds of possible indicators that could be included, so stakeholder feedback will be important, noted Graziano, who is also a FASB Investor Advisory Committee member.
The FASB will continue to examine feedback next year on its draft plan that broadens exceptions to complex derivatives accounting rules, the board’s chair Jones stated.
“As the economy and some of the overarching regulatory environment changes, these instruments are evolving and changing, and we’re trying to fit them all into the existing derivatives accounting guidance,” said Lara Long, managing director at Riveron Consulting. Long’s tenure as a member of a panel that advises the FASB on its agenda and priorities ends Dec. 31.
Under U.S. rules, transactions like forwards and options should be accounted for at fair value, or the current market price.
The FASB’s July proposal would broaden what the board calls the “scope exception,” which means qualifying transactions would not need to make fair value calculations every period.
Firms that would not have to report these transactions utilizing the complicated rules include those that borrow money with interest rates tied to meeting greenhouse gas emissions targets.
The FASB is expecting to get public comments by March 31 on its draft plan for government grants accounting. The proposal would be requiring companies to disclose a grant’s nature and its considerable terms and conditions, according to Bloomberg Tax.
A flood of government relief kept companies open during COVID. Still, no specific U.S. rule now captures government breaks and cash grants. That can lead to accounting variability and inconsistency, Jones stated.
“Filling that gap in GAAP should certainly be one of our priorities,” he noted.
The FASB’s plan depends on the International Accounting Standards Board guidance for government grants.
While investors advocated for the plan to reduce optionality and increase comparability among financial statements, the FASB’s proposed amendments instead “codify almost all the existing diversity in practice,” board member Christine Botosan stated in a dissent that was part of the proposal, Bloomberg Tax reported.
The FASB board members Joyce Joseph and Frederick Cannon have advocated for disclosures that would assist investors to better comprehend the possible future cash flows of firms with and without the grants.
Jones stated he looks forward to “robust discussion” on the proposal, Bloomberg Tax said.