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FASB to Move Ahead on Projects in 2024

S.J. Steinhardt
Published Date:
Dec 28, 2023

The Financial Accounting Standards Board (FASB) will move ahead with a number of projects in 2024, including accounting for software costs and environmental credits, and greater disclosure of income-statement expenses, Chair Richard Jones said in an interview with The Wall Street Journal.

The FASB also expects to finalize a rule on income-statement expenses and to propose rules on derivatives and government grants, said Jones.

By outlining his 2024 agenda, Jones said the FASB will again be asking investors and other stakeholders which issues to take up next. The Board also aims to hold another agenda consultation in 2024, likely in the second half of the year, to gauge what issues to prioritize.

“I think it’s an important way that we consistently make sure that we are being responsive to our stakeholders and making sure we’re keeping accounting and financial reporting up-to-date,” he said. “We’re getting enough of them done that it’s an appropriate time to do it.”

The FASB’s proposed rule requiring publicly traded businesses to break out things such as inventory expenses and employee compensation in the footnotes of their financial statements could be finalized in the coming year. Businesses have urged FASB to revise the proposal it issued in July, saying it would be costly to carry out, and deliver little benefit to investors.

Jones conceded that the rule would increase compliance efforts at companies, but added that the timing of the rule could be delayed by revising the proposal and seeking more public feedback.

The Board may vote next year on whether or not to issue a proposed rule on how companies account for and disclose software costs, Jones said. Current rules, largely unchanged since the 1980s and ‘90s, lay out two different models depending on whether a company develops software, or just uses it in their business.

The FASB is considering a single accounting model for all companies. For companies that license software, a new standard could mark a “very significant change,” Jones said. “It might be a subset [of public companies], but from a market capitalization perspective, it’s an awfully big subset,” he said.

A proposal may also be issued on specific rules to account for environmental credits, as no specific environmental accounting rules companies must follow when recording these transactions currently exist. That proposal is likely in the second half of the year, Jones said. He added that the FASB also hopes to issue proposals on government grants and derivatives, among others.

Other new requirements will need to be met in 2024 by finance executives, such as disclosure of new details on their taxes, crypto assets and large segment expenses, combined with new Securities and Exchange Commission (SEC) rules and climate-disclosure mandates from California, Europe and elsewhere. 

“Companies are struggling to picture themselves complying with all of this, and I think that’s putting additional pressure on what was already a bit of a pressure-cooker for corporate reporting teams,” Steve Soter, vice president and industry principal at business-reporting software provider Workiva, told The Journal.

The FASB is making more of an effort to improve information for investors, as opposed to simplifying financial reporting for companies, than it has in years, Tom Linsmeier, chair of the accounting and information systems department at the University of Wisconsin–Madison and a former FASB board member, told The Journal. “It was more of a company perspective than a user perspective,” he said. 

“The FASB is beginning to address important issues that have existed for a period of time in smaller bite-sized projects,” he said. “Some progress is being made, but bigger challenges remain,” he added, referring to areas such as inadequate rules for research and development and other intangibles.

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