Coronavirus pandemic accounting challenges, the thorny topic of goodwill accounting, and what details companies should reveal about complex financing transactions will headline talks between U.S. and international accounting standard-setters when they meet on Nov. 19.
The U.S. Financial Accounting Standards Board and its global counterpart won’t make any decisions, but the discussions help them figure out next steps on major U.S. and international accounting projects. The boards meet annually.
In some cases, FASB and the International Accounting Standards Board are expected to air similar views. Both say they’re trying to help businesses and accountants with the challenges of the pandemic by extending deadlines to comply with new rules or offering tips on making forecasts when the future is so cloudy.
“We continue to allocate significant staff resources to focus on emerging issues, with a priority for COVID-19-related matters, including technical inquiries and development of educational materials,” FASB’s update to IASB says.
The boards also have been monitoring the rollout of their separate lease accounting standards, and plan to update each other on potential tweaks to the rules.
On other topics, the boards are at loggerheads. FASB is considering a significant change on accounting for goodwill, the intangible asset that companies record when they buy another business. The noncash asset sits on a company’s balance sheet in perpetuity until an outside factor like a nose-diving stock price or shifting consumer tastes forces the company to impair it, or mark down its value, which dings the company’s earnings.
The U.S. board is researching whether to allow companies to amortize, or write down in steady chunks over time, the value of the asset until it disappears from their balance sheets entirely. IASB, in contrast, wants to keep existing accounting intact and is exploring whether to require companies to disclose details investors want about new acquisitions, like the debt and pension liabilities the acquiring company takes on.
The boards also are on different paths when it comes to supply chain financing, the bank-financed tool many companies use to stretch out payments to their suppliers. Few companies reveal in their financial statements that they use these programs. Investors and analysts want details from companies with shaky credit, in particular, because the prolonged payback terms can make their cash flows appear healthier than they really are.
IASB maintains that existing accounting requirements capture what investors say they need, but the board is poised to discuss the topic more in December. FASB in October agreed to consider requiring companies to disclose details about the programs.
The upcoming meeting is a holdover from international accounting convergence, the lofty, years-long program that envisioned a single set of global accounting standards, with FASB and IASB writing new rules jointly. The effort started to fall apart after the 2008 financial crisis. Conflicting political pressures and the logistics of getting more than two dozen people from all over the world to agree on tricky issues forced the two boards to go their separate ways.
The U.S. and international boards continue to meet once a year, and have pledged to keep each other apprised of their priorities and to try to come to similar conclusions on major issues.