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FASB proposes to improve interim reporting

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The Financial Accounting Standards Board issued a proposed accounting standards update Wednesday that aims to improve the navigability of the disclosures that need to be provided for interim reporting periods and clarify both when that guidance is applicable and which disclosures are required in interim reporting periods. 

The proposed ASU is described as “narrow scope improvements” and it’s not supposed to change the fundamental nature of interim reporting or expand or reduce the current interim disclosure requirements. Instead, the proposed ASU would offer greater clarity about the current interim reporting requirements.

The amendments in the proposed ASU would clarify that the guidance in Topic 270, the part of the FASB Accounting Standards Codification on interim reporting, applies to all entities that provide interim financial statements and notes in accordance with GAAP. The amendments would also create a comprehensive list in Topic 270 of interim disclosures that are required in interim financial statements and notes in accordance with GAAP.

The proposed amendments incorporate a disclosure principle, modeled after a previous SEC principle, that would require entities to disclose events and changes that occur after the end of the most recent fiscal year that have a material impact on the entity. The proposed ASU would also improve the guidance about information included in and the format of interim financial statements.

“One of the benefits of the [Codification] was it brought all this disparate accounting guidance into one location, and tried to make it much easier, so that if you were working on a topic, you could find it,” said FASB chair Richard Jones during a session at Financial Executives International’s Current Financial Reporting Insights Conference on Tuesday. “But then we had this chapter on interim reporting. And to be fair, when you looked at it, it probably didn’t do a very good job of explaining when someone prepares interim financial statements, what disclosures are required on an interim basis. And so what we did was we spent a lot of time going through all of our old board memos, through the Codification, the predecessor to the Codification. And what we’ve attempted to do is to bring together into one place required interim disclosures, as well as adding in the disclosure principle that many of you are familiar with from prior SEC guidance related to material changes from the information in the annual report, and when you have to supplement that on an interim basis. And that’s our objective. We had some board members who wanted to greatly expand interim reporting. We had other board members who said, ‘Let’s delete all the requirements and just go with the principle.’ But ultimately, what we decided was we needed to clarify exactly what our standards did and didn’t require, and that’s what we’re focused on.”

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FASB chair Richard Jones speaking at FEI CFRI virtual conference

FASB is asking for comments on the proposed ASU by March 31, 2025. Jones encouraged members of the audience of the virtual FEI CFRI conference who do quarterly reporting at least three times a year to take a look at the proposed ASU. “We think we’re in a pretty good spot, but to the extent that you think we’ve included something or excluded something, that it’s different from what was intended when the standards were issued, we’d be very interested,” he said,

Jones said FASB expects to issue one additional final standard, six exposure drafts and three invitations to comments before the end of the year, and this would be one of those exposure drafts. 

During a press conference following the session, Accounting Today asked if FASB had been receiving much feedback yet on some of its recent standards on crypto assets and income tax reporting.

“I would say on the crypto standard, we haven’t really heard a lot,” said Jones. “Moving into fair value was pretty well received by all of our stakeholder groups. On income taxes, we’ve done a lot of outreach, and what we were talking about was expansion of disclosures currently required. I think those were pretty well understood. It’s possible we’ll get more questions before adoption next year, but as of now, we’re not really getting a huge volume of inquiries.”

Accounting Today also asked about FASB’s plans to offer more guidance on key performance indicators. Later this week, FASB plans to send out an invitation comment on financial key performance indicators, Jones said during the session, and it will ask a series of questions about whether there’s a role for FASB to play in standardizing financial KPIs such as EBITDA, funds from operation, free cash flow or an adjusted earnings measure. Accounting Today asked Jones whether this guidance might address some of the concerns the Securities and Exchange Commission has expressed about the use of non-GAAP measures.

“Whether they’re concerned about them and which ones they are and aren’t, I’ll leave to them,” said Jones. “We have heard from some stakeholders that we should be considering whether there are certain financial KPIs that should be brought into the financial statements. Now, what does that mean? For some that might mean, are there some financial KPIs that could benefit with a standardized definition, say a single definition of EBITDA, and what goes into that? For others, it may simply mean, what industries does it make sense to provide a KPI in the financial statements? Alternatively, some look at it and say, ‘Well, maybe there are KPIs that the company’s already using. Is there a way under a management type approach to bring them into the financial statements, or should potentially, they not be included in the financials?’ So it’s really us getting input on all those issues. Depending on what we hear from that ITC, we’ll bring that back to our board, and our board will be able to make decisions on [whether] there’s a need for standard-setting in this area.”

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IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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