Accounting
FASB proposes to improve interim reporting
The Financial Accounting Standards Board issued a proposed
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.”
FASB is asking for comments on the
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.”
The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all
- H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
- H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
- H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
- H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.
“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”
The bills were also included in a recent Senate
The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter.
- H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
- H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS.
House Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.
“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”
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