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Bridging the GAAP: March 2023

Centri’s Bridging the GAAP newsletter highlights this month’s news, developments and emerging issues in the accounting and financial reporting world.

FASB Standard Setter Updates

Financial Accounting Standards Board

Proposed Changes to Income Tax Disclosures

The FASB released its Exposure Draft to address concerns raised by stakeholders who have indicated that the existing income tax disclosures should be enhanced to provide information to better assess how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. The proposal would require all entities to provide additional disclosures about primarily related to income taxes paid by jurisdiction and the rate reconciliation. Certain disclosures would not be required for entities other than public business entities. The proposal also would eliminate certain disclosure requirements for unrecognized deferred tax liabilities and uncertain tax positions. Comments are due by May 30, 2023.

Proposed Fair Value Accounting for Certain Crypto Assets

The FASB proposed certain amendments to improve the accounting for and disclosure of certain crypto assets. Stakeholders previously indicated the current accounting for holdings of crypto assets as indefinite-lived intangible assets, which is a cost-less-impairment accounting model, does not provide investors, lenders, creditors, and other allocators of capital with decision-useful information. Specifically, reflecting only the decreases, but not the increases, in the value of crypto assets in the financial statements until they are sold does not provide relevant information that reflects (1) the underlying economics of those assets and (2) an entity’s financial position. Entities would also be required to provide interim and annual disclosures about the types of crypto assets held by entities and any changes in their holdings of crypto assets. In addition to better reflecting the economics of crypto assets, measuring those assets at fair value would potentially reduce cost and complexity associated with applying the current cost-less-impairment accounting model. Comments are due June 6, 2023.

SEC Accepts 2023 GAAP Financial Reporting and SEC Reporting Taxonomies

On March 21, 2023, the FASB announced it accepted the 2023 GAAP Financial Reporting Taxonomy (GRT) and the 2023 SEC Reporting Taxonomy (SRT) (collectively referred to as the “GAAP Taxonomy”) for public use. The 2023 GAAP Taxonomy contains updates for amendments to accounting standards and other recommended improvements, including those previously finalized in the 2022 Q3 Supplemental GAAP Taxonomy for the SEC Release Nos. 33-10771; 34-88606; IC-33836 related to business development companies that submit financial statement information using XBRL. The 2023 SRT contains improvements for SEC Staff Accounting Bulletin (SAB) No. 121 on obligations to safeguard crypto assets that an entity holds for platform users and modified documentation labels to identify the substance and intended application of the elements. The SEC staff strongly encourages companies to use the most recent version of the respective taxonomy for their submissions to take advantage of the most up‑to-date tags.

Upcoming March 29, 2023 Meeting

The FASB will discuss its projects on

1. Conceptual Framework: The Reporting Entity: The FASB will discuss its comment letter feedback and issues for redeliberations on the proposed reporting entity chapter of the Conceptual Framework project. The Board also will discuss whether to proceed to drafting a final Concepts Statement for vote by written ballot.
2. Disaggregation—Income Statement Expenses: The FASB will discuss comment letter feedback and issues for redeliberations on the proposed reporting entity chapter of the Conceptual Framework project. The Board also will discuss whether to proceed to drafting a final Concepts Statement for vote by written ballot.
3. Financial Instruments—Credit Losses (Topic 326)—Acquired Financial Assets: The FASB will continue deliberations and discuss transition and next steps.

See our April 2023 Bridging the GAAP newsletter for Centri’s observations.

Upcoming Webcasts

The FASB will host its IN FOCUS: 2023 GAAP and SEC Reporting Taxonomy Improvements and SEC Update webcast at 1:00 PM EDT.  A fireside chat will be included featuring Wes Bricker, Vice Chair—US/Mexico Trust Solutions Co-Leader at PwC, former U.S. Securities and Exchange Commission’s Chief Accountant, and current Chair of the XBRL International Board of Directors, and Richard R. Jones, Chair of the FASB. Members of the SEC’s Office of Structured Disclosure team also will provide an update on the SEC taxonomies and discuss their observations on data quality. For more details, see the FASB’s webcast registration.

Upcoming FASB Meetings

The FASB is tentatively scheduled to meet as follows:

For more information, see the FASB’s calendar.

IASB Standard Setter Updates

International Accounting Standards Board

On March 21, 2023, the IASB issued its Exposure Draft of proposed amendments to IFRS 9, Financial Instruments, in response to feedback received from the post-implementation review of IFRS 9. The amendments clarify:

1. how to account for the settlement of a financial liability via electronic cash transfers;
2. the classification of financial assets with ESG and similar features; and
3. the assessment of contractual cash flows of such loans as solely payments of principal and interest.

Additional disclosures are also proposed to the requirements in IFRS 7, Financial Instruments: Disclosures. Comments are due by July 19, 2023.

Regulatory Updates

Security and Exchange Commission & Treasury Board of Canada Secretariat

New SEC Proposals and Reopening of Comment Period

On March 15, 2023, the SEC proposed three rules related to cybersecurity risks and data breaches:

• Proposed Changes to Regulation S-P would enhance the protection of customer information by, among other things, requiring broker-dealers, investment companies, registered investment advisers, and transfer agents to provide notice to individuals affected by certain types of data breaches that may put them at risk of identity theft or other harm.
• Addressing Cybersecurity Risks to the U.S. Securities Markets would require certain entities that are considered to perform critical services to support the U.S. securities markets to implement policies and procedures that are reasonably designed to address their cybersecurity risks and, at least annually, review and assess the design and effectiveness of their cybersecurity policies and procedures, including whether they reflect changes in cybersecurity risk over the time period covered by the review.
• Proposed Expansion and Update Regulation SCI would expand the scope of entities subject to Regulation SCI to include registered security-based swap data repositories; all clearing agencies that are exempt from registration; and certain large broker-dealers, in particular, those that exceed a total assets threshold or a transaction activity threshold in national market system stocks, exchange-listed options contracts, US Treasury securities, or Agency securities. The proposed changes would also update certain of Regulation SCI’s requirements by requiring that an SCI entity’s policies and procedures include the maintenance of a written inventory and classification of all SCI systems and a program for life cycle management; a program to prevent the unauthorized access to such systems and information therein; and a program to manage and oversee certain third-party providers, including cloud service providers, of covered systems.

As a result of these new cyber-related rule proposals, the SEC reopened the comment period on proposed rules and amendments related to cybersecurity risk management and cybersecurity-related disclosure for registered investment advisers, registered investment companies, and business development companies, which previously closed in April 2022.

Comments on each of these proposals and the reopened proposal are due 60 days after the date of publication in the Federal Register.

Canadian Government to Require GHG Emissions Disclosures and Targets for Large Suppliers

On February 28, 2023, the Government of Canada announced that suppliers of federal procurements greater than $25.0 million will be required to measure and disclose their greenhouse gas (GHG) emissions and adopt a science-based target to reduce them in line with the Paris Agreement. The new rule takes effect April 1, 2023. A similar requirement has been proposed for contractors of the U.S. Government.

Rikki Williams

Senior Director | CPA

Rikki is a Senior Director at Centri Business Consulting. He has more than 16 years of public and private accounting experience. View Rikki Williams's Full Bio