CPAJ News Briefs: FASB, IASB

FASB News

U.S. GAAP Taxonomy Style Guide Issued for Public Comment

FASB staff said the public can now submit comments about a proposed GAAP Taxonomy Style Guide, a document that communicates how the GAAP Financial Reporting Taxonomy (GRT) and SEC Reporting Taxonomy (SRT) are designed. The style guide also provides other information to help a user of the GRT understand how elements and relationships are structured, according to release notes.

The guide includes three sections:

• Section 1: Overview
• Section 2. Assignment of Reference Roles: this includes a general overview; definitions of reference roles, examples of language commonly used in the Accounting Standards Codification (ASC), and additional considerations; and assignment of reference roles for a dimensional structure.
• Section 3. Reference Format: this includes Accounting Standard Codification (ASC) references to the FASB guidance, ASC references to SEC literature (Regulation S-X and Staff Accounting Bulletin), and SEC references not included in the ASC (for example, Regulation S-K and Rule 15c3-1, Net Capital Requirements for Brokers or Dealers) while the SRT only includes SEC and CFTC references. 

The comment period ends on March 17.

IASB News

Global Baseline of Climate and Sustainability Disclosure Rules to Take Effect Next Year

The International Sustainability Standards Board (ISSB) unanimously voted to require that global climate and sustainability disclosure rules take effect next year, an ambitious date based on “the urgent” push for this information. The ISSB’s two standards will take effect for annual periods beginning on or after January 1, 2024, but can be adopted earlier if both are adopted at the same time, the board agreed. Companies that choose to apply the standards earlier have to disclose that fact. The ISSB also affirmed the drafting of the two standards as final rules, declining to re-expose S1, General Sustainability-related Disclosures, and S2, Climate-related Disclosures, although several revisions were made before they were finalized. Any changes to those proposals were in line with the roughly 1,400 comment letters that were submitted, according to the discussions. The rules will be issued by the end of June, the board announced.

The completion of the standards is a landmark moment for the ISSB, as they are the board’s first two environmental, social and governance (ESG) standards—and were done in less than a year. “It is a big moment,” ISSB Chair Emmanuel Faber said during discussions. “It was a short moment, shorter than maybe we had initially planned in the agenda and I think the reason is because that paper described very accurately the absolutely incredible work that has been happening before [and] the immense effort and talent that was put in by our staff,” he said. “You are behind that success that moves us into this incredible place a year after we launched our EDs to move to the finalization of the standards. We know why the foundation was chosen, we know why we were told we needed to start with climate and you guys have delivered—I’m incredibly proud and happy.”

Input Sought on Whether Credit Loss Accounting Rules Work as Intended

The IASB has unanimously agreed to review whether accounting rules for reporting losses from soured loans are working as intended, especially during tough periods riddled with economic uncertainty. The board will draft a Request-for-Information (RFI) to obtain further public input about whether the expected credit losses (ECL) requirements of International Financial Reporting Standard (IFRS) 9, Financial Instruments, effectively gave advance warnings about loans that were in risk of default. During outreach, corporate entities said they were getting better information as a result of the ECL rules, enabling them to better understand what they might not recover, according to the discussions. But they also pointed to areas where there could be simplifications “where we can still get the same benefit out of a number without the same operational costs.” Things like intercompany loans were flagged, staff said. The RFI is expected to be issued by the end of the May, according to meeting papers. The ECL model was developed in 2014, in response to the 2008 global financial crisis, in order to require banks to report losses they expect to incur from loans more quickly than was done prior to the crisis. Old rules were criticized as resulting in “too little, too late” being reported on loan losses, a factor driving the financial crisis of 2008. The new ECL rules took effect January 1, 2018.