November 10, 2022
The Small Business Advisory Committee (SBAC) met on November 10, 2022 at the FASB’s offices. At the meeting, the SBAC members provided input on the following topics:
- Accounting for and Disclosure of Software Costs: SBAC members provided feedback on potential models to modernize the accounting for software costs (for both software for internal use and software to be sold to customers). SBAC members agreed that modernization of the existing software cost guidance would improve financial reporting in this area. Members expressed mixed preferences for the accounting for software costs (i.e., a single model versus a dual model). Members also discussed software purchased within a tangible product and distinguishing between costs related to software improvements and maintenance.
- Targeted Improvements to Income Tax Disclosures: SBAC members provided feedback on the potential improvements to disclosure of income taxes paid and the rate reconciliation information. Members who are investors agreed that those improvements would provide useful information and allow them to improve cash flows forecasts (for example, estimating potential tax increases as a result of onshoring). Some members who are preparers noted that providing disaggregated information by jurisdiction would result in additional costs. Members expressed mixed views on whether the state and local tax information should be required to be disaggregated.
- Joint Venture Formations: FASB staff provided an update on the amendments in the proposed Accounting Standard Update, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. SBAC members generally agreed with the proposed amendments that upon formation, a joint venture should apply a new basis of accounting by recognizing and initially measuring its assets and liabilities at fair value (with certain exceptions that are consistent with the business combinations guidance).
- Segment Reporting: FASB staff provided an update on the proposed Accounting Standards Update, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. One investor member noted that disclosure of significant segment expenses would be helpful in forecasting an entity’s future cash flows and may provide a deeper understanding of the major cost drivers of the entity’s reportable segments. A few members noted that the proposed segment disclosures may lead a public entity to re-evaluate the information that is regularly provided to the CODM, particularly information that is provided to, but not used by, the CODM in making operational and business decisions.
- Government Grants: FASB staff provided SBAC members with an update on the feedback received on the Invitation to Comment on government grants. Certain members noted that this topic is important and should be addressed by the Board. Members noted that most entities are currently analogizing to IAS 20. One member observed that analogizing to IAS 20 is sufficient for practice. Members further commented that IAS 20 could be used as a starting point for standard setting, however additional guidance would be necessary. Additionally, members noted that the project’s scope should focus on the types of government grants that are pervasive in practice.
For more information about the SBAC, please visit the FASB website.
SBAC Meeting Recaps are provided for those interested in following the activities of the SBAC. Official positions of the SBAC are reached only after extensive due process & deliberations. More details on the SBAC’s input on the FASB’s projects can be found within the meeting minutes, which will be published on the FASB website in the coming weeks.