FASB Topic 832 Redeliberations

The Financial Accounting Standards Board (FASB) convened on May 4, 2016 for the first time after the Exposure Draft Comment Period closed on Topic 832 to discuss feedback from staff on the comment letters and other input from various outreach performed by the staff. Overall most stakeholders are supportive of the FASB's efforts to increase transparency in government incentives & address the diversity in practice that exists today in accounting for government assistance. However, some stakeholders urged the Board to reconsider the project as a Recognition & Measurement and Disclosure project versus a Disclosure only project. During the meeting, there was debate around the underlying motivation for why some companies would prefer a larger project. There was no resolution here other than to reaffirm that the Board had already gone down this path of discussion and decided a Disclosure project would be the best way to tackle the issue out of the gate.

Primary Areas of Concern for Staff

The staff came back with three primary areas of concern.

  1. Income tax assistance - most stakeholders agree to exclude agreements within the scope of Topic 740.

  2. Requirement to disclose a quantitative amount of assistance received but not recognized directly in the financials - the issue here is really three-fold and public companies put up the most resistance in this area. The comments focused on potential compliance issues due to: a) difficultly in aggregating data; b) no internal controls around government assistance; and c) no systems in place to track & report disclosures. That said, most financial statement users felt a quantitative value would be "decision useful".

  3. Restrictions - the two primary issues here are confidentiality & competitive disadvantage. Some comment letters referred to confidentiality clauses in their agreements, but they were not able to provide any specifics. Staff conducted further research through outreach and was only able to identify one example - it was from a foreign jurisdiction. Some of the feedback suggested adding a narrative disclosure that only discloses the existence of an agreement, but not the specific T&Cs of the agreement - and some point to GASB Statement 77 when referring to omission of specific details of an agreement. When referring to competitive disadvantage, some companies believe foreign governments will be hesitant to negotiate with them in the future if they are subject to disclosure requirements.

Other Topics Discussed

A number of other topics were discussed by the Board during the meeting, including scope, materiality, private company considerations, not-for-profit exclusion, cost & complexity of implementation, transition, and effective date.

Next Steps

The staff has begun redeliberations to address the following:

  1. Scope

  2. Disclosure of the amount of gov't assistance received but not recognized directly in the financial statements, unless impracticable

  3. Restrictions

  4. Transition and effective date

  5. Private company considerations

  6. Overall costs and benefits of the disclosures

The next Board meeting to discuss Topic 832 is June 8, 2016. Stay tuned...

 

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