Summary - As reported in its “Summary of Decisions” publication, the FASB met on October 16, 2024, and discussed the Private Company Council’s (PCC’s) project on the presentation of contract assets and contract liabilities for construction contractors.
The FASB endorsed the PCC’s decision that the scope of the presentation alternative would be private construction companies within the scope of Topic 910, Contractors—Construction. The FASB also endorsed the PCC’s decision to provide an alternative for private companies to present contract assets and contract liabilities on a gross basis on the statement of financial position. The presentation alternative would be applied at the entity level. The FASB endorsed the PCC’s decision to require that a private company disclose when it has elected the presentation alternative.
In addition, the FASB endorsed the PCC’s decision to require a full retrospective transition approach and related transition disclosures. The Board also decided that when a private company initially applies the presentation alternative for contract assets and contract liabilities, it need not justify that the use of the accounting alternative is preferable as described in paragraph 250-10-45-2.
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© 2024 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Summary - This ASU amends the FASB Accounting Standards Codification™ for SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 121 which expresses the views of the staff regarding the accounting for obligations to safeguard crypto-assets an entity holds for platform users.
The FASB Codification contains the authoritative standards that are applicable to both public entities and nonpublic entities. Content contained in the SEC sections of the Codification is provided for convenience only and relates only to SEC registrants.
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© 2024 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Summary - The FASB has issued Accounting Standards Update (ASU) No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which enhances the transparency about the use of supplier finance programs for investors and other allocators of capital.
The ASU affects buyer companies that use supplier finance programs in connection with buying goods or services. By entering into supplier finance programs with finance providers, suppliers have the option to be paid by a third party in advance of an invoice due date, based on invoices that the buyer has confirmed as valid. These arrangements are also commonly known as reverse factoring, payables finance, or structured payables arrangements.
Under the new ASU, a company that uses a supplier finance program in connection with the purchase of goods or services will be required to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. Specifically, a buyer will be required to provide the following qualitative and quantitative information:
The buyer should disclose the outstanding confirmed amount as of the end of each interim period.
This ASU is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022, except for the pending content in paragraph 405-50-50-3(b)(2), which shall be effective for fiscal years beginning after December 15, 2023. Early adoption is permitted.
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© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Summary - The FASB issued a proposed Accounting Standards Update (ASU) intended to help investors and other allocators of capital better consider the effect of supplier finance programs on a buyer’s working capital, liquidity, and cash flows. Stakeholders are encouraged to review and provide comment on the proposed ASU by March 21, 2022.
The proposed ASU would affect buyers that use supplier finance programs in connection with the purchase of goods and services. Supplier finance programs allow a buyer to offer its suppliers the option to be paid by a third party in advance of an invoice due date, based on invoices that the buyer has confirmed as valid. These transactions are also commonly known as reverse factoring, payables finance, or structured payables arrangements.
Stakeholders have observed that there is a lack of transparency about supplier finance programs because (1) there are no explicit disclosure requirements in Generally Accepted Accounting Principles (GAAP) for those programs; and (2) a buyer may present obligations covered by those programs in the same balance sheet line item as accounts payable or in another balance sheet line item depending on the facts and circumstances of the arrangement.
The proposal would address these issues by requiring the buyer in a supplier finance program to disclose sufficient information about the program to allow an investor to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. These disclosures would include the key terms of the program, as well as the obligation amount that the buyer has confirmed as valid to the third party that is outstanding at the end of the reporting period, a rollforward of that amount, and a description of where that amount is presented in the balance sheet.
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© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.