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Bridging the GAAP: August 2024

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

FASB Issues Final Chapter of Conceptual Framework

The FASB issued a new chapter of its Conceptual Framework on the measurement of items recognized in financial statements. This nonauthoritative framework (which does not establish or change GAAP) provides the Board with measurement concepts to consider when developing standards and describes entry and exit prices as the most relevant and representationally faithful measurement systems. This new chapter completes the FASB’s Conceptual Framework by amending the existing Concepts Statement 8 and replacing Concepts Statements 5 and 7.

FASB Proposes Amendments to Derivatives and Revenue Scoping

The FASB proposed new accounting guidance that would create an exception for certain contracts from being accounted for as derivatives and clarify the accounting for share-based payments received from customers in revenue arrangements.

Feedback on the proposal is due by October 21.

IASB Standard Setter Updates

International Accounting Standards Board

IASB Issues Annual Improvements to IFRS Accounting Standards

The IASB issued narrow-scope amendments to IFRS Accounting Standards that include clarifications, simplifications, corrections, and changes intended to improve consistency in:

• IFRS 1, First-time Adoption of International Financial Reporting Standards;
• IFRS 7, Financial Instruments: Disclosures and Guidance on implementing IFRS 7;
• IFRS 9, Financial Instruments;
• IFRS 10, Consolidated Financial Statements; and
• IAS 7, Statement of Cash Flows.

The amendments are effective for annual periods beginning on or after January 1, 2026. Early adoption is permitted.

IASB Proposes Narrow-Scope Amendments on Translating Financial Information Into Hyperinflationary Currencies

The IASB published an exposure draft proposing narrow-scope amendments to IAS 21, The Effects of Changes in Foreign Exchange Rates, that are intended to address accounting issues that affect companies that translate financial information from a non-hyperinflationary currency to a hyperinflationary currency.

Comments are due by November 22.

IASB Proposes Amendments to IFRS 19

The IASB published an exposure draft proposing amendments to IFRS 19, Subsidiaries without Public Accountability: Disclosures. When initially issued in May, IFRS 19 simplified financial reporting for eligible subsidiaries and reduced disclosure requirements related to IFRS Accounting Standards and amendments as of February 2021. This proposal considers new IFRS Accounting Standards and amendments issued between February 2021 and May 2024. The exposure draft also includes indicative disclosure requirements from the prospective Regulatory Assets and Regulatory Liabilities accounting standard and asks for feedback on whether these requirements would be practical for IFRS 19-eligible subsidiaries.

Comments are due by November 27.

Illustrative Examples to Improve Climate-Related and Other Uncertainties in the Financial Statements

In response to stakeholder demand, the IASB published a consultation document with eight illustrative examples aimed at improving the reporting of climate-related uncertainties in the financial statements. The principles-based examples focus on areas such as materiality judgments, disaggregation of information, and disclosures about assumptions and estimation uncertainties (but can be applied equally to other types of uncertainties beyond climate-related uncertainties). 

ISSB Standard Setter Updates

International Sustainability Standards Board

ISSB Embarks on New Work Plan

The IFRS Foundation issued a Feedback Statement on its agenda consultation on IFRS Sustainability Disclosure Standards as issued by the ISSB. The statement explains how feedback on the agenda consultation shaped the 2024-2026 work plan. Key focus areas include implementation of the first two sustainability standards (IFRS S1 and IFRS S2), industry-based disclosures, interoperability, connectivity, proportionality, and an investor focus.

The ISSB’s agenda consultation ran from May to September 2023 and received over 400 responses from a broad range of stakeholders across various regions. Investors and investor groups submitted 70 of the responses.

SEC Regulatory Updates

Security and Exchange Commission

CAQ Publishes Highly Inflationary Economies Document

The Center for Audit Quality (CAQ) SEC Regulations Committee and its International Practices Task Force (IPTF) issued a discussion document describing recent inflation data for certain countries that the IPTF discussed at its May 2024 meeting. Haiti now has a three-year cumulative inflation rate exceeding 100%, and Egypt, Lao People’s Democratic Republic, Malawi and South Sudan are projected to reach three-year cumulative inflation rates exceeding 100% in the current year.

ASC 830 requires a foreign entity in a highly inflationary economy to remeasure its financial statements using its parent’s reporting currency, as of the beginning of the reporting period, including interim reporting periods, following the period in which the economy becomes highly inflationary. An economy is considered highly inflationary when it has a cumulative inflation rate of approximately 100% or more over a three-year period.

Given global inflation trends, entities with foreign operations should monitor inflation in countries in which they operate that have high levels of inflation.

Other Regulatory Matters

European Commission Issues FAQs on the EU Corporate Sustainability Reporting Rules

The European Commission published a new set of frequently asked questions (FAQs) on EU corporate sustainability reporting rules. The FAQ document aims to clarify certain provisions of the CSRD and other EU regulations including the EU Taxonomy. These Q&As are separate and distinct from EFRAG’s implementation Q&A compilation document on the European Sustainability Reporting Standards.

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