FASB accounting standards refer to bookkeeping rules for private and public nonprofits and companies, particularly in the United States. Such accounting standards are used to set the rules and regulations for local and state governments. The FASB accounting standards follow the generally accepted accounting principles in the profession. Since its inception in 1973, the FASB has always carried out its mandate to govern the rules of the accounting profession in the United States. Collectively, the primary mission of the body is to enhance reporting standards of financial accounting so that the information is relevant to investors and other stakeholders who use financial reports. For example, most shareholders of corporate entities are fond of using financial and accounting reports for rational decision-making processes. Although FASB accounting standards are primarily used for enhancing financial accounting reporting standards, their regular updates provide new regulations that potentially impact many organizations.
Facts as Presented in the Case
As the lead accountant in any organization, the primary task should be to research the new FASB Accounting Standards Update (ASU). Researching and analyzing the ASU demonstrates how the new accounting regulations influence the company. Some new accounting standards updated by June 2022 include Fair Value Measurement, Financial Instruments, and Hedging and Derivatives, among others. For example, the Fair Value Measurement is tailor-made for public business entities and will be effective after December 2023. The Hedging and Derivatives update is also meant for public business entities and is effective after December 2022 (Alkarawy & AL-Kuwair, 2021). The Financial Accounting Standard Board provides an environment where companies are given additional time to implement the financial standards on the current credit losses, leases, and hedging. In this case, all stakeholders are advised to review and suggest comments on the accounting proposals they deem fit (Reimers, 2011). Since 2014, the accounting board has monitored the implementation of many standards to comprehend and convey any issues that might hamper stakeholders from applying them. According to FASB, implementation issues are common among not-for-profit institutions, small public companies, and private organizations.
When organizations are transitioning to a considerable standard, they face severe challenges that may affect their operations. For example, organizations may face the challenge of external and internal resource availability. In addition, the organizations also have an issue with the sources and timing of education (Osadcha et al., 2018). Furthermore, they face extensive transition requirements. In the transition process, there is also a lack of enough IT infrastructure and expertise in having new systems or changing ones already existing. Other issues include adequate internal controls and business solutions that suit the organization’s transition process. Having estimation processes or accurate data is also a challenge for companies in transition. As a result of these adverse factors, most private organizations and other organizations prefer the FASB to delay the implementation of standards that are ineffective, such as leases and hedges (Al Breiki & Nobanee, 2019). However, the updates of accounting standards are known to enhance the transition process facilitated by the board. Therefore, the proposed updates provide a new philosophy that facilitates a more prosperous and efficient transition to the required standards.
A Summary of the Area of Accounting
During the meeting held in June 2022, the FASB, in a unanimous decision, resolved to halt the four-year program that aimed to simplify how organizations compute goodwill impairments. Although the approaches of FASB and its international affiliate, the IASB, on goodwill financial accounting had made a reasonable convergence, the bodies seemed to be separating in the recent past. In 2018, the accounting board decided to include in its technical agenda a widespread program that would revisit the issue of accounting for goodwill and of identifiable intangible assets (Osadcha et al., 2018). Therefore, the subsequent goodwill and intangible assets would attract formal input from all the stakeholders, focusing on public business entities. In July 2019, the financial accounting board of the US was invited to pronounce the accounting goodwill and intangible assets. In this case, the US accounting body had a difficult decision on whether to alternate goodwill with subsequent accounting for cost-benefit analysis (Ikram & Ahmed, 2020). In December 2020, the FASB decided to reestablish goodwill amortization. In this case, the resolution ensured that the reevaluating amortization period was prohibited.
On July 2019, the exposure documents revealed an invitation to comment on the issue of goodwill accounting and intangible assets. In this case, the staff wanted to obtain validated input from stakeholders that would focus on public business entities on goodwill and intangible assets and the project scope (Reimers, 2011). Thus, the accounting board provided a three-month comment period with remarks due by October 2019. Some of the exposure documents’ major highlights were comment letters’ summaries and comments’ invitations. In May 2022, the board discussed the goodwill amortization. The accounting body also availed its leanings to provide goodwill amortization in the same way as impairment. The board directed its staff to continue assessing other income presentation alternatives, but no considerable decisions were reached (Alkarawy & AL-Kuwair, 2021). In May 2022, the board had a unanimous decision, concluding that the conclusions were tentative and would change at future board meetings. In this case, decisions would become final after an official ballot had been issued to the standard.
In my company, the accounting standards updates (ASU) provide a financial perspective as concerns shareholders’ equity, expenses, liability, revenue, and assets. The accounting standards updates provide transparency and accountability to my organization (Ikram & Ahmed, 2020). Therefore, the accounting standards will help my organization because they will enhance the required transparency of financial reports within the company. In addition, the accounting updates will identify when economic circumstances are to be displayed, measured, and recognized. Like most external institutions like insurance companies, stock brokerage firms, regulatory agencies, and investors use financial reporting to provide accurate and relevant information. My company will also utilize ASU for the same reasons. Thus, accounting updates will ensure transparency in reporting and determining the financial reporting measures in my organization (Osadcha et al., 2018). In the United States, accounting principles form the basis of bookkeeping standards widely accepted in preparing financial reports. As a result, my company will also use ASU to promote its bookkeeping standards. Accounting standards updates in the company enhance clarity, comparability, and consistency regarding communicating financial information. The accounting principles introduced by the standards board ensure that my company follows the accepted norm when its accounting professionals compile financial statements (Reimers, 2011). The FASB ensures international financial reporting standards to help my company navigate the turbulent area of accounting prudence. The principles help my organization have consistent financial or accounting practices and standards.
The accounting standards update on financial instruments will assist in vintage disclosures and restructuring in my company. This update was introduced in March 2022 and would be effective for fiscal years that began after December 2022 and will play a critical role in the company. In this case, it would also incorporate interim periods within the fiscal years. The government assistance update involves effective amendments for entities within their range for financial statements meant after December 2021. However, my organization would be allowed to apply for early amendments that would suit its organizational objectives (Al Breiki & Nobanee, 2019). Updates on leases would entail entities that were not yet adopted as of November 2021. Any form of the amendment would be permitted after December 2021. In addition, my company will be allowed to have early applications where it will also have modified retrospective foundations to leases at the commencement of a fiscal year of adopting a final update (Reimers, 2011). Updating financial services such as insurance will provide amendments that will enhance the accounting standards in my company.
In conclusion, a lead accountant for a company would need to advise his company on the FASB Accounting Standards Update that is prevailing at the time. In this case, researching the new FASB accounting standards would greatly assist the organization in being transparent and accountable. It is critical to note that the accounting standards provide a financial picture of a firm as concerns shareholders’ equity, expenses, liability, revenue, and assets. In this scenario, most financial institutions, such as banks, insurance companies, investment banks, and brokerage firms, use accounting standards to ensure information regarding a particular entity is valuable and accurate. In addition, regulatory agencies also use accounting standards as the basis of known companies with prudent financial management. Investors look for companies with good financial reporting standards to invest their financial resources. Therefore, a company with accounting standards updates would be more competitive in the business environment.
Al Breiki, M., & Nobanee, H. (2019). The role of Financial Management in promoting sustainable business practices and development. SSRN Electronic Journal. Web.
Alkarawy, H. G., & AL-Kuwair, E. J. (2021). Accounting improving the costs and business process management in transportation to a third party. Accounting, 701–708. Web.
Ikram, K., & Ahmed, A. (2020). The role of accounting information in the company’s decision-making process. International Journal of Psychosocial Rehabilitation, 24(03), 645–656. Web.
Osadcha, O. O., Akimova, A. O., Hbur, Z. V., & Krylova, I. I. (2018). Implementation of accounting processes as an alternative method for organizing accounting. Financial and Credit Activity Problems of Theory and Practice, 4(27), 193–200. Web.
Reimers, J. L. (2011). Financial accounting: A business process approach. Pearson Education Ltd.