ABA submitted a comment letter in which it called on the Financial Accounting Standards Board to prioritize its projects on troubled debt restructurings and goodwill and asked the board to add several projects to its agenda:
- Expanding the tax credit investments that qualify for accounting that is now limited to those related to specific affordable housing projects;
- Changing software development expense recognition criteria to better align with current software development processes;
- Conducting a post implementation review of Accounting Standard Update 2016-1, which eliminated the “available for sale” classification for equity securities;
- Addressing issues related to the recognition and timing of impairment when a company stops using a leased asset in its primary business activities; and
- Reconsidering the accounting for digital assets.
Goodwill and TDRs are ABA’s highest priorities and are already on the FASB agenda. ABA noted that under the current expected credit losses methodology, TDR accounting has significantly diminished relevance, does not provide decision-useful information and is operationally burdensome. ABA asked FASB to expedite the project and eliminate TDRs. Similarly for goodwill, ABA noted that it is excluded from a bank’s regulatory capital and is not decision-useful information for bank investors. In addition, current accounting and impairment process ends up being an arduous process that provides little value. ABA asked FASB to prioritize this project, which will likely provide operational relief to many companies and especially banks.
The letter was sent in response to FASB’s general invitation to comment on its technical agenda. The letter was the culmination of several months of work with ABA’s Accounting Committee and other stakeholders to identify and formulate issues. The hottest issue based on a preliminary review of comments received by FASB is the accounting for digital assets. In fact, the current invitation to comment received almost 600 letters compared to the previous ITC for agenda consultation in 2016, which received only 45 comment letters. Most of these comments focused solely on allowing fair value accounting for digital assets.
To learn more about any of these issues or if you have other accounting concerns, please contact Josh Stein.