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FASB Focuses on Financial Statement Disclosures, Leased Assets

FASB is revising rules for financial statement disclosures and lease accountin

The Financial Accounting Standards Board's (FASB) attempt to set up a standard for including disclosures in financial

The Financial Accounting Standards Board's (FASB) attempt to set up a standard for including disclosures in financial statement notes is moving in a positive direction, Accounting Today reports.

FASB research director Ron Lott told the news outlet that with the project, FASB is "trying to develop a way for the board to think about disclosure requirements when they do a standards project."

He commented that currently, disclosures are put off until the end of the project. "Not always, but a lot of times you say it takes you so long to work through the recognition and measurement issues that you think about disclosures quickly," Lott added.

Although FASB has forms of disclosure frameworks for measurements and recognition, it has no power over disclosures that may be included in the president's letter nor the Management's Discussion & Analysis. There have been no moves yet for the International Accounting Standards Board (IASB) to collaborate on the project, but it may happen in the future, Lott told the news outlet.

Some of the topics that may be included in the disclosure framework include risks and off-balance sheet transactions, and he noted that companies should not expect anything "drastically new" to be added. Rather, the project involves a refinement of what already goes into the notes.

Simultaneously, FASB is also working with IASB to create a final set of rules regarding accounting for leased equipment, real estate and other materials as capital assets. As Channel Insider reports, this will have an impact on information technology companies in particular, since they will need to start including IT infrastructure in their capital expense lists. Where the infrastructure is physically located will not be a factor in this requirement, the source explains.

Additionally, the businesses will need to break down their IT infrastructure and account for how much of it is in the form of software-as-a-service deployment and how much is dedicated to public cloud computing environments.

One of the risks associated with the proposed rule is that it could lead to greater uncertainty, the source acknowledges, particularly when it comes to leasing contracts and the level of detail they include.

"Finance organizations are first going to have to reexamine all their leasing contracts, and then come up with new formulas for figuring out when they should lease/rent something versus actually buy it," Channel Insider explains.

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