U.S. Accounting Rule Maker Looks to Advance Projects on Tax, Crypto and Expenses in 2023

FASB Chairman Rich Jones said he expects to move many of these projects closer to the finish line in the new year. The board has at least three core projects—two on disclosure of expenses and one on disclosing income taxes—in 2023, according to Mr. Jones.

The shift toward finalizing projects comes as the FASB faces political and investor pressure. The Securities and Exchange Commission’s Investor Advisory Committee, a group of investors, academics and financial advisers, in September suggested setting up an advisory committee to ensure the FASB remains politically independent. 

Accountants and investors argue a new U.S. minimum tax set to go into effect in January risks politicizing accounting rules and could encourage companies to distort financial results. The FASB welcomes outside advice to help shape its standards, Mr. Jones said.   

The FASB will likely finalize a rule in 2023 requiring public companies to start breaking out big-ticket expenses incurred by their business divisions, Mr. Jones said. The board issued a proposal in October and plans to review public feedback in the new year. 

Verizon Communications Inc.

in December said disclosing significant expenses by segment wouldn’t be meaningful to its investors. “Our investors have not expressed a need for additional information about our reportable segments’ expenses beyond that which is already disclosed,” Mary-Lee Stillwell, vice president of accounting and external reporting, said in a Dec. 12 letter to the FASB. Verizon declined to comment further.

The board also is plowing ahead with a separate project in which companies would break out additional expense categories, potentially including labor costs, as line items on income statements. The FASB expects to propose a rule based on the project in the first half of 2023 and could vote on a final standard later in the year, depending on public comments, Mr. Jones said. 

Another major project Mr. Jones said might be finalized in 2023 would require companies to provide more tax details. The FASB in November voted to propose forcing public and private companies to break out income taxes they pay to federal, state and foreign authorities for the year to date in both quarterly and annual financial reports.

The FASB is also working on setting clear accounting and disclosure rules for companies holding bitcoin and other cryptocurrency assets. The proposed rules, which the FASB expects to issue in the first half of 2023, would affect a smaller swath of companies than some other projects, because only a handful of non-crypto businesses hold crypto.

The FASB’s stated mission is to set rules providing investors with information about companies’ finances to enable them to make capital-allocation decisions. Investors generally seek more disclosure, while companies often express concern over compliance costs and oppose disclosing details in areas such as business segments or taxes for fear of revealing too much to competitors.

The tax proposal will likely prove particularly contentious, said Dennis Beresford, a former FASB chair. “A lot of companies probably feel that it might disclose some business practices that they would not like competitors or, frankly, other taxing authorities to know about,” said Mr. Beresford, now an executive-in-residence at the University of Georgia’s Terry College of Business. 

The FASB’s agenda is promising for shareholders, said David Gonzales, a senior accounting analyst at ratings firm

Moody’s

Investors Service, noting that, “I would say that over the past year, there’s been a marked shift toward investor-related issues.” 

In the past, the FASB lost some of its focus on investors toward the end of the standard-setting process, for example, by not requiring enough disclosure from companies, Mr. Gonzales said. 

The FASB puts a strong emphasis on investor input, Mr. Jones said, adding that political pressure hasn’t necessarily increased since he became chair in 2020 amid lawmakers’ scrutiny of the board over its then-new rule on credit losses. “We engage with our elected officials,” he said. “They have an important role in our economy.” 

The slowing economy will also be on the FASB’s radar, Mr. Jones said. “To the extent that we see anything emerging, where we need to act quickly to make an improvement to GAAP to provide better information, we’re prepared to act,” he said, referring to generally accepted accounting principles.

Write to Mark Maurer at [email protected]