FASB Current Projects: What CPA Candidates Should Watch

Why FASB Projects Matter for CPA Candidates

The Financial Accounting Standards Board (FASB) maintains an active agenda of standard-setting projects that address emerging issues and improve existing guidance. While proposed standards are not testable on the CPA exam until they are finalized and effective, understanding the direction of the FASB agenda helps candidates appreciate the evolving nature of financial reporting and prepares them for standards that may become testable during their careers.

Monitoring FASB projects also reinforces core accounting concepts. The issues under debate often highlight areas of existing GAAP that are complex, ambiguous, or subject to diverse practice, all of which are areas the CPA exam is likely to test.

Disaggregation of Income Statement Expenses

One of the most anticipated FASB projects involves requiring public business entities to provide more detailed information about certain expense categories in the notes to the financial statements. Under the proposed standard, entities would need to disaggregate natural expense information, such as employee compensation, depreciation, and amortization, from functional expense categories like cost of goods sold and selling, general, and administrative expenses.

This project reflects investor demand for more transparency into the composition of reported expenses. Currently, companies have significant discretion in how they present expenses on the income statement, and the level of detail varies widely. The proposed disaggregation would make it easier for investors to understand the nature of costs driving a company financial performance.

For CPA candidates, this project reinforces the importance of understanding the difference between natural and functional expense classifications and the role of notes to the financial statements in providing decision-useful information.

Accounting for Software Costs

The FASB has been working on a project to address the accounting for costs of software, whether developed internally or purchased. Current GAAP includes multiple models for software costs depending on how the software will be used: ASC 350-40 for internal-use software, ASC 985-20 for software to be sold, leased, or marketed, and ASC 350-40 guidance for cloud computing arrangements. This fragmentation leads to inconsistent accounting and confusion among preparers and users.

The FASB is considering a single model that would apply regardless of how the software will be deployed or monetized. This could significantly change how technology companies and other entities that invest heavily in software development account for these costs. CPA candidates should understand the existing models and be prepared for potential changes.

Intangible Assets

Related to the software project, the FASB is examining broader issues around the recognition and measurement of intangible assets. Under current GAAP, most internally developed intangible assets are expensed as incurred, while acquired intangible assets are recognized at fair value in a business combination. This asymmetry has drawn criticism as the economy has shifted toward knowledge-based and technology-driven business models where intangible assets represent a significant portion of enterprise value.

Financial Instruments Projects

The FASB continues to work on targeted improvements to financial instruments standards. Current projects include clarifications to the current expected credit loss (CECL) model, refinements to hedge accounting under ASC 815, and potential simplifications to the accounting for certain equity investments. These projects aim to address implementation challenges and improve the usefulness of financial instrument disclosures.

For CPA candidates, financial instruments remain a critical exam topic. Understanding the CECL model, the classification and measurement of financial assets and liabilities, and the mechanics of hedge accounting are all essential for the FAR section.

Codification Improvements and Simplification

The FASB regularly undertakes projects to simplify existing standards and resolve inconsistencies in the Codification. These projects may seem less dramatic than major new standards, but they are important because they clarify existing guidance and reduce unnecessary complexity. Recent simplification efforts have addressed areas such as the measurement of inventory, the accounting for goodwill impairment, and the presentation of debt issuance costs.

Conceptual Framework Updates

The FASB conceptual framework, which provides the foundation for financial accounting and reporting standards, is also subject to periodic updates. The framework addresses fundamental concepts such as the objective of financial reporting, the qualitative characteristics of useful financial information, and the definitions and recognition criteria for elements of financial statements. Changes to the conceptual framework can influence the direction of future standard-setting projects.

How to Stay Current

• Visit the FASB website regularly to review the current technical agenda and recently issued Accounting Standards Updates.
• Read exposure drafts and comment letters to understand the arguments for and against proposed changes.
• Follow the AICPA exam content updates, which specify when new standards become testable.
• Join professional organizations and attend webinars that discuss emerging accounting issues.
• Remember that only finalized and effective standards are testable on the CPA exam, but understanding the direction of change builds conceptual depth.

The FASB agenda reflects the profession response to a changing business environment. By monitoring these projects, CPA candidates develop the awareness and adaptability that define successful accounting professionals.