This part of the assignment deals with the standards which are in the process of being developed by FASB. Financial Accounting Standard Board (FASB) is a statutory body which is engaged in formulating and issuing accounting standards which are to be followed by every organization so as to ensure that the general purpose financial reporting framework is followed (Paul Pacter, 2013). FASB is responsible to ensure that the standards which act as a guideline in the preparation and presentation of the financial statements are in compliance with general accounting framework and also the legal requirements which are in force in the country (Murphy & O’Connell, 2013). In recent years the board has issued numerous numbers of standards which focuses on different aspects with a view of improving the transparency and understandability of the financial statements. There are still some standards which are to be further amended and some are still at their development phase (Holder et al., 2013). In this part of the assignment. Standard which is to be issued on improvements to non-employees share based payment accounting. If the business wants to reduce the cost which the businesses faces then non-staff share based payment system is to be improved. However there lies complexities in the treatment and maintaining usefulness of the information which are provided in the financial statements of the company (Holzmann & Munter, 2017). The report will be concluding with the opinions of the respondents as to whether the standard is to be issued and how the standard will be able to bring about improvements in the accounting process. The report will be ending with the comments of the respondents on the need of the new standard and how the same will help in further disclosure of effective information to the shareholders of the company.
As per the proposal which is to be presented to FASB, non-staff share based payment is necessary in order to keep the employee or staffs of the business satisfied so that the operations of the business can be conducted in an effective manner. The topic which FASB needs to considers I further improvements in stock-based payments. The standard is to be known as Improvement to Non-Employee Shared-Based Payment Accounting (Talley & Podesta, 2016). The basic aim of the standard is to lay forward numerous ideas for encouraging each organization to participate in the comment process for gaining feedback. Before the introduction of the standard FASB needs feedbacks from the companies so as to recognize the need of the standard and the necessary amendments which are still required to be made in the new standard. The board has developed questions which are to be answered by the companies with respective comments which are based on their own organization’s structure. Some of the questions which are developed by the board are concerned with the tax benefits, complexity, treatments and cost which is supported with maintenance information in the financial statements of the company (Takayama, 2015). Moreover, the questions as developed takes into account the relationship between additional tax benefits and cash inflows, permission for the entities to undertake the accounting policy election, tax payment procedure and proposed expansion of the business (Bova & Yang, 2017). The feedbacks which are obtained with the help of the comments of the companies are useful for making the necessary adjustment which are required before the standard becomes available for implementation.
The feedbacks which are accumulated from different companies are given below in details along with the name of the company which provided with the feedback:
Heiskell and MacGillivray and Associates
The company is engaged in providing accounting and auditing services to its clients. The company operates in Australia and is one of the respondents on the new standard which is to be developed by the board. The company has agreed to discard the accounting tool of PIC which it used for the purpose of eliminating the costs which are associated with the business. The firm is also of the opinion that incorporation of the new standard will be beneficial for the overall effective disclosures in the financial statements (Lawrence, 2013). In response to the tax cash flow classification question, the firm agreed that the same can be shown as an operating activity of the business (Farshadfar & Monem, 2013). Hence the firm has agreed with all the necessary adjustments which are proposed by FASB. The standard is expected to be beneficial for both the organization and the staffs.
The company is engaged in technological and innovative services which has a reputation in the market for the defense technologies and security tools which are offered by the company. the company focuses on corporate governance principles in order to manage the policies of the company effectively. The company does not agree with the policies of FASB as which was agreed by Heiskell and MacGillivray and Associates about the policies of identifying the additional tax benefits and deficiencies which are to be recorded in the income statement (Robinson & Schmidt, 2013). The company has suggested that FASB should incorporate the symmetrical equity approach in order to get more favorable results (Karsu, 2016). The approach which is suggested by the company will only be facilitating interest of the public while the interest of the business will be completely ignored. In addition to this, the approach which is suggested by the business will not be in compliance with the capture theory also. On the other hand, the business has agreed that tax cash flows should be identified as operational activity of the business. The business has agreed with all other terms of the proposal which is suggested by the FASB.
The company is engaged in providing services to the clients which are mostly related to online payments for any transactions which are undertaken by the clients. The company acts as merchant which provides the online payment services to its customers. The company has also been asked to respond to the question provided by FASB for the purpose of the new standard which is to be issued shortly. The modification which are suggested by FASB for the new standard are all perfect with the company and the company has agreed to the same. However, the identification and disclosure of the additional tax benefits and deficiencies which are to be recorded in the financial statement of the company has not been agreed upon by Visa Inc (Taylor & Richardson, 2013). The company is of the opinion that although the complexities of the business might be reduced but the volatility of expenses which are associated with income tax will surely increase. Hence it can be said that the company accepted all the adjustments which are suggested by FASB expect the one where disclosure is to be provided in the financial statements. The company is of the opinion that the standard will be beneficial for both the organization and the staffs.
American Bankers Association
The company is engaged in banking activities and the business aims to further improve the overall banking structure and the operational activities associated with the same. Unlike Raytheon Company, the business has agreed with the changes which are proposed by FASB. The only disagreement which the company has is with the disclosure of additional tax benefits and deficiencies in the financial statements of the business. The major cause of such disagreements can be attributed to difference in compensation expenses and the expenses which are shown in the financial statements of the business. The company is also supportive of the fact that the company will be following public interest principle as well as the interest of the organization. Thus, it can be clearly said that the Visa Inc has agreed to all the aspects of the proposal which is suggested by FASB except the disclosure of additional tax benefits and deficiencies in the financial statements of the company (Law & Mills, 2015).
Significance of the Proposal
The proposal which is suggested by FASB is crucial and significant for the purpose of bringing about improvements in the stock compensation of international organizations. Furthermore, with the introduction of the standard it is also expected it will be enhancing the values of the financial statements of the company. As per the responses which are recorded for all the above mention companies all the adjustments which are suggested by FASB are very much necessary and will results in better presentation of the financial statements (Moldovan, 2014). The primary problems which have been identified with the help of the responses of the respondents is that the recognition of additional tax benefits and deficiencies in the financial statements is unnecessary. The reason behind this is that such will facilitate in ensuring that the overall public interest to enhance the economy and the interest of the company is completely ignored. The respondents have however, agreed to show tax cash flow in the operating activities of the business and recognize the same. Thus, it can be said that the proposal is quite significant from the point of view of all organization and general public. The adjustments which are proposed by FASB are to be incorporated in the new standard which is to be developed (Chakravarthy, 2014).
Thus, from the above discussions it is clear that the new standard which is to be issued on Improvement to Non-Employee Shared-Based Payment Accounting are crucial from the point of view of the business and the board needs to develop the standard and implement the same. From the responses which are obtained from the respondent companies, a majority of the companies have disagreed with the detection of additional tax benefits and deficiencies in the financial statements. The reason behind this may be related to the increase in volatility of expenses which are related to income tax. All the respondent companies have however agreed to all other conditions and adjustment which are set by the FASB. All the respondents have agreed that the standard is required for improving the financial statements and add more value to the same.
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Holder, A. D., Karim, K. E., Lin, K. J., & Woods, M. (2013). A content analysis of the comment letters to the FASB and IASB: Accounting for contingencies. Advances in Accounting, 29(1), 134-153.
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Lawrence, A. (2013). Individual investors and financial disclosure. Journal of Accounting and Economics, 56(1), 130-147.
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Robinson, L. A., & Schmidt, A. P. (2013). Firm and investor responses to uncertain tax benefit disclosure requirements. The Journal of the American Taxation Association, 35(2), 85-120.
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