Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.

Wednesday, January 18, 2023 FASB Board Meeting

Accounting for and disclosure of software costs. The Board discussed the recent feedback received from a wide variety of stakeholders on various models.

The Board directed the staff to further research the initial development cost model, including ways to increase the operability and consistency of the application of that model. The initial development cost model would require that all direct software development costs and software enhancement costs be capitalized from the point at which it is probable that (1) the software project will be completed and (2) the software will be used to perform the function intended. Software development costs incurred after the software is substantially complete and ready for its intended use and ongoing maintenance costs would be expensed as incurred.

The Board also directed the staff to further research a dual model. That model would require that certain software costs be expensed as incurred, while other software costs would be accounted for under the initial development cost model. The Board directed the staff to research alternatives to delineate between which software costs should be expensed and which should be capitalized.

The Board directed the staff to complete the research on recognition and measurement for the initial development cost and dual models before further considering presentation and disclosure improvements. The Board decided not to further pursue the ongoing development cost model or the expense all model.

EITF 21-A, Accounting for Investments in Tax Credit Structures using the Proportional Amortization Method.

The Board ratified the following final consensus reached by the EITF at its December 1, 2022 meeting and directed the staff to draft a final Accounting Standards Update reflecting the final consensus for vote by written ballot.

The Task Force reached a final consensus on the following issues:

  1. To affirm the Task Force’s consensus-for-exposure reached at the June 16, 2022 EITF meeting, which included the following issues:
    1. The proportional amortization method should be elected by entities on a tax-credit-program-by-tax-credit-program basis.
    2. The criteria in paragraph 323-740-25-1(a), (b), and (c) should be retained with no additional clarification to those criteria (other than conforming edits).
    3. The criterion in paragraph 323-740-25-1(aa) should be retained with a clarification that the criterion would be evaluated in relation to the operating and financial policies of the underlying project.
    4. When applying the criterion in paragraph 323-740-25-1(aaa), the existence of refundable tax credits does not automatically preclude an investor from applying the proportional amortization method. Clarification to this criterion would also include that:
      1. Projected benefits refer to total return, including tax credits, other tax benefits, and non-tax-related cash flows (including refundable tax credits). Additionally, the Task Force clarified that refundable tax credits should be included in the denominator but not in the numerator when performing the substantially all test.
      2. “Substantially all” should be determined using discounted amounts, and the discount rate to be used should be consistent with the cash flow assumptions used by the investor in making the investment decision.
    5. The existing reassessment requirement in paragraph 323-740-25-1C should be retained with no additional clarifications. That is, entities would reassess whether a tax credit investment meets the proportional amortization method criteria only upon a change in the nature of the investment or a change in the relationship with the project sponsor.
    6. Entities should apply the flow-through method to tax equity investments that qualify for and are accounted for using the proportional amortization method.
  2. To remove the cost method in Subtopic 323-740, Investments—Equity Method and Joint Ventures—Income Taxes.
  3. To remove the equity method example in Example 1 in Subtopic 323-740.
  4. To require that the delayed equity contribution guidance be applied to all investments that qualify for and are accounted for using the proportional amortization method.
  5. To affirm the Task Force’s consensus-for-exposure that an entity may apply the modified retrospective approach or the retrospective approach upon transition.
  6. To allow the amendments to the cost method, equity method example, and delayed equity contributions in Subtopic 323-740 to be applied using either (a) the entity’s general transition method or (b) a prospective transition method.
  7. To affirm the Task Force’s consensus-for-exposure on disclosures that would retain the disclosure objective and require certain disclosures for all investments in tax credit programs for which an entity has elected to use the proportional amortization method, regardless of whether the specific investment meets the criteria to apply the proportional amortization method.
  8. To require adoption for public business entities for fiscal years beginning after December 15, 2023, including interim periods in those fiscal years.
  9. To require adoption for other-than-public entities for fiscal years beginning after December 15, 2024, including interim periods in those fiscal years.
  10. To permit early adoption for all entities, including early adoption in any interim period after the issuance of a final Update as of the beginning of the fiscal year that includes that interim period.