The Public Markets Advisory Committee (PMAC) tackled a range of topics from intangible assets to the nitty-gritty of lease accounting. They shared insights on what’s working, what’s not, and what’s next in the world of financial reporting.
Key Points
•🗓️ Date: May 15, 2025
•📜 Intangibles: Discussion on aligning recognition guidance and valuing internally generated intangibles
•🏢 Leases: Feedback on the effectiveness and costs of the new leases standard
•💸 Debt and Equity: Tackling complexities and recommending improvements
•🏢 Public Business Entity: Input on GAAP definitions and their impact
📚 Accounting for Intangibles
On May 15, 2025, the PMAC dove deep into the murky waters of intangible assets. They explored the Recognition of Intangibles and debated how to better align the guidance for intangibles acquired in business combinations versus asset acquisitions. Some members highlighted the economic value of internally generated intangibles and their associated cash flows, especially in tech and R&D-heavy sectors.
🏢 Leases Under the Microscope
The committee reviewed the Post-Implementation Review on Leases, noting that while the new standard has increased transparency, it wasn't all smooth sailing. Initial implementation costs were higher than expected, though ongoing compliance costs have leveled off. Members flagged challenges like identifying embedded leases and reassessing discount rates. Despite the hurdles, the new standard has helped some entities manage lease contracts better.
💸 Debt and Equity Dilemmas
Debt and equity guidance complexities were another hot topic. Members discussed how nonsubstantive contract terms and capital structure challenges lead to unintuitive accounting outcomes. The consensus? There's a need for more clarity and additional disclosures to help investors and creditors understand these instruments better.
🏢 Defining Public Business Entities
The PMAC also weighed in on the definition of a public business entity. While simplifying definitions could help, members felt that current GAAP applications are generally understood. They didn't see this as a high-priority issue but acknowledged the potential benefits of fewer, clearer definitions.
