At a recent conference, they shared their thoughts on private credit, digital assets, and other hot financial reporting issues.
The annual Baruch College Financial Reporting Conference in New York is probably the nerdiest conference for accountants and CFOs that we know of, or would dare to attend. But it’s also a great place to hear from the people behind the lettered government agencies about their priorities for the year. And this year’s event on May 7 did not disappoint.
While we hope to scatter more of what we learned throughout our coverage this year, here are three things we heard that you will want to know.
Cash questions.
When is a cash equivalent not a cash equivalent? Digital assets on company balance sheets have given rise to a new issue in US accounting standards. In some cases, a digital asset qualifies as a cash equivalent, the Financial Accounting Standard Board has said, at least preliminarily. To understand if a company’s digital asset meets the mark, though, FASB is going to require more details about all issuers’ “cash equivalent” line on balance sheets, whether or not a company holds assets like Bitcoin or stablecoins.
On a panel at the Baruch conference, Jackson Day, technical director of FASB, urged the accountants and other finance executives in attendance to pay attention to this upcoming change: If you have cash equivalents, you are going to have new disclosures under this proposal.
This might not go over very well, according to the other panelists. Cash equivalents are generally highly liquid, low-risk securities that earn a company return on its excess cash. Panelist Lara Long, a managing director at Riveron, said more details on cash equivalents could introduce competitive harm in the transparency of treasury strategies or upcoming investment plans, and whether a company relies on riskier investments or riskier financial.
Panelist Mark LaMonte, a partner at WilliamsMarston and former credit analyst, said that when he saw that [cash equivalents] line on the financial statements, he was accepting that and that it was readily available to settle obligations. So, it is somewhat fascinating now that we are thinking. We may need more disclosure around this to let people know what it really is. So, maybe there has been a long misconception about what a cash equivalent was, but if that misconception did not really exist, then we wonder why you would burden companies with incremental disclosure requirements.
DICE and slice.
It’s a mouthful, but the disaggregation of income statement expenses accounting standards update is a hot topic among accountants this year. (Call it DICE like everyone else.) Issued in late 2024, it goes into effect for annual reporting periods beginning after December 15, 2026, and interim reporting periods a year later.
As FASB’s Day noted at the conference, DICE was originally issued as an important response to investor feedback that there needed to be more disaggregation on what was going on in the income statement. It contains specific requirements about certain things that have to be disclosed, including purchases, inventory, tangible asset amortization, media, or depletion.
WilliamsMarston’s La Monte said for the smaller public companies he works with their struggle is just starting. He stated that it is important that those companies, regardless of size, need to start thinking about this, particularly if you are in that space where you’re making something, where you have these inventorial costs. The accounting systems that these companies are using are not necessarily going to be able to capture that information and produce what is needed to comply with these disclosures. So, there are going to need to be system work-arounds.
More, please.
If you slap the label “private” on an asset, expect the SEC to come calling. On the panel that addressed current developments at the SEC, Sheri York, the deputy chief accountant of the SEC’s office of the chief accountant, noted that OCA is watching the world of private credit closely. We are thinking about disclosure a lot in this space and mostly because there is a lot of judgment involved in valuing these assets.
Much of this investment comes through investment vehicles that are applying investment company accounting, which means they are measuring all of their investments at fair value. As you would expect, this growth is obviously creating more of a continued focus on valuation, which makes it challenging, right? Because private assets, by their nature, are illiquid.”