5 financial reporting issues to keep an eye on

The Financial Accounting Standards Board is studying whether new ESG reporting requirements are needed. As corporations increasingly focus on ESG, the accounting implications of ESG-related transactions will be of interest to regulators and investors. Monitoring FASB deliberations in 2022 will allow companies to anticipate how to present ESG-related transactions within a developing regulatory and reporting structure.

In addition to watching for new reporting requirements for ESG-related transactions, companies must also consider implications for data collection processes and controls and choose reporting methods that best deliver rigorous ESG reporting outside the financial statements. Companies should be preparing today for competitive and compliance-driven needs to enhance sustainability reporting as momentum grows toward a baseline global standard. KPMG supports the development of a global baseline ESG reporting standard to achieve greater consistency, reliability and comparability in ESG reporting. This effort not only serves the capital markets, but clear standards will also help companies develop cohesive ESG strategies to unlock value for investors, customers and employees.

The Securities and Exchange Commission proposed new requirements for cybersecurity risk and incident disclosures. The last guidance issued for registrants was in 2018. The proposal is a step toward further transparency in the marketplace, offering more prescriptive guidance on disclosing cyber risks and incidents.

Additionally, FASB is examining whether new reporting requirements are warranted for cryptocurrency holdings and other intangible assets. If FASB decides to take up a project on accounting for digital assets, companies should monitor these developments for any significant changes from current practice.

Investors want to understand the value and risks of digital asset holdings. Corporations with digital assets should think about how they communicate the values of their holdings and understand the risks involved when going crypto.

Companies adopting a digital asset investment policy should update their corporate governance, accounting procedures and internal controls to support successful investment strategies.

In a recent KPMG survey, 50% of C-suite executives said that global corporate tax reform efforts keep them up at night; 37% say the same about domestic corporate tax reform.

In the U.S., debates over domestic tax reform have stalled as President Biden’s Build Back Better legislation remains in limbo. While tax reforms at home will likely have the biggest impact on U.S. businesses, financial officers should also focus on developments in global tax reform.

Chief tax officers can prepare companies by communicating how OECD proposals will affect their organizations. Model legislation for a global minimum tax has been released, and dozens of nations appear poised to implement changes that could impact U.S. companies with foreign operations.