Changes in Accounting That Will Impact Your Practice
With the new year comes new regulations, standards, and compliance requirements for accountants. Here are a few of the updates you need to keep an eye out for in 2023.
Changes from The Financial Accounting Standards Board (FASB)
The Financial Accounting Standards Board (FASB), is an independent, non-profit organization that establishes accounting and reporting standards, as well as the Generally Accepted Accounting Principles (GAAP).
Changes and updates from FASB can make serious impacts on firms, so it’s important to stay up to date on each update and how it will affect your firm. Here are three of the biggest Accounting Standards Updates (ASU) that went into effect in January 2023, and what you need to know about them.
Accounting Standards Update (ASU) 2022-04
ASU 2022-04 updates the transparency of supplier finance programs. This creates explicit disclosure requirements and obligations. This is a major change and affects all entities that use supplier finance programs in connection with the purchase of goods and services.
This update requires that buyers disclose sufficient information about the program. This includes:
- The key terms of the program (including payment timing and terms)
- The outstanding confirmed amount
- A description of where any obligations are presented in the balance sheet
- A roll forward of any obligations during the annual period
Accounting Standards Update (ASU) 2018-12
ASU 2018-12, “Targeted Improvements to the Accounting for Long-Duration Contracts” (LDTI) was initially issued on August 15, 2018, but the effective date was deferred twice. Finally, as of January 1, 2023, it’s in effect.
The goal of the update is to improve financial reporting, specifically for insurance companies. While the objective is to improve, simplify, and enhance financial reporting, the fact is that many firms are changing their entire software system to stay compliant.
The good news is that these changes are only applied to insurance companies that issue long-duration contracts, such as life insurance, disability income, long-term care, and annuities.
If your firm is affected, you may also need to be aware of ASU 2022-5 which was issued to help manage the costs of adopting LDTI.
Accounting Standards Update (ASU) 2022-06
Everyone who has contracts, hedging relationships, or other transactions that reference LIBOR (London Interbank Offered Rate) are affected by ASU 2022-06.
The UK Financial Conduct Authority (FCA) has made it so that banks and financial institutions are no longer required to submit LIBOR. ASU 2022-06 provides a structured guideline for how to adapt to this change.
Changes in State Laws
State laws have also been put into effect in January 2023. These state regulations must be met for any employee living in the required state as well as any organizations doing business in those states.
California has made an amendment to the Pay Transparency Law. Employers in California are now required to provide a pay scale for any job for job applicants or current employees upon request.
Due to this, employers are also required to maintain records identifying job titles and wage rate history for each employee throughout their time at the company.
Paid Medical and Family Leave (PFML) begins in 2023 in Colorado.
Eligible employees are able to receive 12 weeks of paid family and medical leave. This is funded through a payroll tax, but the paid leave must be funded before an employee is able to take the leave.
All employees and employers will start paying into PFML in 2023, but the earliest estimated date that employees will be able to start taking paid leave is in 2024.
While the federal rate is holding at $7.25 an hour, many states have increased their minimum wage rate. This includes Maine’s increase to $13.80 an hour and Washington’s increase to the highest in the country of $15.74 an hour.
Other states that are affected by various minimum wage laws in 2023 include:
- New York
Use a Tool You Can Trust
Keeping up with new compliance standards, regulations, and laws is a lot to tackle, and it can be easy to miss minor updates. Rather than doing it all yourself, use a software you can trust to do the work for you.
Payroll Relief from AccountantsWorld® by IRIS was built for professionals like you, to give you the tools and resources you need to succeed. We guarantee 100% calculations, forms filed, and taxes paid for all 50 states and US territories. We make compliance easy.
See how Payroll Relief can help streamline your payroll workflow, helping you make payroll profitable.