Briefing at a Glance

  • The Financial Accounting Standards Board (FASB) announced Monday that its chair, Rich Jones, has added a research project to the agenda to monitor current accounting trends related todata infrastructure investments and non-traditional lending, including private credit.。
  • As part of the project, the U.S. accounting standard-setter may identify potential improvements to the standards underpinning generally accepted accounting principles (GAAP).
  • According to a FASB spokesperson, the board defines data infrastructure investments as data centers, the financing arrangements behind them, the use of these assets in a company's or entity's operations, and related contractual arrangements.

In-Depth Analysis

The launch of this new research project comes amid growing scrutiny of the accounting treatment used by large technology companies to finance data center projects.

Although companies are generally required to disclose significant risks to their operations, as reported by The Wall Street Journal last month, there are currently no specific disclosure requirements forpower purchase agreementsentered into by tech companies to achieve their artificial intelligence goals.

For example, according to The New York Times,Meta secured billions in financingto build a massive data center in Louisiana without taking on the debt itself. Such deals often allow companies to shift risks associated with the AI boom to lesser-known firms. This could lead to a future situation where, if tech giants do not ultimately need all their computing capacity, smaller companies or special purpose vehicles (SPVs) may be left to bear the responsibility.

KPMG, one of the Big Four accounting firms, also weighed in on the issue last year, noting in a report that data center companies "operate in a dynamic and complex environment that has implications for financial reporting, compliance, and operational efficiency."

KPMG reported that the accounting for data centers requires owners to make critical and sometimes subjective decisions. For example, choosing whether to classify them asproperty, plant, and equipmentor as investment property "could have a significant impact!" the report emphasized.

A FASB spokesperson said the FASB's research agenda is set by the chair, who can add or remove projects as needed.

Editor's note: This story has been updated to include additional comments from a FASB spokesperson.