Project Update

Distinguishing Liabilities from Equity (Including Convertible Debt)

Last updated on September 27, 2017.  Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

*Project Objective
*Decisions Reached at Last Meeting
*Next Steps
*Board/Other Public Meeting Dates
*Background Information
*Contact Information

*Project Objective

The objective of this project is to improve understandability and reduce complexity (without loss of information for users) of the accounting for instruments with characteristics of liabilities and equity (including convertible debt).

*Decisions Reached at Last Meeting (September 20, 2017)

The Board decided to add to its agenda a project on distinguishing liabilities from equity with the objective of improving understandability and reducing complexity (without loss of information for users) that would focus on indexation and settlement (in the context of the derivative scope exception), convertible debt, disclosures and earnings-per-share.

*Next Steps

The Board directed the staff to research and draft a technical plan that would focus on indexation and settlement (in the context of the derivative scope exception), convertible debt, disclosures and earnings-per-share.

*Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

*September 20, 2017 Board Meeting—The Board added to its agenda a project on distinguishing liabilities from equity (including convertible debt).

*Background Information

The FASB’s history of distinguishing liabilities from equity dates back to 1986 when the FASB added to its technical agenda a broad project on financial instruments. Since then, the FASB issued various pieces of guidance to resolve various issues raised by stakeholders. Stakeholders observe that distinguishing liabilities from equity (including convertible debt) continues to be a major financial reporting issue that the Board should consider for improvement because current guidance is overly complex, internally inconsistent, path dependent, form based, and is a cause for frequent financial statement restatements.

On September 20, 2017, the Board decided to add to its agenda a project on distinguishing liabilities from equity (including convertible debt) with the objective of improving understandability and reducing complexity (without loss of information for users).

*Contact Information

Mary Mazzella
Senior Project Manager
msmazzella@fasb.org

Aarika Friend
Project Manager
afriend@fasb.org

Lucy Cheng
Project Manager
lcheng@fasb.org

Shane Kinley
Postgraduate Technical Assistant
skinley@fasb.org

Jared Cline
Postgraduate Technical Assistant
jcline@fasb.org