Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
Wednesday, March 29, 2023 FASB Board Meeting
Conceptual Framework: The reporting entity. The Board deliberated substantive issues that were identified by comment letter respondents to the Exposure Draft. The Board made the following decisions:
Features of a Reporting Entity
The Board affirmed its decision that a reporting entity has three features: (1) economic activities have been conducted, (2) those economic activities can be distinguished from those of other entities, and (3) the financial information in general purpose financial reporting faithfully represents the economic activities conducted within the circumscribed area and is useful in making decisions about providing resources to the entity.
Consolidated Financial Statements
The Board affirmed its decision that if a circumscribed area of economic activities includes a parent-subsidiary relationship, a full set of consolidated financial statements that faithfully represents the circumscribed area’s economic activities is necessary to meet the objective of general purpose financial reporting.
Parent-Only Financial Statements
The Board affirmed its decision that parent-only financial statements depicting a circumscribed area of economic activities in which a parent-subsidiary relationship exists do not represent a full set of financial statements as defined in Chapter 7, Presentation, of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, and, therefore, are not sufficient to meet the objective of general purpose financial reporting.
Portion of a Larger Entity
The Board affirmed its decision that a portion of a larger entity, such as a subsidiary, branch, or division, can represent a circumscribed area of economic activities and, consequently, meet the description of a reporting entity in paragraph RE5 of the Exposure Draft.
Combined Financial Statements
The Board decided that combined financial statements can appropriately depict two or more entities that are under common control or common management if the two or more commonly controlled or commonly managed entities are combined to represent a circumscribed area of economic activities.
Permission to Ballot
The Board directed the staff to draft final Chapter 2, The Reporting Entity, of Concepts Statement 8 for vote by written ballot.
Disaggregation—income statement expenses (revised March 30, 2023). The Board continued its initial deliberations by discussing clarifications of the decisions at the January 11, 2023 Board meeting, interim reporting, application to private companies, transition, cost-benefit considerations, and comment period. The Board also discussed whether to proceed to drafting a proposed Accounting Standards Update for vote by written ballot. The Board made the following decisions:
Inventory Costs
The Board clarified that manufacturing expenses should not be separated from costs capitalized to inventory when they are of the same category (for example, employee compensation). The Board revised the required category from “inventory expense” to “inventory expense and other manufacturing expenses.”
Application of Selling Expenses Disclosure to Nonbusiness Entities
The Board decided that the selling expenses disclosure requirement would apply only to entities in the scope of this project.
Requirement to Disclose Natural Expenses Included in One Caption without a Mapping Requirement
The Board decided to require that a specific list of natural expenses that are (1) already required to be disclosed in total, (2) included in only one expense caption that is also a relevant expense caption, and (3) not subject to a mapping requirement be included in the same tabular format disclosure as any other expense disaggregation requirements resulting from this project.
Other Amortization, Depreciation, and Depletion
The Board decided to link depreciation and amortization to existing disclosure requirements in paragraph 360-10-50-1 and paragraph 350-30-50-2. The Board clarified that amortization of a finance lease right-of-use asset recognized in accordance with paragraphs 842-20-35-7 through 35-8 and amortization of leasehold improvements recognized in accordance with paragraphs 842-20-35-12 through 35-13 should be included as part of either the depreciation required category or the amortization required category.
The Board decided to add depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities in accordance with Subtopic 932-360, Extractive Activities—Oil and Gas—Property, Plant, and Equipment, as a separate category.
Application to Interim Periods
The Board decided to require all disclosures for interim reporting periods.
Entities Subject to Disaggregation Requirements
The Board decided that the disaggregation requirements would apply only to public business entities.
Practical Expedients
The Board decided not to pursue the following practical expedients:
The Board decided to require prospective application of the disaggregation disclosure requirements (with optional retrospective application).
Analysis of Costs and Benefits
The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs and expected benefits of the amendments in the proposed Update and that the expected benefits of those amendments would justify the expected costs.
Comment Period
The Board decided on a 90-day comment period for the proposed Update.
Permission to Ballot
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.
Financial instruments—credit losses (Topic 326)—acquired financial assets. The Board continued initial deliberations and made the following decisions:
Presentation
The Board decided not to change the presentation of purchased financial assets with credit deterioration (PCD) and to include a question about presentation in the proposed Accounting Standards Update.
Transition
The Board decided to require a modified retrospective transition method whereby the expanded PCD scope would be applied retrospectively to the date an entity adopted the amendments in Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
Analysis of Costs and Benefits
The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs and expected benefits of the amendments in the proposed Update and that the expected benefits of those amendments would justify the expected costs.
Comment Period
The Board decided on a 60-day comment period for the proposed Update.
Next Steps
The Board directed the staff to draft a proposed Accounting Standards Update for vote
by written ballot.
Wednesday, March 29, 2023 FASB Board Meeting
Conceptual Framework: The reporting entity. The Board deliberated substantive issues that were identified by comment letter respondents to the Exposure Draft. The Board made the following decisions:
Features of a Reporting Entity
The Board affirmed its decision that a reporting entity has three features: (1) economic activities have been conducted, (2) those economic activities can be distinguished from those of other entities, and (3) the financial information in general purpose financial reporting faithfully represents the economic activities conducted within the circumscribed area and is useful in making decisions about providing resources to the entity.
Consolidated Financial Statements
The Board affirmed its decision that if a circumscribed area of economic activities includes a parent-subsidiary relationship, a full set of consolidated financial statements that faithfully represents the circumscribed area’s economic activities is necessary to meet the objective of general purpose financial reporting.
Parent-Only Financial Statements
The Board affirmed its decision that parent-only financial statements depicting a circumscribed area of economic activities in which a parent-subsidiary relationship exists do not represent a full set of financial statements as defined in Chapter 7, Presentation, of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, and, therefore, are not sufficient to meet the objective of general purpose financial reporting.
Portion of a Larger Entity
The Board affirmed its decision that a portion of a larger entity, such as a subsidiary, branch, or division, can represent a circumscribed area of economic activities and, consequently, meet the description of a reporting entity in paragraph RE5 of the Exposure Draft.
Combined Financial Statements
The Board decided that combined financial statements can appropriately depict two or more entities that are under common control or common management if the two or more commonly controlled or commonly managed entities are combined to represent a circumscribed area of economic activities.
Permission to Ballot
The Board directed the staff to draft final Chapter 2, The Reporting Entity, of Concepts Statement 8 for vote by written ballot.
Disaggregation—income statement expenses (revised March 30, 2023). The Board continued its initial deliberations by discussing clarifications of the decisions at the January 11, 2023 Board meeting, interim reporting, application to private companies, transition, cost-benefit considerations, and comment period. The Board also discussed whether to proceed to drafting a proposed Accounting Standards Update for vote by written ballot. The Board made the following decisions:
Inventory Costs
The Board clarified that manufacturing expenses should not be separated from costs capitalized to inventory when they are of the same category (for example, employee compensation). The Board revised the required category from “inventory expense” to “inventory expense and other manufacturing expenses.”
Application of Selling Expenses Disclosure to Nonbusiness Entities
The Board decided that the selling expenses disclosure requirement would apply only to entities in the scope of this project.
Requirement to Disclose Natural Expenses Included in One Caption without a Mapping Requirement
The Board decided to require that a specific list of natural expenses that are (1) already required to be disclosed in total, (2) included in only one expense caption that is also a relevant expense caption, and (3) not subject to a mapping requirement be included in the same tabular format disclosure as any other expense disaggregation requirements resulting from this project.
Other Amortization, Depreciation, and Depletion
The Board decided to link depreciation and amortization to existing disclosure requirements in paragraph 360-10-50-1 and paragraph 350-30-50-2. The Board clarified that amortization of a finance lease right-of-use asset recognized in accordance with paragraphs 842-20-35-7 through 35-8 and amortization of leasehold improvements recognized in accordance with paragraphs 842-20-35-12 through 35-13 should be included as part of either the depreciation required category or the amortization required category.
The Board decided to add depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities in accordance with Subtopic 932-360, Extractive Activities—Oil and Gas—Property, Plant, and Equipment, as a separate category.
Application to Interim Periods
The Board decided to require all disclosures for interim reporting periods.
Entities Subject to Disaggregation Requirements
The Board decided that the disaggregation requirements would apply only to public business entities.
Practical Expedients
The Board decided not to pursue the following practical expedients:
- Qualitative disclosure when substantially all of an expense line item relates to a single type of relevant expense category
- Scoping expedient when an expense line item includes immaterial amounts of required expense categories
- Inventory expense is not a required category when inventory is not presented separately on the balance sheet.
The Board decided to require prospective application of the disaggregation disclosure requirements (with optional retrospective application).
Analysis of Costs and Benefits
The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs and expected benefits of the amendments in the proposed Update and that the expected benefits of those amendments would justify the expected costs.
Comment Period
The Board decided on a 90-day comment period for the proposed Update.
Permission to Ballot
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.
Financial instruments—credit losses (Topic 326)—acquired financial assets. The Board continued initial deliberations and made the following decisions:
Presentation
The Board decided not to change the presentation of purchased financial assets with credit deterioration (PCD) and to include a question about presentation in the proposed Accounting Standards Update.
Transition
The Board decided to require a modified retrospective transition method whereby the expanded PCD scope would be applied retrospectively to the date an entity adopted the amendments in Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
Analysis of Costs and Benefits
The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs and expected benefits of the amendments in the proposed Update and that the expected benefits of those amendments would justify the expected costs.
Comment Period
The Board decided on a 60-day comment period for the proposed Update.
Next Steps
The Board directed the staff to draft a proposed Accounting Standards Update for vote
by written ballot.