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, September 14, 2022 FASB Board Meeting
Leases. The Board held an education session on issues raised by private company stakeholders related to the accounting for leases between entities under common control. No decisions were made.
Joint venture formations. The Board deliberated sweep issues and decided to:
- Define formation date in the Master Glossary as the date on which an entity initially meets the definition of a joint venture.
- Require that a joint venture recognize any negative goodwill (the net identifiable assets recognized by the joint venture in excess of the fair value of the joint venture as a whole) resulting from the formation transaction as an adjustment to equity.
- Clarify the types of arrangements and business combinations guidance that a joint venture would analyze to determine whether transactions are separate from or part of the joint venture formation. The Board decided that a joint venture would analyze whether any contingent payments to the venturers or employees are part of the joint venture formation or represent a transaction separate from the joint venture formation, while the business combinations guidance for preexisting relationships or acquisition-related costs would not apply.
- Clarify that the formation date is always the measurement date and that if multiple transactions are accounted for as a single transaction, then the identifiable assets and liabilities would be recognized when they have satisfied the recognition criteria in Subtopic 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Noncontrolling Interest.
- Require that any contingent arrangements deemed to be part of the joint venture formation and classified within assets or liabilities follow the guidance in Subtopic 805-20.
- Provide guidance for scenarios in which the joint venture replaces share-based payment awards.
- Provide a scope exception to all entities that may be proportionately consolidated by one or more of the venturers and not-for-profit entities.
- Clarify that for an entity electing the retrospective transition option, the entity would apply the relevant business combinations guidance that existed at the formation date.
- The level at which goodwill impairment testing would occur in circumstances in which the joint venture does not satisfy the definition of a business in Topic 805, Business Combinations.
- Presentation of financial statements for the predecessor entity of a joint venture.
The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs of the amendments in the proposed Accounting Standards Update and that the expected benefits of those amendments would justify the expected costs.
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 60 days.