PROJECT UPDATE

Simplifying the Balance Sheet Classification of Debt

Last updated on January 14, 2020. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Sections updated on the date above are indicated with an asterisk *)

 

Objective:

The objective of this project is to provide guidance that will reduce the cost and complexity of determining the current versus noncurrent balance sheet classification of debt.
 

Background:

This project is part of the Board’s Simplification Initiative. The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information required to be reported by an entity.

The Board has heard from stakeholders that the guidance on the balance sheet classification of debt is unnecessarily complex. To reduce complexity, the Board has decided to consider replacing current narrow-scope guidance with principles-based guidance.

Exposure Draft:

On January 10, 2017, the FASB issued the proposed Accounting Standards Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent) . The due date for comment letters was May 5, 2017.

Comment Letters:

Revised Exposure Draft:

On September 12, 2019, the FASB issued a revised proposed Accounting Standards Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent) . The due date for comment letters was October 28, 2019.

Download the revised proposed Accounting Standards Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent) .

Comment Letters:
Read comment letters on the revised proposed Accounting Standards Update.

Read the press release on the revised proposed Update.

Decisions Reached at Last Meeting (July 31, 2019):


The Board continued redeliberations of the proposed Accounting Standards Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent). The Board made the following decisions.

Classification Principle—Settlement of Debt through the Issuance of Equity

The Board clarified how an entity would apply the debt classification principle to a debt arrangement in which its contractual terms specify that it will be entirely settled through the issuance of equity. The Board decided to include a question for respondents in the revised proposed Accounting Standard Update about equity-settled debt arrangements.

Variable Rate Demand Obligations with Remarketing Agreements

The Board decided that no further amendments to the revised proposed Update are necessary related to variable rate demand obligations with remarketing agreements.

Grace Period Disclosures

The Board decided to remove a proposed disclosure for events of default, which would have required an entity to disclose a description of the course of action that an entity has taken, or that it proposes to take, to remedy the default . The Board also decided not to add a similar disclosure requirement for grace periods that have not expired before the balance sheet date.

Master Glossary Definition of Current Liabilities and Illustrative Examples

The Board considered its prior decisions made on the Master Glossary definition of current liabilities and on illustrative examples. No changes were made.

Analysis of Costs and Benefits

The Board concluded that it has received sufficient information and analysis to make an informed decision on the perceived costs of the changes and that the expected benefits would justify the expected costs of the amendments in the revised proposed Update.
 

Tentative Board Decisions Reached to Date (as of July 31, 2019):

 
A summary of decisions reached to date can be found here .

The Board meeting minutes, handouts, and videos 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.

The following are links to the minutes for each meeting.  To view Board meetings and handouts from the past 90 days, click here .
 
July 31, 2019 Board Meeting —The Board continued redeliberations on issues from its January 2017 proposed Accounting Standards Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent) .
March 20, 2019 Board Meeting —The Board continued redeliberations on issues from its January 2017 proposed Accounting Standards Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent) .
January 23, 2019 Board Meeting —The Board continued redeliberations on issues from its January 2017 proposed Accounting Standards Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent).
October 24, 2018 Board Meeting —The Board continued redeliberations on issues from its January 2017 proposed Accounting Standards Update,  Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent).
August 22, 2018 Board Meeting —The Board continued redeliberations on issues from its January 2017 proposed Accounting Standards Update,  Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent).
September 13, 2017 Board Meeting —The Board began redeliberations on issues from its January 2017 proposed Accounting Standards Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent).
June 28, 2017 Board Meeting —The Board discussed comment letter feedback received. The handout from the Board meeting can be found here .
October 19, 2016 Board Meeting —The Board discussed project direction, stakeholder feedback, and sweep issues that arose since the last meeting.
July 29, 2015 Board Meeting —The Board concluded its initial deliberations on this project.
January 28, 2015 Board Meeting —Principle for balance sheet classification of debt
January 28, 2015 Board Meeting —Principle for balance sheet classification of debt
August 13, 2014 Board Meeting —Agenda prioritization meeting about whether to add a project to the Board’s agenda

The comment period closed on October 28, 2019, and the Board will consider comment letter feedback on the revised proposed Update.

Jenifer Wyss
Supervising Project Manager
jjwyss@fasb.org

Autumn Zobrist
Postgraduate Technical Assistant
azobrist@fasb.org

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

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