Tentative Board Decisions

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, February 27, 2019 FASB Board Meeting

Disclosures by business entities about government assistance. The Board continued redeliberations on the proposed Accounting Standards Update, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.    
 
The Board discussed comments received from the external review of the staff draft of the final Update and next steps in the project. The Board directed the staff to conduct outreach to gain additional information about the expected costs and the expected benefits of the staff draft of a final Update.  
 

Codification improvements—financial instruments. The Board discussed comment letter feedback on the proposed Accounting Standards Update, Codification Improvements—Financial Instruments.
 
The Board decided to amend the guidance in Topic 326, Financial Instruments—Credit Losses, for each of the following topics:
  1. Accrued Interest: The Board decided to:
    1. Extend the accounting policies and practical expedients related to accrued interest receivables in the proposed Update to available-for-sale (AFS) debt securities for which an entity is excluding accrued interest from both the fair value and amortized cost basis of the AFS debt security when recognizing and measuring an impairment.
    2. Retain the amendments in the proposed Update that would not define a period of time that is considered timely when applying the accounting policy election not to measure an allowance for credit losses on accrued interest receivables if an entity writes off the uncollectible accrued interest receivable in a timely manner.
    3. Require additional disclosures related to an entity’s accounting policy elections for measuring and presenting accrued interest receivables, including the disclosure of:
      1. The accounting policy election not to measure an allowance for credit losses when the accrued interest receivable is written off in a timely manner
      2. What time period or periods are considered timely when writing off uncollectible accrued interest receivables
      3. How an entity writes off uncollectible accrued interest receivables (either by reversing interest income, recognizing a credit loss expense, or a combination of both)
      4. The amount of uncollectible accrued interest receivable written off by reversing interest income.
    4. Clarify that the transition guidance for a modification of an entity’s writeoff policy to conform with the requirements of the accounting policy election for timely writeoffs of uncollectible accrued interest would be applied on a modified retrospective basis by means of a cumulative-effect adjustment to opening retained earnings in the statement of financial position as of the date of adoption of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326) —Measurement of Credit Losses on Financial Instruments
  2. Projections of Interest Rate Environments for Variable-Rate Financial Instruments and Consideration of Prepayments in Determining the Effective Interest Rate. The Board decided to require entities to adjust the effective interest rate for the consideration of the timing (and change of timing) of expected prepayments when using a discounted cash flow method to measure expected credit losses if an entity elects to project changes of an independent factor for variable rate financial assets.   
  3. Consideration of Estimated Costs to Sell When Foreclosure Is Probable. The Board decided to remove the requirement to discount the estimated costs to sell when applying the collateral-dependent guidance.
  4. Vintage Disclosures—Line-of-Credit Arrangements Converted to Term Loans. The Board decided to require that entities present line-of-credit arrangements that convert to term loans in a separate column that is not presented by origination year within the credit-quality disclosures.
The Board directed the staff to perform additional outreach and research on the following topics:
  1. Use of negative allowances for AFS debt securities
  2. The scope of transfers between classifications and categories for loans and debt securities.
The Board decided to include its previous decision to provide transition relief for entities that elect to use a prepayment-adjusted effective interest rate in a discounted cash flow approach to measure credit losses on troubled debt restructurings in a future Codification improvements document.
 
The Board decided to amend the guidance in Topic 830, Foreign Currency Matters, for the following topic:
  1. Remeasurement of Equity Securities at Historical Exchange Rates. The Board decided to retain the guidance in paragraph 830-10-45-18 that certain equity securities held at cost are nonmonetary items and debt securities classified as held-to-maturity (HTM) are monetary items.
The Board decided to amend the guidance in Topic 815, Derivatives and Hedging, for each of the following topics:
  1. Partial-Term Fair Value Hedges of Interest Rate Risk. The Board decided:
    1. To retain the scope of the assumed-term measurement guidance in paragraph 815-25-35-13B such that it continues to be limited to interest rate risk. The Board clarified that measuring the change in fair value of a hedged item attributable to interest rate risk using an assumed term does not preclude the same cash flows from also being designated in a hedge of foreign exchange risk.
    2. To clarify that in a forward-starting partial-term hedge, an entity may assume a forward issuance date for the hedged item that coincides with the date in which the first hedged cash flow begins to accrue.
  2. Amortization of Fair Value Hedge Basis Adjustments. The Board decided to align the amortization guidance for fair value hedge basis adjustments in partial-term fair value hedges with that of full-term fair value hedges.
    1. Transition Guidance for Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The Board decided to clarify that the amendment of the transition adjustment specified in paragraph 815-20-65-3(e)(1) be reflected retrospectively regardless of whether an entity elects to adopt other proposed amendments retrospectively. The Board also clarified that an entity can retrospectively designate more than one partial-term fair value hedging relationship for the same debt instrument that would be outstanding at the same time for eligible hedging instruments and hedged items that existed between the date of adoption of Update 2017-12 and the effective date of the proposed amendments if all other requirements would have been met and an entity adopts the amendments on a retrospective basis.
The Board affirmed its decisions in the proposed Update with respect to the following topics:
  1. Issue 1A: Accrued Interest
  2. Issue 1B: Transfers between Classifications or Categories for Loans and Debt Securities
  3. Issue 1C: Recoveries
  4. Issue 2A: Conforming Amendments to Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors
  5. Issue 2B: Conforming Amendments to Subtopic 323-10, Investments—Equity Method and Joint Ventures—Overall
  6. Issue 2C: Clarification That Reinsurance Recoverables Are within the Scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost
  7. Issue 2D: Projections of Interest Rate Environments for Variable-Rate Financial Instruments
  8. Issue 2E: Consideration of Prepayments in Determining the Effective Interest Rate
  9. Issue 3C: Disclosures of Fair Value Hedge Basis Adjustments
  10. Issue 3D: Consideration of the Hedged Contractually Specified Interest Rate under the Hypothetical Derivative Method
  11. Issue 3E: Scope for Not-for-Profit Entities
  12. Issue 3F: Hedge Accounting Provisions Applicable to Certain Private Companies and Not-for-Profits
  13. Issue 3G: Application of the First-Payments-Received Cash Flow Hedging Technique to Overall Cash Flows on a Group of Variable Interest Payments
  14. Issue 4A: Scope Clarification for Subtopic 320-10, Investments—Debt and Equity Securities—Overall, and Subtopic 321-10, Investments—Equity Securities—Overall
  15. Issue 4B: HTM Debt Securities Fair Value Disclosures 
  16. Issue 4C: Applicability to Topic 820, Fair Value Measurement, to the Measurement Alternative
  17. Issue 4D: Remeasurement of Equity Securities at Historical Exchange Rates
  18. Issue 5B: Contractual Extensions and Renewals.
Effective Date, Transition Method, Transition Disclosures
 
Amendments Related to Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10)—Recognition and Measurement of Financial Assets and Financial Liabilities:
 
The Board decided:
  1. For all entities, the amendments will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities should apply the guidance retrospectively by means of a cumulative-effect adjustment to opening retained earnings as of the beginning of the first reporting period in which all of the amendments in Update 2016-01 were adopted.
  2. Early adoption will be permitted in any interim period provided that an entity has adopted all of the amendments in Update 2016-01.
  3. For the amendments related to equity securities without readily determinable fair values for which an entity elects the measurement alternative in accordance with paragraph 321-10-35-2, the entity should apply the guidance prospectively.
Amendments Related to Update 2016-13
 
The Board decided:
  1. For entities that have not yet adopted Update 2016-13, the effective date and transition method for the amendments related to this Update will align with the effective date and transition method of Update 2016-13.
  2. For entities that have already adopted Update 2016-13, the amendments will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities should apply the amendments retrospectively by means of a cumulative-effect adjustment to the opening retained earnings balance as of the beginning of the first reporting period in which Update 2016-13 was adopted. Early adoption will be permitted in any interim period within the fiscal years beginning after December 15, 2018, provided that an entity has adopted Update 2016-13.
The Board decided to require the following transition disclosures related to the amendments in Update 2016-01 and Update 2016-13:
  1. The nature of the change in accounting principle, including an explanation of the newly adopted accounting principle.
  2. The method of applying the change.
  3. The effect of the adoption on any line item in the statement of financial position, if material, as of the beginning of the first period for the proposed amendments are effective. Presentation of the effect on financial statement subtotals is not required.
  4. The cumulative effect of the change on retained earnings or other components of equity in the statement of financial position as of the beginning of the first period for the proposed amendments are effective.
  5. An entity that issues interim financial statements should provide the disclosures in (1) through (4) in each interim financial statement of the fiscal year of change and the annual financial statement of the period of change.
Amendments Related to Update 2017-12
 
The Board decided that:
  1. For entities that have adopted the amendments in Update 2017-12 as of the issuance of the final Update, the amendments will be effective as of the beginning of an entity’s first annual reporting period beginning after the issuance of the final Update. The Board also affirmed the guidance in the proposed Update that early adoption is permitted as of any day on or after the issuance of the final Update.
  2. For entities that have not yet adopted the amendments in Update 2017-12, the effective date will align with the date that an entity adopts the amendments in Update 2017-12.
The Board decided to require the following transition disclosures related to the amendments in Update 2017-12:
  1. The nature of and reason for the change in accounting principle.
  2. The method of applying the change. For those entities that adopted Update 2017-12 before the issuance date of the final Update, this will require that entities disclose whether they adopted the eligible amendments on a retrospective or prospective basis.
  3. The effect of the adoption on any line item in the financial statements as of the beginning of the first period for which the amendments are effective. Presentation of the effect on financial statement subtotals is not required.
  4. The cumulative effect of the change on retained earnings or other components of equity in the statement of financial position as of the beginning of the first period for which the amendments are effective.
  5. An entity that issues interim financial statements must provide the disclosures in (1) through (4) in each interim financial statement of the fiscal year of change and the annual financial statement of the period of change.
Analysis of Costs and Benefits
 
The Board concluded that it has received sufficient information and analysis to make an informed decision on the topics presented and that the expected benefits of the amendments justify the expected costs.
 
Next Steps
 
The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.
 

Conceptual framework—elements. The Board continued its discussion of the definition of a liability.
 
The Board decided that:
  1. All present obligations to transfer assets and obligations to deliver shares sufficient in number to satisfy a determinable or defined obligation should meet the definition of a liability. 
  2. An analysis discussing the measurement of obligations to issue a fixed number of shares is unnecessary for the Board to deliberate on in the elements phase.

Disclosure framework: disclosure review—income taxes. The Board continued redeliberations on its July 2016 proposed Accounting Standards Update, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes, focusing on the proposed requirement to disaggregate income tax expense and income taxes paid between domestic amounts and foreign amounts.
 
The Board decided to require the disaggregation of income tax expense (or benefit) and income taxes paid by federal or national, state, and foreign amounts. The Board clarified that income tax expense (or benefit) and income taxes paid on foreign earnings imposed by the jurisdiction of domicile should be included in the amount for that jurisdiction of domicile.  
 
The Board decided to issue a revised proposed Update for public comment that includes amendments from all the decisions made since the Board issued its 2016 proposed Update.
 
Next Steps
 
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot. The Board decided to provide a comment letter period of either 45 days after issuance or May 31, 2019, whichever is later.