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, July 31, 2019 FASB Board Meeting

Codification improvements—share-based consideration payable to a customer. The Board discussed comments received on its March 2019 proposed Accounting Standards Update, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements—Share-Based Consideration Payable to a Customer.

The Board's discussion focused on the following topics:
  1. Redeliberation issues
  2. Transition and effective date
  3. Analysis of costs and benefits
  4. Next steps.
Redeliberation Issues  

The Board affirmed its decisions to require (1) that an entity measure and classify the share-based awards in accordance with Topic 718 and (2) that post-grant-date changes in measurement of the share-based awards due to the form of consideration should not be recognized in revenue and should be recognized elsewhere in the income statement.

The Board decided to clarify the amendments in the proposed Update as follows:
  1. An entity should follow Topic 718 to evaluate conditions that affect the vesting and fair value of the share-based awards.
  2. An entity should estimate the fair value of the share-based awards when a grant date has not been achieved but goods and services have been delivered to a customer.
  3. A nonpublic entity making the election to measure its liability-classified share-based awards not issued to customers at intrinsic value should initially and subsequently measure share-based awards issued to customers at fair value.
  4. An entity should assess the fair value of distinct goods and services received from a customer when determining whether the share-based awards reduce the transaction price.
The Board decided not to amend the Codification for the following areas raised by stakeholders in response to the proposed Update:
  1. The attribution of post-grant-date changes in the measurement of the share-based awards when they are liability classified
  2. The establishment of a new grant date for the share-based awards
  3. The accounting for modifications of the share-based awards
  4. The accounting for share-based awards granted by a lessor to a lessee as a lease incentive
  5. The accounting for the share-based awards by the customer receiving the awards
  6. The determination of when the entity that has received the share-based awards is no longer a customer of the grantor
  7. The disclosure requirements applicable to the grantor of the share-based awards.
Transition and Effective Date

The Board affirmed the transition guidance in the proposed Update subject to the following:
  1. A clarification of when the cumulative catch-up adjustment to retained earnings should be recorded
  2. An option to apply the amendments in the final Update as of either the beginning of the fiscal year they are adopted or the beginning of the fiscal year when the amendments in Update 2018-07 were adopted.
The Board decided that the amendments should be effective for:
  1. Public business entities that have not adopted Update 2018-07 and all entities that have adopted Update 2018-07: Fiscal years beginning after December 15, 2019, and interim periods within those years
  2. All others: Fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
The Board decided to allow an entity to adopt the amendments in a final Update early, but no earlier than an entity’s adoption of the amendments in Update 2018-07.

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 of the changes and that the expected benefits would justify the expected costs of the amendments included in a final Update.

Next Steps

The Board directed the staff to draft a final Update for vote by written ballot.


Measurement and other topics related to revenue contracts with customers under Topic 805. The Board discussed the feedback received on its February 2019 Invitation to Comment, Measurement and Other Topics Related to Revenue Contracts with Customers under Topic 805, and the outcome of the June 13, 2019 Emerging Issues Task Force meeting on Issue No. 18-A, “Recognition under Topic 805 for an Assumed Liability in a Revenue Contract.” The Board made the following decisions.  
 
Status of Issue 18-A 
 
The Board decided to subsume Issue 18-A on the recognition of an assumed liability from a revenue contract in a business combination into the Board’s research project on measurement and other topics related to revenue contracts in a business combination. 

Discussion of Potential Alternatives 
 
The Board decided not to eliminate any of the potential alternatives identified by the staff on  measurement and other topics related to an assumed liability from a revenue contract in a business combination. The Board directed the staff to conduct further research on the potential alternatives identified.


Simplifying the balance sheet classification of debt. 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 Standards 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.


Codification improvements—hedge accounting. The Board discussed proposed amendments to the Codification resulting from stakeholder feedback on Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The Board discussed the following topics:

Change in Hedged Risk in a Cash Flow Hedge

The Board decided the following:
  1. An entity would be required to use only its best estimate of the hedged risk when performing the assessment of hedge effectiveness and clarified that the best estimate must be made at the individual transaction level.
  2. An entity would be required to first identify hedged transactions that occur during the hedge period before identifying hedged transactions that occur during the two-month period after the hedge period.
  3. An entity would be required to document its method of identifying hedged transactions using hindsight at hedge inception rather than making the hindsight method an accounting principle subject to Topic 250, Accounting Changes and Error Corrections.
Contractually Specified Components
 
The Board decided to add an additional criterion to hedge a contractually specified component in a spot transaction. That criterion would require that the pricing formula that includes the contractually specified component be based on how the price is determined in the nonfinancial asset’s spot market.
 
Private Company Considerations
 
The Board decided not to provide private companies and not-for-profit entities with relief to delay the reassessment of their hedged risk best estimate until their financial statements are available to be issued.
 
Effective Date
 
The Board decided that the proposed amendments would be effective for all entities for fiscal years beginning after December 15, 2020. For public business entities, the proposed amendments would be effective for interim periods within fiscal years beginning after December 15, 2020. For all other entities, the proposed amendments would be effective for interim periods within fiscal years beginning after December 15, 2021. Early adoption would be permitted for all entities on any date on or after issuance of a final Update if the entity has adopted the amendments in Update 2017-12.
 
Analysis of Costs and Benefits
 
The Board decided that:
  1. It has received sufficient information and analysis to make an informed decision on the perceived costs of the changes.
  2. Subject to feedback received through the comment letter process, the expected benefits would justify the expected costs of the amendments included in the proposed Update.
Next Steps
 
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 60 days.