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, September 16, 2020 FASB Board Meeting
Ratification of an EITF consensus-for-exposure. The Board ratified the following consensus-for-exposure reached by the EITF at its September 3, 2020 meeting and directed the staff to draft a proposed Accounting Standards Update reflecting the consensus-for-exposure for vote by written ballot.
Issue No. 19-C, “Warrant Modifications: Issuers’ Accounting for Modifications of Equity Classified Freestanding Call Options That Are Not within the Scope of Topic 718, Compensation—Stock Compensation, or Topic 815—Derivatives and Hedging”
The Task Force reached a consensus-for-exposure to expand the scope of this Issue to include modifications of all freestanding equity-classified derivative instruments that remain equity classified after modification.
The Task Force reached a consensus-for-exposure that an entity should treat a modification of the terms or conditions of a freestanding equity-classified derivative instrument as an exchange of the original instrument for a new instrument. The Task Force also reached a consensus-for-exposure that an entity should measure the effect of a modification of a freestanding equity-classified derivative instrument as the excess, if any, of the fair value of the modified instrument over the fair value of the original instrument immediately before its terms are modified.
The Task Force reached a consensus-for-exposure that an entity should recognize the effect of a modification of a freestanding equity-classified derivative instrument based on the substance of the transaction as follows:
- Scenario A: Financing Transaction to Raise Equity. An equity issuance cost in accordance with the guidance in paragraph 340-10-S99-1.
- Scenario B: Financing Transaction to Raise or Modify Debt. An expense in accordance with the guidance in Topic 470, Debt, and Topic 835, Interest.
- Scenario C: Transaction to Compensate for Goods or Services. Compensation cost in accordance with the guidance in Topic 718.
- Scenario D: Other Modifications That Are Not Related to Financings or Compensation for Goods or Services. A dividend.
The Board decided to provide a 60-day comment period for the proposed Update.