On the Horizon

Distinguishing Liabilities and Equity (Including Convertible Debt)


The FASB is nearing the end of initial deliberations on potential improvements to distinguishing liabilities and equity (including convertible debt).
 
It focuses on areas stakeholders identified as overly complex, internally inconsistent, and the source of frequent financial statement restatements.

Added to the FASB agenda in 2017, the objective of the project is to make guidance in this area less complex and more understandable without reducing the quality of information provided to investors. It focuses on areas stakeholders identified as overly complex, internally inconsistent, and the source of frequent financial statement restatements.  They include indexation and settlement in the context of the derivative scope exception and convertible instruments.

The FASB plans to issue a proposed Accounting Standards Update during the second half of 2019.

 

Changes to the Disclosure Requirements for Income Taxes

The revised proposed ASU would (1) remove disclosures that no longer are considered cost beneficial or relevant and (2) add disclosures identified as relevant to financial statement users.

Stakeholders have until May 31, 2019, to review and submit comments on the FASB’s revised proposed Accounting Standards Update (ASU) intended to improve the relevance of current income tax disclosure requirements to financial statement users.

In July 2016, the FASB issued a proposed ASU that set forth enhanced disclosure requirements for income taxes. The proposed ASU was part of the FASB’s broader disclosure framework project to improve the effectiveness of disclosures in notes to financial statements.

The Board delayed finalizing the proposal because of potential tax reform. The federal government subsequently passed the Tax Cuts and Jobs Act in December 2017, which substantially changed how U.S. businesses are taxed. As a result, the FASB decided to revise its original proposal.

The new proposed ASU reflects these revisions, as well as stakeholder input on the original July 2016 proposal. The revised proposed ASU would (1) remove disclosures that no longer are considered cost beneficial or relevant and (2) add disclosures identified as relevant to financial statement users.