June 13, 2019

The Emerging Issues Task Force (EITF) met on June 13, 2019, and deliberated the following topics:

• Issue No. 18-A, “Recognition under Topic 805 for an Assumed Liability in a Revenue Contract”—The Task Force discussed the comment letter feedback on the proposed Update, Business Combinations (Topic 805): Revenue from Contracts with Customers—Recognizing an Assumed Liability, and on the related FASB Invitation to Comment (ITC), Measurement and Other Topics Related to Revenue Contracts with Customers under Topic 805. The Task Force decided not to affirm its consensus-for-exposure on Issue 18-A as a consensus at this time. The EITF recommended to the Board that the issues in the proposed Update be considered holistically with the issues described in the ITC and that the Board should consider the alternatives raised by comment letter respondents in determining an appropriate path forward for Issue 18-A.
• Issue No. 19-A, “Financial Instruments—Clarifying the Interactions between Topic 321 and Topic 323”—The Task Force reached a consensus-for-exposure to require an organization to consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of the measurement alternative under Topic 321 immediately before applying or upon discontinuing the equity method of accounting under Topic 323. In addition, the Task Force reached a consensus-for-exposure that, when determining the appropriate Topic to apply, an organization should not consider whether the equity security underlying a forward contract or purchased option would, individually or with existing investments, be accounted for under the equity method upon settlement of the forward contract or exercise of the purchased option. The organization would evaluate the remaining requirements in paragraph 815-10-15-141. The Task Force reached a consensus-for-exposure to require prospective transition and to require an organization to disclose the nature of and reasons for the change in accounting principle, the transition method, and a qualitative description of the financial statement line items affected by the change. The Task Force was unable to reach a consensus-for-exposure on whether to require accumulated equity method losses that have not been allocated to an investor’s investments in the investee (that is, accumulated investee losses in the memo account) to be offset against any unrealized gains resulting from remeasurement of the investments due to an observable transaction in accordance with the measurement alternative in Topic 321. The Task Force decided to remove that issue from the scope of Issue 19-A and asked the staff to perform additional research on its pervasiveness.

The staff also conducted an education session for the Task Force on Issue No. 19-B, “Revenue Recognition—Contract Modifications of Licenses of Intellectual Property.” The staff has formed a working group to obtain feedback on alternatives for this Issue. A non-public meeting of the working group is scheduled for July 16, 2019. The staff plans to provide Task Force members with alternatives based on further research and feedback from the working group at a future EITF meeting.

The Board will consider for ratification the consensus-for-exposure on Issue 19-A on June 26, 2019. The Board will consider the Task Force discussion of Issue 18-A at a future Board meeting to determine an appropriate path forward for this Issue. The next EITF meeting is tentatively scheduled for September 19, 2019. The July 11, 2019 extra meeting date will not be utilized.  For more information on the EITF, including updates on the next EITF meeting date, visit the FASB website.