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, April 8, 2020 FASB Board MeetingEffective date considerations due to Coronavirus Disease 2019 (COVID-19) disruptions. In response to global concerns about the effects that the COVID-19 pandemic may have on stakeholders, the Board discussed delaying for certain entities the effective dates of:
- Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606)
- Accounting Standards Update No. 2016-02, Leases (Topic 842)
Board Decisions
The Board decided to add a project to its technical agenda to amend the effective dates of Topic 606 and Topic 842 for certain entities as described below.
Additionally, the Board decided to add a project to its research agenda to evaluate how to reduce implementation costs related to applying Topic 606 to initial franchise fees.
Revenue from Contracts with Customers (Topic 606)
The Board discussed an implementation issue in the franchisor industry related to Topic 606. The Board decided to amend the effective date of Topic 606 for franchisors that are not public business entities to annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. The Board decided to make the amendment optional.
Leases (Topic 842)
The Board decided to amend the effective date of Topic 842 for private companies and private not-for-profit (NFP) entities to annual reporting periods beginning after December 15, 2021, and to interim periods within fiscal years beginning after December 15, 2022.
The Board also decided to amend the effective date of Topic 842 for NFPs that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or an over-the-counter market (public NFPs) and which have not yet issued financial statements. For these entities, the Board decided to amend the effective date to be fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption will continue to be permitted.
Comment Period of the Proposed Update
The Board decided to provide a 15-day comment period for the proposed Update.
Next Steps
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.
Other COVID-19 related discussion. [Revised 04-28-20]
The Board also discussed plans to support stakeholders as they navigate the effects of the COVID-19 pandemic relating to (1) effective dates for significant standards with effective dates of 2022 and beyond and (2) future standard-setting activities for current project deliberations. Additionally, the staff provided an update on the following technical inquiries that are related to the effects of COVID-19:
Leases
The staff discussed its response to Question 1 in the FASB Staff Q&A, Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic.
Derivatives and Hedging
The staff discussed its response to Question 1 in the FASB Staff Q&A, Topic 815: Cash Flow Hedge Accounting Affected by the COVID-19 Pandemic.
Interest Income
The staff received a technical inquiry regarding the recognition of interest income. For illustrative purposes that inquiry included a fact pattern whereby an institution was providing assistance to borrowers impacted by COVID-19. The institution in the example provided a “loan payment holiday” allowing borrowers to temporarily stop payments. Interest would not accrue while the loan payment holiday is in effect. The loan modification in the fact pattern did not represent a troubled debt restructuring in accordance with Subtopic 310-40, Receivables—Troubled Debt Restructuring by Creditors. Additionally, in accordance with Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs, the modification would be accounted for as the continuation of the original lending arrangement; that is, not as a new lending arrangement—in which case the modification would not be accounted for as an extinguishment of the original loan and the recognition of a new loan.
The staff discussed its response to how the institution should recognize interest income when a payment holiday is given and interest is not accrued in this scenario. There were two views expressed in the technical inquiry:
View 1—Upon modification, a new effective interest rate in accordance with Subtopic 310-20 is determined that equates the revised remaining cash flows to the carrying amount of the original debt and is applied prospectively for the remaining term. That is, interest income is recognized during the payment holiday period.
View 2—Upon modification, the institution should recognize interest income on the loan in accordance with the contractual terms. Under this view, the institution would recognize no interest income during the payment holiday and would resume recognizing interest income when the payment holiday ends.
The staff reviewed the submission, accompanying illustrations, and referenced accounting guidance and believes both views to be appropriate.
Fair Value Measurement
The staff recently received a request to suspend mark-to-market accounting. In that request, the authors of the letter specifically referenced guidance developed during the 2008-2009 financial crisis. The staff provided a reminder of the orderly transaction guidance in Topic 820, Fair Value Measurement, specifically paragraphs 820-10-35-54C through 54J, which provide guidance for measuring fair value when the volume or level of activity for an asset or a liability has significantly decreased and identifying transactions that are not orderly. The staff stands ready to address any interpretive questions with respect to that guidance.
The Board decided to add a project to its technical agenda to amend the effective dates of Topic 606 and Topic 842 for certain entities as described below.
Additionally, the Board decided to add a project to its research agenda to evaluate how to reduce implementation costs related to applying Topic 606 to initial franchise fees.
Revenue from Contracts with Customers (Topic 606)
The Board discussed an implementation issue in the franchisor industry related to Topic 606. The Board decided to amend the effective date of Topic 606 for franchisors that are not public business entities to annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. The Board decided to make the amendment optional.
Leases (Topic 842)
The Board decided to amend the effective date of Topic 842 for private companies and private not-for-profit (NFP) entities to annual reporting periods beginning after December 15, 2021, and to interim periods within fiscal years beginning after December 15, 2022.
The Board also decided to amend the effective date of Topic 842 for NFPs that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or an over-the-counter market (public NFPs) and which have not yet issued financial statements. For these entities, the Board decided to amend the effective date to be fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption will continue to be permitted.
Comment Period of the Proposed Update
The Board decided to provide a 15-day comment period for the proposed Update.
Next Steps
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.
Other COVID-19 related discussion. [Revised 04-28-20]
The Board also discussed plans to support stakeholders as they navigate the effects of the COVID-19 pandemic relating to (1) effective dates for significant standards with effective dates of 2022 and beyond and (2) future standard-setting activities for current project deliberations. Additionally, the staff provided an update on the following technical inquiries that are related to the effects of COVID-19:
Leases
The staff discussed its response to Question 1 in the FASB Staff Q&A, Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic.
Derivatives and Hedging
The staff discussed its response to Question 1 in the FASB Staff Q&A, Topic 815: Cash Flow Hedge Accounting Affected by the COVID-19 Pandemic.
Interest Income
The staff received a technical inquiry regarding the recognition of interest income. For illustrative purposes that inquiry included a fact pattern whereby an institution was providing assistance to borrowers impacted by COVID-19. The institution in the example provided a “loan payment holiday” allowing borrowers to temporarily stop payments. Interest would not accrue while the loan payment holiday is in effect. The loan modification in the fact pattern did not represent a troubled debt restructuring in accordance with Subtopic 310-40, Receivables—Troubled Debt Restructuring by Creditors. Additionally, in accordance with Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs, the modification would be accounted for as the continuation of the original lending arrangement; that is, not as a new lending arrangement—in which case the modification would not be accounted for as an extinguishment of the original loan and the recognition of a new loan.
The staff discussed its response to how the institution should recognize interest income when a payment holiday is given and interest is not accrued in this scenario. There were two views expressed in the technical inquiry:
View 1—Upon modification, a new effective interest rate in accordance with Subtopic 310-20 is determined that equates the revised remaining cash flows to the carrying amount of the original debt and is applied prospectively for the remaining term. That is, interest income is recognized during the payment holiday period.
View 2—Upon modification, the institution should recognize interest income on the loan in accordance with the contractual terms. Under this view, the institution would recognize no interest income during the payment holiday and would resume recognizing interest income when the payment holiday ends.
The staff reviewed the submission, accompanying illustrations, and referenced accounting guidance and believes both views to be appropriate.
Fair Value Measurement
The staff recently received a request to suspend mark-to-market accounting. In that request, the authors of the letter specifically referenced guidance developed during the 2008-2009 financial crisis. The staff provided a reminder of the orderly transaction guidance in Topic 820, Fair Value Measurement, specifically paragraphs 820-10-35-54C through 54J, which provide guidance for measuring fair value when the volume or level of activity for an asset or a liability has significantly decreased and identifying transactions that are not orderly. The staff stands ready to address any interpretive questions with respect to that guidance.