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.
Investment Companies—Disclosures about Investments in Another Investment Company. The Board decided to issue a proposed Accounting Standards Update to solicit public comment on the following remaining tentative decisions:
- A feeder fund should attach the master fund’s financial statements along with its financial statements.
- All investments companies should disclose each investment owned by an investee fund that exceeds 5 percent of the reporting investment company’s net assets at the reporting date.
The Board previously decided that the requirements would be applied prospectively with early adoption permitted.
The Board directed the staff to draft a proposed Update for vote by written ballot. The Board decided that the comment period for the proposed Update would be 75 days.
Technical Corrections and Improvements. The Board discussed various proposed technical corrections to the FASB Codification, including:
Employee Stock Ownership Plans
The Board decided to amend Subtopic 718-40 on employee stock ownership plans to link the term fair value as used therein to the definition of fair value in Topic 820 instead of the definition of fair value in FASB Statement No. 123 (revised 2004), Share-Based Payment.
The Board decided that entities affected by this change would apply the guidance prospectively to plan financial statements issued after the effective date. The Board also decided to propose that plan sponsors affected by this amendment would disclose the following in the period of change:
- The fact that they were using a framework other than the framework in Topic 820 in prior valuation of the ESOP plan(s)
- A description of how the valuation methodology that was used differed from that of Topic 820 and the possible effect on prior valuations.
The Codification currently contains two different definitions of fair value, one originating from Statement 123(R) (used within Topic 718 on stock compensation and Subtopic 505-50 on equity-based payments to nonemployees) and a second definition originating from FASB Statement No. 157, Fair Value Measurements (used within Topic 820). The Board decided to retain the two definitions because they do not appear to be causing confusion in practice.
The Board decided that some of the proposed changes arising from this project would be initially accounted for as a change in accounting principle, with the cumulative effect of the change reflected as an adjustment to the opening balance of retained earnings. The Board also decided to require disclosure of the nature of and reason for the change as well as the cumulative effect of the change. The Board decided to provide entities with an option of applying the changes retroactively.
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot. The Board decided that the comment period for the proposed Update would be 75 days.
Financial Instruments—Classification and Measurement. The Board continued redeliberating the February 2013 proposed Accounting Standards Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, specifically discussing the fair value through other comprehensive income measurement attribute for investments in certain equity securities and disclosures about core deposit liabilities.
Fair Value through Other Comprehensive Income Measurement Attribute for Investments in Certain Equity Securities
The Board affirmed the guidance in the proposed Update, which would require all investments in equity securities to be measured at fair value through net income, except for the following:
- Investments in equity securities accounted for under the equity method of accounting
- Investments in equity securities without readily determinable fair values for which the entity has elected to apply the practicality exception to carry them at cost, adjusted for both impairment and observable price changes.
The Board affirmed the proposed disclosure requirement that public business entities disclose for each annual period the balance of its core deposit liabilities disaggregated by significant types of deposit accounts. Entities would also disclose the total balance of each of the significant types of deposit accounts. The Board decided, however, not to define core deposit liabilities and to instead require entities to qualitatively disclose what management deems to be core deposits (that is, the components that make up the core deposit liability balance). In addition, the Board decided to provide qualitative characteristics of the core deposit liabilities in the implementation guidance of the final standard to help management in identifying core deposits.
The Board also decided to require public business entities to disclose the weighted-average life of the core deposit liabilities based on the entities' historical experience.
The Board decided to remove the proposed disclosure requirement that public business entities disclose the all-in-cost-to-service rate for the core deposit liabilities.
Finally, the Board affirmed that entities other than public business entities would not be required to disclose information about the core deposit liabilities.
Liabilities and Equity—Short-Term Improvements. The staff discussed its pre-agenda research project on distinguishing liabilities from equity. The purpose of the meeting was for the Board to provide the staff with feedback on the potential objective for the project. No technical decisions were made during this meeting.
The Board discussed areas in the accounting guidance where targeted improvements could be made to reduce complexity. Further, the Board directed the staff to perform additional research to determine whether complexity could be reduced in the following areas:
- Accounting for derivatives indexed to, and potentially settled in, an entity’s own stock in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (originally issued as EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock)
- Accounting for convertible debt.
Pensions—Cash Balance Plans. The staff discussed its pre-agenda research project on cash balance pension plans. The meeting was educational; no decisions were made.
The Board discussed issues regarding the measurement of an employer’s defined benefit obligation for cash balance plans. The discussion focused on concerns with measuring the obligation at the walkaway amount and on whether the diversity in practice warrants adding a project to the agenda.
The Board will decide whether to add a project to its technical agenda on this topic at its agenda prioritization meeting on August 13, 2014.