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.
December 10, 2014 FASB Board Meeting
Consolidation—Principal versus Agent Analysis.
The Board redeliberated several significant issues identified by
reviewers during the extended external review process for the final
Accounting Standards Update on Topic 810, Consolidation.
Series Mutual Funds
Reviewers noted that the guidance in the draft of the final Update would
result in certain registered mutual funds being considered variable
interest entities (VIEs).
The Board decided that series funds and similar legal entities should be
required to apply the VIE/voting interest entity scope determination in
Topic 810 in paragraph 810-10-15-14(b)(1) as currently drafted;
however, additional implementation guidance also should be provided to
clarify how to interpret the voting right criterion in the VIE/voting
interest entity scope determination. This implementation guidance would
apply to entities that comply or operate in accordance with requirements
that are similar to those included in the Investment Company Act of
1940 for registered mutual funds. The Board also decided that additional
disclosures specifically related to those structures were not
necessary.
Kick-Out Rights Held by the General Partner and Its Related Parties
The Board decided that when determining whether a limited partnership is
a VIE, the general partner, entities under common control with the
general partner, and other parties acting on behalf of the general
partner should be excluded from the simple majority or lower threshold
of voting interests to exercise kick-out rights.
Indirect Assessment of Related Party Interests
The Board decided to eliminate the proposed rebuttable presumption that
indirect interests held by related parties of the decision maker should
be considered on a proportionate basis, which could be overcome based on
a qualitative assessment. The Board decided instead to require that
indirect interests always be considered on a proportionate basis with
one exception: when the related party entities are under common control,
in which case indirect interest should be considered in its entirety.
Pro Rata Consolidation
The Board decided that entities that currently apply the pro rata method
of consolidation should be allowed to continue applying that method of
consolidation.
Impact on Accounting Standards Update 2014-01
The Board decided to provide a specific scope exception from certain
VIE related party guidance for legal entities within the scope of
Accounting Standards Update No. 2014-01, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects.
Specifically, these entities would not be required to apply the
guidance in which a related party of the decision maker that receives
substantially all of the activities of the VIE must consolidate the VIE.
Related Party Guidance for a Single Decision Maker versus Shared Power
The Board decided that the changes made to the assessment of related
party relationships should continue to be limited to situations in which
a single reporting entity has the power to direct the activities of a
VIE that most significantly impact the VIE´s economic performance and
should not extend to situations in which power is shared.
Deconsolidation
The Board decided that, at transition, fair value may be used when it is
not practicable for a reporting entity to determine the carrying amount
of the retained interest in a deconsolidated legal entity.
Employee Share-Based Payment Accounting Improvements.
The Board discussed whether the accounting by private companies might
be simplified by providing one or more practical expedients in the
following areas:
- Estimating the expected term of an award
- Classifying awards with repurchase features
- Measuring awards classified as liabilities at intrinsic value.
The Board also discussed which entities would be allowed to apply both existing and any potentially new practical expedients.
The Board deferred any technical decisions until after it has received
and considered the input from the Private Company Council.