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.
July 16, 2014 FASB Board Meeting
Consolidation—Principal
versus Agent Analysis. The Board redeliberated the remaining issues on the
November 2011 proposed FASB Accounting Standards Update, Consolidation
(Topic 810): Principal versus Agent Analysis.
Alignment of the
Definition of Participating Rights
The guidance in the proposed
Update would have changed the voting interest entity (VOE) definition of
participating rights to align with the variable interest entity (VIE) definition
of participating rights. The Board decided to retain the current definition of
participating rights for VOEs in Topic 810, Consolidation.
Applicability to Nonpublic Business Entities
The Board
decided not to provide recognition, measurement, or disclosure alternatives for
nonpublic business entities.
Cost and Benefits and Reexposure
Considerations
The Board considered a staff analysis of the expected
benefits and perceived costs of proposed changes to the consolidation guidance
and concluded that those benefits justify the costs of change. The Board also
considered its requirements for reexposure. The Board determined that reexposure
was not necessary and decided to issue final guidance in an Accounting Standards
Update, but only after an extended staff draft period and fatal-flaw process,
which would include an extended time frame for external review by a broad range
of stakeholders.
Transition
The Board affirmed the
transition guidance proposed in the Exposure Draft; entities can choose between
either the full or modified retrospective methods of application. Additionally,
the Board decided not to provide a separate transition alternative for nonpublic
business entities.
Effective Date
The Board decided that
for public business entities, the final guidance should be effective for annual
periods and interim periods within those annual periods beginning after December
15, 2015. The Board decided that for nonpublic business entities, the final
guidance should be effective for annual periods beginning after December 15,
2016, and interim periods beginning after December 15, 2017.
The Board
decided to allow all entities the option of applying the new requirements in
fiscal years beginning before the mandatory effective date.
FASB
Ratification of EITF Consensuses. The Board ratified the following
consensuses reached at the June 12, 2014 Emerging Issues Task Force meeting. The
Board directed the staff to draft final Accounting Standards Updates reflecting
those consensuses for a vote by written ballot.
Issue No. 12-G,
"Measuring the Financial Assets and Financial Liabilities of a Consolidated
Collateralized Financing Entity"
This Issue provides an
alternative to Topic 820, Fair Value Measurement, for measuring the financial
assets and the financial liabilities of a consolidated collateralized financing
entity that would eliminate the difference that results when both the financial
assets and the financial liabilities of a collateralized financing entity are
measured at fair value.
The minutes of the June 12, 2014 EITF meeting,
which will be posted to the FASB website the week of July 21, 2014, describe the
consensus in detail.
Issue No. 13-F, "Classification of Certain
Government-Guaranteed Mortgage Loans upon Foreclosure"
This
Issue applies to government-guaranteed mortgage loans that have all of the
following conditions: (a) the loan has a government guarantee that is not
separable from the loan before foreclosure, (b) at the time of foreclosure, the
creditor has the intent to convey the real estate property to the guarantor and
make a claim on the guarantee, and the creditor has the ability to recover under
that claim, and (c) at the time of foreclosure, any amount of the claim that is
determined on the basis of the fair value of the real estate property is fixed.
A creditor should reclassify a government-guaranteed mortgage loan within the
scope of this Issue to a separate other receivable at the time of
foreclosure.
The minutes of the June 12, 2014 EITF meeting, which will be
posted to the FASB website the week of July 21, 2014, describe the consensus in
detail.
Insurance—Disclosures
about Short-Duration Contracts. The Board discussed outreach performed to
assess potential issues related to reinsurance and continued its discussion of
disclosures about short-duration
contracts.
Reinsurance
The Board considered the staff’s
analysis of stakeholder outreach and concluded that there were no reinsurance
accounting issues that should be included in the scope of the insurance
project.
Disclosures about Short-Duration
Contracts
Incurred and Paid Claims Development
Tables
The Board affirmed its previous decision to require
insurance entities that issue short-duration insurance contracts to provide
annual disclosures about claims liabilities (specifically, information about
claims development, claims frequency, and claims duration) going back to the
earliest period for which uncertainty arose about the amount and timing of
claims payments, but need not exceed 10 years. The Board clarified that
insurance entities would not be precluded from presenting more than 10 years of
information about claims liabilities and that for certain aggregated information
about claims with very short durations (such as health insurance claims),
entities could provide information for fewer than 10 years.
The Board
decided to also require disclosure of net outstanding claims from years prior to
those presented in the claims development tables, aggregated or disaggregated in
the same way that insurance entities aggregate or disaggregate disclosures about
claims liabilities.
Qualitative Information about the Liability
for Unpaid Claims and Claim Adjustment Expense
The Board decided
to require entities to disclose in annual financial statements information about
material changes in judgments made in calculating the liability for unpaid
claims and claim adjustment expenses, including the reasons for the changes and
the effects on the financial statements.
Health Insurance
Claims
The Board decided that reporting entities should provide
the same disclosures for all types of short-duration contracts, except that
disclosures about health insurance claims need not include the percentage payout
of claims by accident year.
Next Steps
The Board will
continue redeliberating the disclosures about short-duration contracts at a
future Board meeting.