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.
October 22, 2014 FASB
Board Meeting
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 (1)
the impairment of investments in equity securities accounted for under the
equity method of accounting and (2) probability thresholds in the impairment
assessment of investments in equity securities without readily determinable fair
values measured under the practical expedient. The practical expedient allows
such securities to be measured at cost minus impairment, if any, plus or minus
changes resulting from observable price changes in orderly transactions for an
identical investment or a similar investment of the same issuer.
Impairment of Investments in Equity Securities Accounted for under the
Equity Method of Accounting
The Board decided to remove investments
in equity securities accounted for under the equity method of accounting from
the scope of this project. Based on this decision, current generally accepted
accounting principles (GAAP) would be retained.
Probability
Thresholds in the Impairment Assessment of Investments in Equity Securities
Without Readily Determinable Fair Values
The Board decided to remove
the threshold of more likely than not from the impairment assessment of
investments in equity securities without readily determinable fair values, while
retaining the significance threshold.
Accounting
for Income Taxes—Intra-entity Asset Transfers and Balance Sheet Classification
of Deferred Taxes. The Board deliberated the following two issues related to
accounting for income taxes.
Issue 1: Intra-Entity Asset
Transfers
The Board decided to require recognition of the current
and deferred income tax consequences of an intra-entity asset transfer when the
transfer occurs. Current GAAP requires that both the buyer and the seller defer
the recognition of the current and deferred income tax consequences until the
asset or assets have been sold to an outside party.
Transition
The Board decided to require modified
retrospective transition with a cumulative catch-up adjustment to opening
retained earnings in the period of adoption.
Transition
Disclosures
The Board decided to require at transition,
disclosure of (1) the nature of and reason for the change in accounting
principle and (2) certain quantitative information about the change in
accounting principle.
Issue 2: Balance Sheet Classification of
Deferred Income Taxes
The Board decided to require that all deferred
income tax assets and liabilities be presented as noncurrent in a classified
statement of financial position. Current GAAP requires that deferred income
taxes for each tax-paying component of an entity be presented in two
classifications in a classified statement of financial position: (1) a net
current asset or liability and (2) a net noncurrent asset or liability.
Transition
The Board decided to require prospective
transition.
Transition Disclosures
The Board
decided to require at transition, disclosure (1) of the nature of and reason for
the change in accounting principle and (2) that prior periods were not restated.
Next Steps
The Board directed the staff to draft a
proposed Accounting Standards Update for vote by written ballot with a comment
period of approximately 120 days.
The Board expects that the effective
date for both issues will be the same. For public companies, the expected
effective date will be annual periods, including interim periods within those
annual periods, beginning after December 15, 2016. For private companies, the
expected effective date will be annual periods beginning after December 15,
2017, and interim periods thereafter. Private companies would be allowed to
adopt the new guidance early, but not before the effective date for public
companies. If a private company elects early adoption, it must do so for both
issues.