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 29, 2014 FASB
Board Meeting
Accounting
for Financial Instruments—Impairment. The Board continued redeliberations of
the December 2012 proposed Accounting Standards Update, Financial
Instruments—Credit Losses (Subtopic 825-15), specifically discussing: (1)
disclosures about credit risk and the recognition of credit losses and (2) the
scope of the final guidance.
Disclosures
The Board made
the following decisions:
- The Board affirmed the provisions in the proposed Update that require an
entity to disclose the factors that influenced management´s current expected
credit losses, the changes in those factors, and the reasons for those
changes.
- Consistent with the Board´s decision reached at the September 3, 2014
Board meeting to retain current generally accepted accounting principles
(GAAP) for writeoffs of uncollectible receivables, the Board decided that an
entity should disclose its policies for writing off uncollectible
receivables.
- The Board affirmed the disclosure guidance in the proposed Update about an
entity´s reasonable and supportable forecasts of credit losses. The Board
decided not to explicitly require that an entity disclose the time period
covered by the reasonable and supportable forecasts.
- The Board decided to retain the current GAAP disclosures requiring an
entity to disclose its policies for accounting for nonaccrual financial
assets, including policies for placing financial assets on nonaccrual
status.
- The Board decided to clarify that the qualitative disclosures included in
the proposed Update relating to collateralized financial assets would only
apply to collateral-dependent financial assets.
- The Board affirmed the provision in the proposed Update that requires that
an entity disclose past-due information for all financial assets within the
scope of the current expected credit loss (CECL) model.
The Board also
discussed disclosures related to available-for-sale debt securities and the roll
forward disclosure requirements in the proposed Update, but did not make final
decisions regarding these topics. The Board directed the staff to perform
additional research regarding the definition of originations to be included in
the roll forward disclosure.
Scope
The Board decided to
remove the following types of financial assets from the scope of the CECL model:
- Loans made to participants by defined contribution employee benefit
plans
- Policy loan receivables of an insurance entity
- Promises to give (pledge receivables) of a not-for-profit entity
- Related party loans and receivables between entities under common
control
The Board decided to include financial guarantee contracts that
are not accounted for as insurance or at fair value through net income in the
scope of the CECL model.
Additionally, the Board affirmed that expected
credit losses on reinsurance receivables of an insurance entity and loans made
by a not-for-profit entity to meet its mission (programmatic loans) would be
accounted for under the CECL model.
The Board directed the staff to
perform further research on whether the disclosure provisions in the proposed
Update, as subsequently modified, should apply to reinsurance receivables,
programmatic loans, and financial guarantees.
Simplifying
Income Statement Presentation by Eliminating the Concept of Extraordinary
Items. The Board discussed the staff´s analysis of stakeholders´ feedback
received on proposed Accounting Standards Update, Income
Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income
Statement Presentation by Eliminating the Concept of Extraordinary Items,
and affirmed the proposed changes.
Presentation and
Disclosure
The Board affirmed its decision to eliminate the concept
of extraordinary items from generally accepted accounting principles (GAAP).
The presentation and disclosure requirements in Subtopic 225-20 for items that
are unusual in nature or infrequently occurring will be retained.
Transition
The Board decided to revise its previous decision
and to allow entities an option to elect either prospective or retrospective
application rather than requiring prospective application.
Transition Disclosures
The Board decided that the only required
transition disclosure for an entity that prospectively applies the guidance
would be to disclose both the nature and amount of an item included in income
from continuing operations after adoption that relates to an adjustment of an
item previously separately classified and presented as an extraordinary item
before adoption, if applicable.
Effective Date and Early
Adoption
The guidance will be effective for annual periods, and
interim periods within those annual periods, beginning after December 15, 2015.
The Board decided to permit early adoption provided that the guidance is applied
from the beginning of the fiscal year of adoption.
Next
Steps
The Board directed the staff to draft a final Accounting
Standards Update for vote by written ballot.