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.
April 7, 2015 FASB Board Meeting
Accounting for Financial Instruments—Hedging. The Board continued redeliberations of the May 2010 proposed Accounting Standards Update, Accounting
for Financial Instruments and Revisions to the Accounting for
Derivative Instruments and Hedging Activities—Financial Instruments
(Topic 825) and Derivatives and Hedging (Topic 815).
The Board discussed the following issues:
- Presentation of hedge ineffectiveness
- Quantitative definition of a reasonably effective threshold
- Implications of a dual effectiveness threshold—reasonably
effective for hedges of nonfinancial items and highly effective for
hedges of financial instruments
- Fair value hedges of nonfinancial items
- Additional qualifying strategies under a reasonably effective threshold for nonfinancial items
- Analysis of existing impairment guidance for cash flow hedges
- Additional disclosures for hedges of nonfinancial items under a reasonably effective threshold
- Subsequent qualitative effectiveness testing.
The Board made no technical decisions.
Leases. The Board continued redeliberating the proposals in the May 2013 Exposure Draft, Leases, specifically discussing nonpublic business entity considerations.
The Board decided that there should not be any alternative recognition,
measurement, disclosure, presentation, or transition guidance provided
for nonpublic business entities reporting under GAAP (except for the
practical expedient to allow the use of a risk-free rate to measure
lease liabilities).
Next Steps
The staff has begun drafting a final leases standard based on the
tentative decisions reached by the Board. Later in the drafting process,
the Board will discuss any "sweep" issues that arise during drafting,
the benefits and costs of the new leases standard, and effective date.
Clarifying the Definition of a Business.
Definition of a Business
The staff updated the Board on progress made on the first phase of the
project—clarifying the definition of a business—since the December 17,
2014 meeting. The Board made no technical decisions. The Board plans
to continue deliberations on this project phase in May.
Accounting for Partial Sales
The Board began deliberations of the project´s second phase—accounting
for partial sales of a nonfinancial asset—and discussed ways to clarify
certain accounting issues associated with accounting for partial sales
of nonfinancial assets in the scope of Subtopic 610-20 on gains and
losses from the derecognition of nonfinancial assets.
The Board decided that an entity should recognize a gain or loss on the
partial sale of a nonfinancial asset (for example, when an entity sells a
partial interest in a legal entity that holds only a nonfinancial
asset) only if the seller does not consolidate the legal entity and the
other criteria in paragraph 610-20-40-1 have been met.
Retained Interests
The Board decided that when an entity sells a part of a nonfinancial
asset (for example, when an entity sells a partial interest in a legal
entity that holds only a nonfinancial asset), any noncontrolling
interest retained by the seller in the entity that holds the
nonfinancial asset should be measured at carryover basis.
Accounting for Identifiable Intangible Assets in a Business Combination for Public Business Entities and Not-for-Profit Entities.
The staff updated the Board on research and outreach performed since
the project was added to the technical agenda in November 2014. The
Board made no technical decisions. The Board plans to begin
deliberations in May.
Accounting for Goodwill for Public Business Entities and Not-for-Profit Entities.
The staff updated the Board on the status of the project. The Board
made no technical decisions. The Board plans to continue its
deliberations in May.
Ratification of EITF Consensuses and Tentative Conclusions.
FASB Ratification of EITF Consensuses
The Board ratified the following consensuses reached at the March 19,
2015 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. 14-A, "Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions"
The EITF reached a consensus that, for purposes of calculating
historical earnings per unit under the two-class method, the earnings
(losses) of a transferred business before the date of a dropdown
transaction should be allocated entirely to the general partner
interest. Qualitative disclosures about how the rights to the earnings
(losses) differ before and after the dropdown transaction occurs for
purposes of computing earnings per unit under the two-class method also
are required.
The minutes of the March 19, 2015 EITF meeting, which will be posted to
the FASB website the week of April 20, 2015, describe the consensus in
detail.
Issue No. 14-B, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)"
The EITF reached a consensus that would remove the requirement to
categorize within the fair value hierarchy all investments for which
fair value is measured using the net asset value of the investment as a
practical expedient. Investments that calculate net asset value (or its
equivalent), but for which the practical expedient is not applied, will
continue to be included in the fair value hierarchy. The consensus also
would remove the requirement to make certain disclosures for all
investments that are eligible to be measured at fair value using the net
asset value practical expedient. Rather, those disclosures are limited
to investments for which the entity has elected to estimate the fair
value using that practical expedient.
A reporting entity should continue to disclose information on
investments for which fair value is measured using net asset value (or
its equivalent) as a practical expedient to help users understand the
nature and risks of the investments and whether the investments, if
sold, are probable of being sold at amounts different from net asset
value.
The minutes of the March 19, 2015 EITF meeting, which will be posted to
the FASB website the week of April 20, 2015, describe the consensus in
detail.
FASB Ratification of EITF Consensuses-for-Exposure
The Board ratified the following consensuses-for-exposure reached at the
March 19, 2015 EITF meeting. The Board directed the staff to draft
proposed Accounting Standards Updates reflecting those
consensuses-for-exposure for a vote by written ballot. The Board
decided to expose the related proposed Updates for Issue No. 15-A and
Issue No. 15-C for public comment for a period of approximately 25 days.
For Issue No. 15-B, the Board decided to expose the related proposed
Update for public comment for a period of approximately 60 days.
Issue No. 15-A, "Application of the Normal Purchases and Normal
Sales Scope Exception to Certain Electricity Contracts within Nodal
Energy Markets"
The EITF reached a consensus-for-exposure that the use of locational
marginal pricing by an independent system operator to determine the
transmission charge (or credit) does not constitute net settlement of a
contract for the purchase or sale of electricity on a forward basis for
delivery to a location within a nodal energy market, even in scenarios
in which legal title to the associated electricity is conveyed to the
independent system operator during transmission. Consequently, those
contracts may be eligible to meet the physical delivery criterion of the
normal purchases and normal sales scope exception. If the physical
delivery criterion is met, along with all of the other criteria of the
normal purchases and normal sales scope exception, an entity may elect
to designate those contracts as normal purchases or normal sales.
The minutes of the March 19, 2015 EITF meeting, which will be posted to
the FASB website the week of April 20, 2015, describe the
consensus-for-exposure in detail.
Issue No. 15-B, "Recognition of Breakage for Certain Prepaid Stored-Value Cards"
The EITF reached a consensus-for-exposure that a prepaid stored-value
card is a financial liability if the card (a) does not have an
expiration date, (b) is not subject to unclaimed property laws, (c) is
redeemable for goods and services only at third-party merchants, or for
cash, or both, and (d) is not directly attached to a segregated bank
account like a customer depository account.
The consensus-for-exposure proposes a narrow scope exception to the
guidance in Subtopic 405-20 to require that breakage be accounted for
consistent with Topic 606 for the sale of a prepaid stored-value card
that is a financial liability. If an entity expects to be entitled to a
breakage amount for a liability resulting from the sale of a prepaid
stored-value card within the scope of this proposed Update, the entity
would derecognize the amount related to the expected breakage in
proportion to the pattern of rights expected to be exercised by the card
holder only to the extent that it is probable that a significant
reversal of the recognized breakage amount will not subsequently occur.
If an entity does not expect to be entitled to a breakage amount, the
entity would derecognize the amount related to the expected breakage
when the likelihood of the customer exercising its remaining rights
becomes remote.
Entities also would disclose the methodology used for recognizing breakage for prepaid stored-value cards.
The minutes of the March 19, 2015 EITF meeting, which will be posted to
the FASB website the week of April 20, 2015, describe the
consensus-for-exposure in detail.
Issue No. 15-C, "Employee Benefit Plan Simplifications"
Issue I: Fully Benefit-Responsive Investment Contracts
The EITF reached a consensus-for-exposure that fully benefit-responsive
investment contracts would be measured, presented, and disclosed only at
contract value. A plan would continue to provide disclosures that help
users understand the nature and risks of the fully benefit-responsive
investment contracts, including a description of the events that would
cause the plan to transact at an amount different from contract value.
The consensus-for-exposure would clarify that plans would not be
required to provide the fair value disclosures in Topic 825 for fully
benefit-responsive investment contracts.
Issue II: Plan Investment Disclosures
GAAP requires plans to disclose (a) individual investments that
represent 5 percent or more of net assets available for benefits and (b)
the net appreciation or depreciation for investments by general type.
The consensus-for-exposure would eliminate those requirements for both
participant-directed investments and nonparticipant-directed
investments.
Investments (both participant-directed and nonparticipant-directed
investments) of employee benefit plans would be required to be grouped
only by general type, eliminating the need to disaggregate the
investments in multiple ways. If an investment is measured at net asset
value (or its equivalent) using the practical expedient in Topic 820 and
that investment is in a fund that files an Internal Revenue Service
Form 5500, Annual Return/Report of Employee Benefit Plan, as a direct filing entity, disclosure of that investment´s strategy would no longer be required.
Issue III: Measurement Date Practical Expedient
The consensus-for-exposure is intended to provide a practical expedient
to permit plans to measure net assets as of a month-end date that is
closest to the plan´s fiscal year-end, when the fiscal period does not
coincide with month-end.
If a plan applies the practical expedient and a contribution,
distribution, and/or significant event occurs between the alternative
measurement date and the plan´s fiscal year-end, the plan would be
required to disclose the amount of the contribution, distribution,
and/or significant event. The plan also would be required to disclose
the accounting policy election and the date used to measure net assets.
The minutes of the March 19, 2015 EITF meeting, which will be posted to
the FASB website the week of April 20, 2015, describe the
consensus-for-exposure in detail.
Technical Corrections and Improvements. The Board discussed feedback received on the proposed FASB Accounting Standards Update, Technical Corrections and Improvements, and made the following decisions.
Proposed Amendments Removed from the Final Accounting Standards Update
The Board decided to remove the proposed amendments to Subtopics 805-50,
Business Combinations—Related Issues; 810-30, Consolidation—Research
and Development Arrangements; and 970-323, Real
Estate—General—Investments—Equity Method and Joint Ventures, because the
proposed corrections have been made in other Accounting Standards
Updates. The Board also decided to remove the proposed amendment to
Subtopic 958-605, Not-for-Profit Entities—Revenue Recognition, and
directed the staff to conduct additional research to determine the
appropriate terminology for the clarification.
Changes Proposed That the Board Decided Not to Finalize
- Subtopic 715-30, Compensation—Retirement Benefits—Defined
Benefit Plans—Pension: The proposed amendment to correct a reference to
Section 715-80-50, Compensation—Retirement Benefits—Multiemployer
Plans—Disclosure, was not made to avoid the possibility of creating
confusion in current practice for local chapters of not-for-profit
entities that are currently exempt from the disclosure requirements in
that Section.
- Subtopic 820-10, Fair Value Measurement—Overall: The proposed
amendment to include additional recognition guidance was not made to
avoid potential misinterpretation in practice.
Additional Amendments Identified by Stakeholders and Board Members
The Board decided to make the following additional amendments in response to comments received from stakeholders:
- Subtopic 255-10, Changing Prices—Overall: Changes were made to
the first sentence in paragraph 255-10-55-2 to clarify that trading
securities can be held in any type of trading account and to remove
wording that would imply the securities were held for resale to
customers only.
- Subtopic 320-10, Investments—Debt and Equity Securities—Overall:
When one of a paired structured note is sold, it should be measured
like a participating interest in paragraph 860-20-40-1A. Additionally,
changes were made to the Master Glossary term readily determinable fair value to provide a parallel sentence structure between all listed components of the definition.
- Subtopic 958-205, Not-for-Profit Entities—Presentation of
Financial Statements: The illustration in paragraph 958-205-45-10A was
clarified to illustrate the accounting for situations resulting in the
expiration of donor-imposed restrictions. Additionally, the last
sentence in paragraph 958-205-45-10 was removed to avoid any confusion
about the expiration of the restriction.
Transition Guidance
The Board decided to provide transition guidance for the following amendments:
- Subtopic 274-10, Personal Financial Statements—Overall: The
proposed amendment should be applied prospectively by recognizing and
presenting separately the cumulative effect of the change in accounting
principle as an adjustment to the opening balance of retained earnings,
or net worth, for all estimated current value of investments in real
estate on the balance sheet as of the effective date. Additionally, a
reporting entity should disclose the nature of the change and the reason
for the change.
- Subtopic 470-30, Debt—Participating Mortgage Loans: An entity
should recognize and present separately the cumulative effect of the
change in accounting principle as an adjustment to the opening balance
of retained earnings. An entity may elect to apply the proposed
amendment retrospectively. Additionally, a reporting entity should
disclose the nature of the change and the reason for the change.
- Subtopic 718-40, Compensation—Stock Compensation—Employee Stock
Ownership Plans: The amendments should be applied prospectively, and an
entity should recognize and present separately the cumulative effect of
the change in accounting principle as an adjustment to the opening
balance of retained earnings. Additionally, an entity should disclose:
- The fact that it was using a framework other than the framework in Topic 820 on fair value measurement in prior valuations
- A qualitative description of how the valuation methodology
that was used differs from that of Topic 820 and the possible effect on
prior valuations
- The nature of the change and the reason for the change.
Effective Date
The Board decided that the changes should apply to all entities in
annual periods beginning after December 15, 2015, and interim periods
within those annual periods. Early adoption is permitted.
Permission to Ballot
The Board decided that it has received sufficient information and
analysis on the proposed amendments to make an informed decision on the
issues presented and that the expected benefits of those amendments
justify the perceived cost of change. The Board directed the staff to
draft a final Update for vote by written ballot.
Financial Statements of Not-for-Profit Entities.
The Board decided to extend the comment period deadline to 120 days
from the issuance of the Exposure Draft, which is expected to be on or
about April 23, 2015.