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.

November 23, 2015 FASB Board Meeting

Employee Share-Based Payment Accounting Improvements. The Board completed redeliberations of its proposed Accounting Standards Update, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (the proposed Update), and gave the staff permission to draft a final Accounting Standards Update for vote by written ballot.

The Board affirmed proposed changes to the accounting for share-based payment awards issued to employees in the following areas:
  1. Accounting for income taxes upon vesting or settlement of awards
  2. Presentation of excess tax benefits on the statement of cash flows
  3. Accounting for forfeitures
  4. Minimum statutory withholding requirements
  5. Presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet minimum statutory withholding requirements
  6. Private company practical expedients
    1. Expected term
    2. Intrinsic value.
The Board did not affirm its proposed changes to the classification of awards with repurchase features.

Accounting for Income Taxes upon Vesting or Settlement of Awards

The Board affirmed its decision to require entities to recognize all excess tax benefits and all tax deficiencies as income tax expense or benefit in the income statement. The Board clarified that the tax effects of exercised or vested awards are discrete items in the reporting period in which they occur (that is, entities would not consider them in determining the annual estimated effective tax rate).

The Board also affirmed its decision to remove the requirement to delay recognition of an excess tax benefit until the tax benefit is realized.

Presentation of Excess Tax Benefits on the Statement of Cash Flows

The Board affirmed its decision to require that cash flows related to excess tax benefits be classified as an operating activity.

Accounting for Forfeitures

The Board affirmed its decision to allow an entity to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (that is, an entity must estimate the number of awards that are expected to be forfeited) or account for forfeitures when they occur.

Minimum Statutory Withholding Requirements

The Board affirmed its decision to raise the threshold to qualify for equity classification to permit withholding up to the maximum individual statutory rate in the applicable jurisdiction.

Presentation of Employee Taxes Paid on the Statement of Cash Flows When an Employer Withholds Shares to Meet Minimum Statutory Withholding Requirements

The Board affirmed its decision to require that an employer classify the cash paid when directly withholding shares to meet minimum statutory withholding requirements as a financing activity on the statement of cash flows.

Classification of Awards with Repurchase Features

The Board decided not to finalize its proposal to require an entity to assess whether a contingent event that triggers a repurchase feature is probable of occurring, regardless of whether the contingent event is within or outside the employee’s control. The Board indicated that it may address the accounting for repurchase features as part of another project regarding distinguishing liabilities from equity.

Private Company Practical Expedients

Expected Term

The Board affirmed its decision to provide private companies with a practical expedient to estimate the expected term for all awards with performance or service conditions. However, the Board decided to modify the practical expedient as follows:
  1. If vesting is dependent upon only a service condition, an entity shall estimate the expected term as the midpoint between the requisite service period (that is, the period during which an employee must render service in order to vest in an award) and the contractual term of the award. This is consistent with the expedient included in the proposed Update.
  2. If vesting is dependent upon satisfying a performance condition, an entity first would determine whether the performance condition is probable of being achieved:
    1. If the entity concludes that the performance condition is probable of being achieved, then the entity shall estimate the expected term as the midpoint between the requisite service period and the contractual term. This is consistent with the expedient included in the proposed Update.
    2. If the entity concludes that the performance condition is not probable of being achieved, the entity shall estimate the expected term as (i) the contractual term if the service period is implied (that is, the service period is not explicitly stated but inferred based on the achievement of the performance condition at some undetermined point in the future); (ii) the midpoint between the requisite service period and the contractual term if the service period is explicitly stated. This represents a change from the expedient included in the proposed Update.
Intrinsic Value

The Board affirmed its decision to provide private companies with a one-time election to switch from measuring liability-classified awards at fair value to measuring liability-classified awards at intrinsic value.

Eliminating the Indefinite Deferral in Topic 718—Stock Compensation

To improve usability of the FASB Accounting Standards Codification®, the Board affirmed its decision to eliminate the indefinite deferral of certain requirements in Topic 718. This amendment will not result in change to current GAAP requirements; it only would remove guidance in the Codification that is indefinitely deferred.

Transition Method

The Board decided to provide different methods of transition for the amendments.

The Board decided that a modified retrospective transition method, with a cumulative-effect adjustment recognized in equity, would be used for the adoption of following amendments:

Accounting for Income Taxes upon Settlement of an Award (Applicable to All Entities)

The amendment to remove the requirement to delay recognition of an excess tax benefit until the tax benefit is realized.

Minimum Statutory Withholding Requirements (Applicable to All Entities)

The amendment to change the exception for liability classification when an employer uses a net-settlement feature to withhold shares to meet an employee’s minimum statutory withholding requirements. Under the modified retrospective transition method, the changes will be applied to outstanding liability awards at the date of adoption.

Accounting for Forfeitures (Applicable to All Entities)

The amendment allowing an entity an accounting policy election to either estimate the number of forfeitures or recognize forfeitures as they occur.

Intrinsic Value Election for All Liability-Classified Awards (Applicable to Nonpublic Entities Only)

The amendment to provide nonpublic entities with a one-time election to change the measurement of liability-classified awards from fair value to intrinsic value.

The Board decided to require a retrospective transition method for the following amendment:

Presentation of Employee Taxes Paid on the Statement of Cash Flows When an Employer Withholds Shares to Meet Minimum Statutory Withholding Requirements (Applicable to All Entities)

The amendment to classify cash paid when directly withholding shares to meet minimum statutory withholding requirements as a financing activity in the statement of cash flows.

The Board decided to provide an option to use either a prospective transition method or a retrospective transition method for the following amendment:

Presentation of Excess Tax Benefits on the Statement of Cash Flows (Applicable to All Entities)

The amendment to remove the requirement that employers present excess tax benefits as a cash inflow from financing activities and a cash outflow from operating activities. The Board previously proposed to require a retrospective transition method.

The Board decided to require a prospective transition method for the following amendments:

Accounting for Income Taxes upon Settlement of an Award (Applicable to All Entities)

The proposal that all excess tax benefits and tax deficiencies should be recognized in the income statement.

Expected Term (Applicable to Nonpublic Entities Only)

The proposal to provide nonpublic entities with a practical expedient for estimating the expected term of an award.
 
Disclosures in the Period of Adoption (Applicable to All Entities)

The Board decided that the disclosures about a change in accounting principle in paragraphs 250-10-50-1 through 50-3 will be required with one exception: entities would not be required to quantify the income statement effect of a change (direct and indirect) in the period of adoption.

Disclosures about Accounting for Forfeitures (Applicable to All Entities)

The Board decided to amend the disclosure requirements in paragraph 718-10-50-2(e) to include information about unvested awards rather than awards expected to vest. This amendment would only apply to entities that elect to account for forfeitures as they occur.

Effective Date

The Board decided that the amendments will be effective for public entities for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. The amendments will be effective for nonpublic entities for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption will be permitted in any interim or annual period.

Next Steps

The staff will proceed to drafting a final Accounting Standards Update for vote by written ballot.


Financial instruments—Impairment. The Board continued redeliberating the December 2012 proposed Accounting Standards Update, Financial Instruments—Credit Losses (Subtopic 825-15).

The Board discussed feedback received on the external review draft relating to purchased financial assets with credit deterioration (PCD assets).

The Board made no technical decisions.


Clarifying the Definition of a Business (Phase 2). The Board continued its deliberations, discussing the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, in substance nonfinancial assets, and the accounting for partial sales.

The Board made no decisions.