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.

Wednesday, August 24, 2016 FASB Board Meeting

Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost. The Board discussed a summary of comments received on the proposed Accounting Standards Update, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The Board made no technical decisions; however, it directed the staff to perform research on particular aspects of the proposed Update.


Clarifying the definition of a business. The Board continued its redeliberations of its proposed Accounting Standards Update, Business Combinations (Topic 805): Clarifying the Definition of a Business, and discussed the following topics:
  1. Threshold
  2. Substantive processes
  3. Definition of output.
Threshold

The Board affirmed its decision to include the threshold as a practical screen. When applying the threshold, the set is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the threshold is not met, an entity would evaluate the rest of the implementation guidance to determine whether the set is the acquisition or disposition of a business or an asset or assets.

When applying the threshold, the Board clarified that:
  1. A single identifiable asset includes any asset that could be recognized and measured as a single identifiable asset under Topic 805, Business Combinations, for financial reporting purposes with the following exceptions:
    1. A tangible asset that is attached to and cannot be physically removed and used separately from other tangible assets (or intangible asset representing the right to use a tangible asset), without incurring significant cost, significant diminution in utility, or fair value to either asset
    2. In-place lease intangible assets, favorable or unfavorable lease assets and liabilities, and related real estate assets should be considered a single asset.
  2. Deferred tax assets and the effects of deferred tax liabilities should be excluded from the gross assets acquired.
  3. Identifiable assets within the same major asset class that have significantly different risk characteristics should not be considered similar assets.
Substantive Processes

The Board affirmed its decision that to be accounted for as a business, at a minimum, the set must include an input and a substantive process that together significantly contribute to the ability to create outputs.

The Board decided that when a set does not have outputs, a set would need to include employees that perform a substantive process.

The Board decided not to provide guidance on how to assess whether contracts for future goods or services entered into at the same time with the same counterparty are part of the set.

The Board affirmed its decision that the presence of more than an insignificant amount of goodwill is an indicator that the acquired set includes a substantive process.

Definition of Output

The Board affirmed its decision to define output as the result of inputs and processes applied to those inputs that provide goods or services to customers, other revenues, or investment income, such as dividends or interest.


Disclosure framework: disclosure review—inventory. The Board continued discussion on potential changes to inventory disclosure requirements in Topic 330, Inventory, and next steps. The Board made no technical decisions. The topic will be discussed at a future decision-making Board meeting.


Consolidation: interests held through related parties that are under common control. The Board discussed a summary of comments received on the proposed Accounting Standards Update, Consolidation (Topic 810): Indirect Interests Held through Related Parties That Are under Common Control. The Board decided that when determining whether a single decision maker is the primary beneficiary of a variable interest entity (VIE), a single decision maker will no longer be required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, the single decision maker will include such interests on a proportionate basis consistent with indirect interests held through other related parties. The Board also made the following decisions:

Transition Method and Disclosures

The Board decided that entities that have already adopted the amendments in Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (Update 2015-02), will be required to apply the amendments in the final Update retrospectively to all relevant prior periods beginning with the annual period in which the amendments in Update 2015-02 were initially adopted. Entities that have not yet adopted the amendments in Update 2015-02 will be required to apply the same transition method elected for the application of Update 2015-02.

The Board also affirmed the transition disclosures in the proposed Update.

Effective Date and Early Adoption

The Board decided that the guidance in the final Update will be effective for public business entities for annual periods beginning after December 15, 2016, including interim periods within that period. For all other entities, the guidance will be effective for annual periods beginning after December 15, 2016, and interim periods within annual periods after December 15, 2017.

Entities that have not yet adopted the amendments in Update 2015-02 will be required to adopt the amendments in the final Update at the same time they adopt the amendments in Update 2015-02.

The Board also decided that early adoption will be permitted as of the date of issuance of the final Update, including adoption in an interim period.

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 the amendments justify the perceived cost of change. The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.