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.
January 20, 2016 FASB Board Meeting
Technical corrections and improvements. The Board discussed proposed technical corrections and improvements to the FASB Accounting Standards Codification® and made the following decisions.
Insurance
The Board decided to simplify the guidance related to participating insurance by replacing alternate variations of the term participating insurance contract (that is, participating insurance contracts, participating insurance, and participating contract) with the term participating insurance contract.
Similarly, the Board decided to simplify the guidance related to reinsurance receivable/recoverable by using one term, reinsurance recoverable, consistently throughout the applicable guidance.
Troubled Debt Restructuring
The Board decided to remove the term debt from the Master
Glossary because the current definition will be embedded within
Subtopics 310-40 and 470-60. The amendment will clearly state that the
definition is specific to those Subtopics.
Fair Value Measurement
The Board decided to clarify the difference between a valuation approach and a valuation technique as
discussed in Topic 820. The proposed amendment also would require an
entity to disclose when there has been a change in either or both a valuation approach and valuation technique.
Profit Recognition
The Board decided to amend the Codification to reflect the final decision of EITF Issue No. 87-9, Profit Recognition on Sales of Real Estate with Insured Mortgages or Surety Bonds,
which states that a FHA or VA insured loan does not have to be fully
insured for the seller/financer to record profit under the full accrual
method.
Sales of Financial Assets
The Board decided to amend the implementation guidance in Subtopic
860-20 to clarify that the decision to put defaulted loans and
associated liabilities back on the seller/servicer's books involves a
two-step analysis.
Cloud-Computing Arrangements
The Board decided to amend Subtopic 350-40 to direct entities to
existing guidance that clarifies how to account for arrangements that
include a license to internal-use software acquired from third parties.
Other Proposed Amendments
The Board decided to make a number of other amendments that would
correct, clarify, or improve existing guidance in the Codification.
Transition Guidance
The Board decided that some of the proposed changes arising from this
project would be initially accounted for as a change in accounting
principle, with the cumulative effect of the change reflected as an
adjustment to the opening balance of retained earnings. The Board also
decided to require disclosure of the nature of and reason for the change
as well as the cumulative effect of the change. The Board decided to
provide entities with an option of applying the changes retrospectively.
The proposed amendments for Topic 820 related to FHA and VA insured
mortgages and the clarification related to fair value measurement would
be applied prospectively.
Next Steps
The Board directed the staff to draft a proposed Accounting Standards
Update for vote by written ballot. The Board decided that the comment
period for the proposed Update would be 75 days.
The Board also discussed the technical corrections related to Revenue from Contracts with Customers (Topic 606) and Consolidation (Topic 810): Amendments to the Consolidation Analysis at the Board meeting. The tentative decisions follow.
Update 2014-09, Revenue from Contracts with Customers
The Board decided to propose the following amendments:
- Supersede the guidance on preproduction costs related to
long-term supply arrangements within Subtopic 340-10, Other Assets and
Deferred Costs—Overall. As a consequence, an entity would apply the
guidance in Subtopic 340-40, Other Assets and Deferred Costs—Contracts
with Customers.
- Amend the impairment testing guidance in Subtopic 340-40, Other
Assets and Deferred Costs—Contracts with Customers, to clarify that:
- Contract renewals and extensions should be considered when
measuring the remaining amount of consideration an entity expects to
receive.
- An entity would include both the amount of consideration it
has already received but has not recognized as revenue and the amount
the entity expects to receive in exchange for the goods or services to
which the contract asset relates when measuring the consideration the
entity expects to receive.
- The order of impairment testing is (1) assets outside the
scope of Topic 340 (for example, inventory within the scope of Topic
330), then (2) assets within the scope of Topic 340, then (3) asset
groups or reporting units within the scope of Topic 350, Goodwill and
Other, and Topic 360, Property, Plant and Equipment.
- Amend the onerous contract test within the guidance in Subtopic
605-35, Revenue Recognition—Construction-Type and Production-Type
Contracts, so that the contract is the lowest level at which testing is
required, while not precluding entities from evaluating onerous
contracts at the performance obligation level.
- Amend the scope of Topic 606 to specify that contracts (not only
insurance contracts) that are within the scope of the guidance in Topic
944, Financial Services—Insurance, are excluded from the scope of Topic
606.
- Amend Example 7 of Topic 606 on contract modifications to better
align the analysis in the example with the guidance in paragraph
606-10-25-12.
- Create a new Subtopic, 924-815,
Entertainment—Casinos—Derivatives and Hedging, that would include a
scope exception from derivatives guidance for fixed odds wagering
contracts of entities within the scope of Topic 924.
- Align the cost capitalization guidance for both public and private funds in Topic 946, Financial Services—Investment Companies.
The Board directed the staff to draft a separate proposed Accounting
Standards Update for those issues for vote by written ballot with a
45-day comment period.
Update 2015-02, Amendments to the Consolidation Analysis
The Board decided to amend the guidance in paragraph 810-10-25-42 by
deleting the last sentence of that paragraph, which states "indirect
interests held through related parties that are under common control
with the decision maker should be considered the equivalent of direct
interests in their entirety."
The Board also directed the staff to consider whether any amendments to
the guidance in Subtopic 810-10 for fees paid to decision makers or
service providers were necessary as a result of the proposed change.
The Board directed the staff to draft a separate proposed Accounting
Standards Update for the issue for vote by written ballot with a 30-day
comment period.
Financial performance reporting.
The staff presented its research into the current practice of reporting
functional and natural lines in the performance statement. The staff
also presented its proposal for how the Board could consider
disaggregating functional lines into certain natural components. No
decisions were made. The Board directed the staff to evaluate and
clarify the objective of the project in light of all of the staff's
research in the project for assessment at a future meeting.