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 6, 2016 FASB Board Meeting
Revenue recognition—identifying performance obligations and licensing.
The staff updated the Board on developments related to the license
restrictions and the license renewals guidance in the forthcoming
Accounting Standards Update, Revenue from Contracts with Customers (Topic 606)—Identifying Performance Obligations and Licensing. The Board made no decisions.
The Board observed that the application guidance on licensing does not
override the five-step revenue recognition model in Topic 606. An entity
is expected to apply the guidance for identifying performance
obligations to determine whether a contract includes one or multiple
licenses. The Board also observed that the use and benefit guidance
applies to both the initial license of intellectual property and
renewals.
Definition
of a business (phase 2): clarifying the scope of Subtopic 610-20 and
accounting for partial sales of nonfinancial assets. The Board
discussed what types of transactions are partial sales, the partial
sales model, what should be the scope of Subtopic 610-20, Other
Income—Gains and Losses from the Derecognition of Nonfinancial Assets,
and in substance nonfinancial assets. The Board made the following
decisions.
Partial Sales in the Scope of Subtopic 610-20
The Board decided that all transactions in which an entity retains an
equity interest in the asset or receives an equity interest in the buyer
(including contributions of nonfinancial assets to form joint ventures)
would be in the scope of Subtopic 610-20. The guidance in Topic 845,
Nonmonetary Transactions, on exchanges of nonfinancial assets for a
noncontrolling ownership interest would be eliminated.
Partial Sales Model
The Board decided that the unit of account when transferring a
nonfinancial asset and retaining an equity interest in the asset or the
buyer would be the entire underlying asset. This reverses the Board's
previous decision that the unit of account is the partial interest
transferred.
The Board decided that any retained noncontrolling investment would be
recorded at fair value. This reverses the Board's previous decision
that the retained interest would be measured at carryover basis.
Accounting When Control Is Not Transferred
The Board decided that the accounting for a transaction in which control
of the nonfinancial asset does not transfer is dependent upon the
reason why the asset is not derecognized. If the asset is not
derecognized because the seller still consolidates the legal entity (for
example, selling a noncontrolling interest in a subsidiary that only
holds nonfinancial assets subject to Subtopic 610-20), the transaction
would be recorded as an equity transaction consistent with the guidance
in Topic 810, Consolidation. If the entity cannot derecognize the
nonfinancial asset because the requirements in paragraph 610-20-40-1
have not been met, the entity would record a contract liability as the
offset for the consideration received.
Liabilities
The Board decided that the buyer's assumption of the seller's liability
would be consideration received in exchange for the nonfinancial asset
that would be included in the calculation of the gain or loss.
Scope of Subtopic 610-20 and In Substance Nonfinancial Assets
The Board decided that all businesses would be excluded from the scope of Subtopic 610-20.
Groups of Assets or Subsidiaries That Are Not a Business
The Board decided that if a subsidiary or group of assets that is not a
business is an in substance nonfinancial asset(s), all of the assets in
the group or subsidiary would be subject to Subtopic 610-20. The Board
also decided that if Subtopic 610-20 or no other GAAP applies to a group
of assets, the entity would separate the assets and apply the
applicable GAAP to each asset in a group of assets. The transfer of a
subsidiary that is not a business for which the substance of the
transaction is not subject to other GAAP (for example, Subtopic 610-20
or Topic 860 on financial assets) would continue to be accounted for in
accordance with Topic 810.
In Substance Nonfinancial Assets
The Board decided that when substantially all of the fair value is
concentrated in nonfinancial assets, with an exception for cash and cash
equivalents, groups of assets or subsidiaries that are not a business
would be considered in substance nonfinancial assets.
Accounting for goodwill impairment.
The Board discussed the impairment test for reporting units with zero
or negative carrying amounts and the disclosure requirements for all
entities. The Board made the following decisions.
Reporting Units with Zero or Negative Carrying Amounts
The Board decided that entities should apply the same impairment model
for a reporting unit with a zero or negative carrying amount as the
model for a reporting unit with a positive carrying amount by comparing
the fair value of the reporting unit to its carrying amount. This
reverses the Board's previous decision to require the write-off of
goodwill allocated to reporting units with zero or negative carrying
amounts.
Disclosures
The Board decided that in addition to the current disclosure
requirements, entities with reporting units with zero or negative
carrying amounts should disclose the following:
- Identification of reporting units with zero or negative carrying amounts
- The amount of goodwill attributable to each reporting unit with a zero or negative carrying amount.
Transition Disclosures
The Board decided that entities should provide the applicable
disclosures described in paragraphs 250-10-50-1(a), which are the nature
of and reason for the change in accounting principle, and 250-10-50-2,
which states that the required transition disclosures should be included
in both interim and annual financial statements in the period of the
change.
Next Steps
The Board directed the staff to draft a proposed Accounting Standards
Update for vote by written ballot, with a comment period of 60 days.