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, November 30, 2016 FASB Board Meeting

Nonemployee share-based payment accounting improvements. The Board discussed the following:
  1. Comments received from external reviewers on a draft of the proposed Accounting Standards Update on improvements to nonemployee share-based payment accounting
  2. Contractual versus expected term for measuring nonemployee share-based payment transactions
  3. Analysis of the costs and benefits of the Board's decisions
  4. Permission to ballot and comment period.
Comments Received from External Reviewers

The Board discussed the comments received from external reviewers and agreed:
  1. To retain the transition requirements previously agreed upon by the Board and solicit feedback on the operability of the requirements through exposure.
  2. To delay the discussion about effective date interaction with Topic 606, Revenue from Contracts with Customers, until after exposure of the proposed amendments.
Contractual versus Expected Term for Measuring Nonemployee Share-Based Payment Transactions

The Board decided to require the use of the contractual term as an input for measuring nonemployee share-based payment transactions.

Analysis of the Costs and Benefits

The Board concluded that it has received sufficient information and analysis on the forthcoming proposed amendments on nonemployee share-based payments to make an informed decision on the issues presented and that the expected benefits of the amendments justify the related costs.

Permission to Ballot and Comment Period

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot. The Board decided on a 90-day comment period for the proposed Update.

Conceptual framework—measurement. The Board decided the following related to initial measurement:
  1. There are three categories of initial measurement:
    1. Entry price
    2. Exit price
    3. Estimated future cash flows.
  2. Exit price is appropriate as an initial carrying amount of an asset when the subsequent measure of the asset will be at exit price.
  3. For transactions in which something other than cash is exchanged, the initial measure of an asset may be based on the exit price for the asset transferred.
  4. The overall objective in identifying costs to be included in the initial carrying amount of an asset at entry price should be to capture the costs incurred to bring the asset to the location and condition necessary for it to be capable of operation.
  5. The following categories help identify the types of costs that should be included in an initial carrying amount consistent with the objective described in (4):
    1. Government-imposed charges
    2. Costs of services related to the acquisition of the asset and readying the asset for use
    3. Costs to participate in the market for the asset.
  6. Gains and losses on cash flow hedges are neither part of the entry price of assets nor a cost to be included in initial carrying amounts of assets based on the objective and categories described in (4) and (5), respectively.
The Board directed the staff to develop a revised project plan to address the elements of financial statements (which are currently defined in FASB Concepts Statement No. 6, Elements of Financial Statements) concurrently with presentation and measurement concepts.

Ratification of EITF consensus. The Board ratified the consensus reached at the November 17, 2016 Emerging Issues Task Force meeting on the following EITF Issue. The Board directed the staff to draft an Accounting Standards Update reflecting the consensus for vote by written ballot.

Issue No. 16-B, "Employee Benefit Plan Master Trust Reporting"

Presentation

The Task Force reached a consensus that a plan should present its interest in the master trust and the change in its interest in that master trust as single line items in the statement of net assets available for benefits and the statement of changes in net assets available for benefits, respectively.

Disclosure

The Task Force reached a consensus that some additional disclosures are necessary. These disclosures include providing the dollar amount of the plan's interest in each general type of investment held by the master trust, which supplements the existing requirement to disclose the master trust's balances in each of those investments, by general type. The Task Force also reached a consensus to require a plan to disclose the master trust's other assets and liabilities, as well as the dollar amount of the plan's interest in each of those assets and liabilities.

The Task Force reached a consensus that a health and welfare benefit plan is not required to provide investment disclosures for 401(h) account assets because those disclosures are required to be provided within the defined benefit pension plan financial statements. As such, the Task Force also reached a consensus to require disclosure of the defined benefit pension plan name within the health and welfare benefit plan so that all users can access the investment disclosure information relating to the 401(h) accounts, if desired.

Lastly, the Task Force reached a consensus to remove the current GAAP requirement to disclose the plan's overall percentage interest in the master trust for plans with divided interests because it would now provide redundant information.

Transition

The Task Force reached a consensus that the amendments in the Update should be applied retrospectively to all periods presented beginning in a reporting entity's fiscal year of adoption. The Task Force believes that retrospective application would enhance interperiod consistency and comparability of financial information.

The Task Force believes that a reporting entity should be required to only disclose the transition disclosures in paragraph 250-10-50-1(a).

Effective Date and Early Adoption

The Task Force reached a consensus that the amendments in the Update should be effective for fiscal years beginning after December 15, 2018, and that early adoption should be permitted, but entities would be required to adopt the amendments in the Update as a whole; that is, a plan cannot early adopt some individual amendments and not others.


The minutes of the November 17, 2016 EITF meeting, which will be posted to the FASB website by the end of December 2016, describe the consensus on Issue 16-B.

Accounting for goodwill impairment. The Board continued its redeliberations of the proposed Accounting Standards Update, Intangibles—Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment, and discussed transition issues, various private company issues, the effective date for nonpublic entities, and costs and benefits. The Board made the following decisions.

Transition

The Board reaffirmed its decision to require the transition disclosures described in paragraphs 250-10-50-1(a) and 250-10-50-2.

The Board clarified that an entity will be able to adopt the guidance regardless of whether it evaluates goodwill for impairment using the quantitative assessment in the period of adoption.

Private Company Issues

The Board decided to incorporate the guidance on impairment charges when goodwill is tax deductible into the private company accounting alternative.

The Board decided that private companies that switch from the private company accounting alternative to the forthcoming guidance on or before the effective date should apply the guidance prospectively; private companies would not need to justify preferability for the accounting change.

Effective Date for Nonpublic Entities

The Board decided that nonpublic entities should apply the new guidance for annual and any interim impairment tests for periods beginning after December 15, 2021, with early adoption allowed.

Costs and Benefits

The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs of the changes and that the benefits of the amendments justify the costs.

Next Steps

The Board directed the staff to draft an Accounting Standards Update for vote by written ballot.


Leases implementation. The staff provided the Board with an update on the inquiries and feedback received since the issuance of Accounting Standards Update 2016-02, Leases (Topic 842). The staff also highlighted the following key inquiries and discussed next steps with respect to implementation:
  1. Impact of prior asset group impairments on operating lease right-of-use asset measurement
  2. Testing operating leases for impairment
  3. Determining the head lease's lease term in a sublease situation
  4. Accounting for sales-type leases with significant variable payments.
The Board agreed with the staff's plan to continue to work with stakeholders to address implementation questions as they arise.