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.

Monday October 10, 2016 FASB Board Meeting

Clarifying the scope of Subtopic 610-20 and accounting for partial sales of nonfinancial assets. The Board discussed several comments received on the June 2016 proposed Accounting Standards Update, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The Board made the following decisions related to the scope, transition method, and effective date:

Scope
  1. The Board decided to exclude transactions between entities under common control from the scope of Subtopic 610-20.
  2. The Board affirmed its decision to exclude nonfinancial assets transferred in the form of a legal entity from the scope of Subtopic 610-20 if all of the assets in the legal entity do not meet the definition of in substance nonfinancial assets. In that case, the legal entity (including the nonfinancial assets) would be deconsolidated in accordance with Topic 810, Consolidation.
  3. The Board decided to clarify that an entity that transfers nonfinancial assets or in substance nonfinancial assets to another party in exchange for assets should apply the guidance in Subtopic 610-20. That decision would result in an amendment to Subtopic 805-50, Business Combinations—Related Issues.
  4. The Board affirmed its decision not to address the accounting for the sale of an undivided interest.
Transition Method

The Board affirmed its decision that entities would be required to adopt the guidance in Subtopic 610-20 either (1) retrospectively to each period presented in the financial statements or (2) retrospectively with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. An entity may elect to apply a different transition method to Subtopic 610-20 than the entity does to Topic 606, Revenue from Contracts with Customers.

The Board decided that under both transition methods, entities adopting Subtopic 610-20 would be required to apply the revised definition of a business in the forthcoming guidance. The Board expects to finalize the revised definition of a business in the November 2015 proposed Accounting Standards Update, Business Combinations (Topic 805): Clarifying the Definition of a Business, at the same time as the amendments to Subtopic 610-20.

Effective Date and Early Adoption

The Board affirmed the proposed effective date. Therefore, for public entities, the amendments would be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Public entities may apply the guidance earlier but only as of fiscal years beginning December 15, 2016, including interim periods within those periods. For all other entities, the amendments would be effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.
All other entities may apply the guidance earlier as of fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. All other entities also may apply the guidance earlier as of fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning one year after the fiscal year in which the entity first applies the guidance.

The Board also decided that entities would be required to adopt the guidance in Subtopic 610-20 at the same time that they adopt the guidance in Topic 606.

The Board asked the staff to conduct outreach to gather additional input about the operationality of the effective date and transition requirements.


Clarifying the definition of a business. The Board continued its redeliberations of its November 2015 proposed Accounting Standards Update, Business Combinations (Topic 805): Clarifying the Definition of a Business, and discussed the following topics:
  1. Transition and transition disclosures
  2. Effective date and early adoption.
Transition and Transition Disclosures

The Board affirmed its decision to require that the amendments in the Update be applied prospectively to any transaction that occurs on or after the effective date and to not require any transition disclosures.

Effective Date and Early Adoption

The Board decided that public business entities should apply the guidance to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities should apply the guidance to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.

The Board decided that for acquisition transactions, entities may early adopt the amendments upon issuance as of the beginning of annual reporting periods and interim reporting periods within that reporting period.

The Board decided that for disposal transactions, entities may early adopt the amendments as follows:
  1. For public business entities, as of the annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period
  2. For all other entities, as of the annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the amendments as of the annual reporting periods beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the amendments.

Accounting for goodwill impairment. The Board discussed comments received on its May 2016 proposed Accounting Standards Update, Intangibles—Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. The Board specifically discussed the impairment test, reporting units with zero or negative carrying amounts, fair value guidance, and transition and effective date. The Board made the following decisions.

Impairment Test

The Board affirmed its decision in the proposed Update to remove Step 2 of the current impairment test rather than allowing Step 2 as an option.

The Board also decided to:
  1. Include guidance on the deferred tax effects of tax deductible goodwill on the impairment charge
  2. Supersede paragraphs 350-20-35-18 through 35-19 that provide guidance on circumstances in which the impairment test is not complete at the reporting date
  3. Clarify that an entity should not allocate foreign currency translation adjustments from accumulated other comprehensive income to a reporting unit.
The Board considered, but decided not to:
  1. Prescribe a valuation premise used to determine the fair value of a reporting unit
  2. Require additional disclosures about an entity's use of the qualitative assessment for any given reporting unit.
Reporting Units with Zero or Negative Carrying Amounts

The Board affirmed its decision in the proposed Update to apply the same one-step impairment test to all reporting units, including those with zero or negative carrying amounts. An entity would be required to disclose the amount of goodwill allocated to reporting units with zero or negative carrying amounts. The Board considered but decided not to require additional disclosures about reporting units with zero or negative carrying amounts.

Fair Value Guidance

The Board decided to retain the fair value guidance on assuming a taxable versus nontaxable transaction in Topic 350, as modified in the proposed Update to reflect the change to a one-step impairment test.

Transition and Effective Date

The Board decided to align the effective date for decisions reached in this project with the requirements in Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This would result in an effective date of years beginning after December 15, 2019, for public business entities that are SEC filers, and December 15, 2020, for entities that are not SEC filers. Early adoption would be allowed for all entities as of January 1, 2017. The Board also affirmed prospective application as proposed.

The Board decided to provide specific transition guidance for private companies that have elected the private company alternative on the subsequent accounting for goodwill but that have not adopted the private company alternative to subsume certain intangible assets into goodwill. The Board decided to allow these private companies the opportunity to change their accounting to the guidance in the forthcoming final Update without having to justify that the new guidance is preferable under Topic 250, Accounting Changes and Error Corrections.

Next Steps

The Board directed the staff to draft a preballot draft of an Accounting Standards Update for Board and external review and to return at a future Board meeting to address any issues arising from that review, the cost and benefit analysis, and permission to proceed with a draft for written ballot.

Subsequent accounting for goodwill for public business entities and not-for-profit entities (phase 2). The Board decided to suspend deliberations on Phase 2 of the project, while evaluating the effectiveness of the Phase 1 changes in meeting the Board's objective and continuing to monitor the IASB's projects on goodwill.