Tentative Board Decisions

Codification improvements—nonemployee share-based payments. The Board discussed proposed improvements to the amendments in the recently issued Accounting Standards Update No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The Board made the following decisions.  
 

Disclosures by business entities about government assistance. The Board continued redeliberations of the proposed Accounting Standards Update, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. 
 
The Board decided that the scope of the amendments would apply to grants of assets, tax assistance, low-interest-rate loans, loan guarantees, and forgiveness of liabilities and directed the staff to draft clarifying language on this scope. 
 
The Board affirmed its decision that the amendments in the final Accounting Standards Update should be applied on a modified prospective basis in the first set of financial statements following the effective date to agreements that are either (1) existing at the effective date or (2) entered into after the effective date. Retrospective application also is permitted.
 
The Board decided that the amendments in the final Update would be effective for fiscal years ending after December 15, 2020, for public business entities and fiscal years ending after December 15, 2021, for nonpublic business entities (private companies). Early adoption is permitted. 
 
The Board affirmed its decision that the disclosure requirements for public business entities and private companies would be the same. 
 
Next Steps
 
The Board directed the staff to draft a final Accounting Standards Update and perform additional outreach with stakeholders for the staff to bring to another meeting to address the feedback, any sweep issues, and the costs and benefits of the amendments.
 

Disclosure framework: disclosure review—income taxes. The Board continued redeliberations of proposed Accounting Standards Update, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes. The Board also considered whether new income tax disclosures should be added or existing income tax disclosures should be removed after considering the effects of the Tax Cuts and Jobs Act.
 
Potential New Disclosures as a Result of the Tax Cuts and Jobs Act
 
The Board decided not to require any additional disclosures for any provisions of the Tax Cuts and Jobs Act, including global intangible low-taxed income, the base erosion anti-abuse tax, or foreign-derived intangible income. The Board directed the staff to research practice to determine what disclosures, if any, entities currently provide for the transition tax under Internal Revenue Code section 965, which requires taxpayers that have untaxed foreign earnings and profits to pay a tax as if those earnings and profits had been repatriated to the United States.  
 
Change in Tax Law
 
The Board decided to remove the disclosure in the proposed Update that would have required all entities to provide a description of an enacted change in tax law that is probable to have an effect in a future period. 
 
Disaggregation of Pretax Income (or Loss) from Continuing Operations, Income Tax Expense (or Benefit), and Income Taxes Paid
 
The Board decided to affirm the proposed amendment that would require all entities to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign. The Board also decided to amend the proposed disclosure to clarify that entities should disclose pretax income (or loss) from continuing operations before intracompany eliminations.
 
The Board decided to affirm the proposed amendment that would require all entities to disclose income tax expense (or benefit) and income taxes paid disaggregated between domestic and foreign. The Board decided to remove the proposed amendment that would have required all entities to disclose income taxes paid to any country that is significant to the total amount of income taxes paid.
 
Indefinitely Reinvested Foreign Earnings
 
The Board decided to remove the proposed disclosure that would have required all entities to provide an explanation of the circumstances that caused a change in the assertion about the indefinite reinvestment of undistributed foreign earnings and the corresponding amount of those earnings. The Board also decided to remove the existing guidance that requires all entities to disclose the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures.  
 
Cash, Cash Equivalents, and Marketable Securities
 
The Board decided to remove the proposed amendment that would have required all entities to disclose the aggregate of cash, cash equivalents, and marketable securities held by foreign subsidiaries.
 
Unrecognized Tax Benefits
 
The Board decided to remove the proposed disclosure that would have required public business entities to disclose, within the reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period, settlements using existing deferred tax assets separate from those that have been or will be settled in cash.
 
The Board decided to affirm the proposed disclosure that would require public business entities to disclose the line items in the statement of financial position in which unrecognized tax benefits are presented and the related amounts of such unrecognized tax benefits with a minor clarification.
 
The Board also decided to affirm the proposed amendment that would remove the disclosure that requires entities to disclose unrecognized tax benefits that could change in the next 12 months.
 
Valuation Allowances
 
The Board decided to affirm the proposed disclosure that would require public business entities to disclose the amount and explanation of the valuation allowance recognized or released during the reporting period.
 
Effective Tax Rate Reconciliation
 
The Board decided to affirm the proposed disclosure that would modify the existing rate reconciliation requirement for public business entities to be consistent with SEC Regulation S-X, which requires separate disclosure for any reconciling item that amounts to more than 5 percent of the amount computed by multiplying the income before tax by the applicable statutory federal income tax rate. The Board also decided to affirm the proposed disclosure that would require public business entities to explain year-to-year changes in the reconciling items included in the rate reconciliation.  
 
Carryforward Disclosures—Public Business Entities
 
The Board decided to remove the proposed requirement for public business entities to disclose the non-tax-effected amount of carryforwards. The Board also decided to add a requirement for public business entities to disclose the valuation allowance associated with the tax-effected amounts of federal, state, and foreign carryforwards.  
 
Carryforward Disclosures—Entities Other Than Public Business Entities
 
The Board decided to amend the proposed disclosure that requires entities other than public business entities to disclose the non-tax-effected amount of carryforwards by requiring those entities to show credit carryforwards separate from loss carryforwards.
 
Interim Cash Taxes Paid
 
The Board decided to require a disclosure of interim taxes paid for all entities that prepare interim financial statements. 
 
Project Next Steps
 
The Board directed the staff to incorporate the Board's decisions described above into a draft of a proposed Accounting Standards Update. The Board then will consider whether all the disclosures considered above should be included in a proposed Update or whether certain previously proposed amendments should be separated and included in a final Accounting Standards Update.


Financial reporting effects of the Tax Cuts and Jobs Act. The staff provided the Board with an update on the staff's monitoring efforts related to the financial reporting implications of tax reform. The Board directed the staff to perform additional research.


Agenda request. The Board discussed the staff's preagenda research findings related to agenda requests for targeted transition relief upon the adoption of the amendments in Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

The Board decided:

1. To add a project to the technical agenda to allow entities, upon adoption of Topic 326, to irrevocably elect the fair value option for financial assets within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost, that are eligible for the fair value option in Subtopic 825-10, Financial Instruments—Overall, on an instrument-by-instrument basis.
2. Not to allow entities an option to discontinue fair value measurements for financial assets measured at fair value and apply the guidance in Subtopic 326-20. 

Analysis of Costs and Benefits
 
The Board concluded that it has received sufficient information and analysis to make an informed decision and that the expected benefits of the proposed amendments would justify the expected costs.
 
Next Steps
 
The Board directed the staff to:

1. Draft a proposed Accounting Standards Update for vote by written ballot with a 30-day comment period.
2. Include a question in the proposed Update to gain further insight into situations for which an entity would prefer to discontinue fair value measurements for financial assets currently accounted for in accordance with the fair value option in Subtopic 825-10.