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.

1. Sales-type leases with substantial variable lease payments
2. Remeasurement of lease payments based on a reference index or rate
3. Reduction of scope in a lease contract.

1. Fair value hedge accounting for fixed-rate call option monetization strategies (The Board decided to instead consider whether to address that issue as part of the Hedge Accounting—Phase 2 research project.)
2. Customer account disclosures
3. Permit an entity to elect as its functional currency the parent’s reporting currency for all its foreign subsidiaries
4. Including the current portion of fixed assets as an element of working capital.

1. Sales-type leases with substantial variable lease payments. A lessor would be required to classify a lease with lease payments that are predominantly variable as an operating lease.
2. Remeasurement of lease payments based on a reference index or rate. Lessees would have an option to remeasure lease liabilities upon a change in a reference index or rate affecting future lease payments. Lessees that elected to apply that option would be required to disclose that fact and to apply that option as an entity-wide election.
3. Reduction of scope in a lease contract. When a separate lease component within a contract is terminated and the economics of the remaining lease components remain substantially the same as before the partial termination of that contract, an entity (lessee or lessor) would not apply modification accounting to the remaining lease components.

1. For the first issue (sales-type leases with substantial variable lease payments), prospective application would be for new leases entered into after the effective date or modifications of existing leases that are accounted for as separate leases or new leases after the effective date.
2. For the second and third issues (remeasurement of lease payments based on a reference index or rate and reduction of scope in a lease contract), the Board decided that prospective application would be for leases existing at the effective date and new leases entered into after the effective date.

1. Leases—The staff has responded to more than 270 technical inquiries, and the Board has issued 5 Updates aimed at improving and simplifying Topic 842, Leases. At its July 29, 2020 meeting, the Board discussed four issues and decided to add three of those to a targeted improvements project as part of its ongoing PIR efforts. A virtual roundtable will be held on September 18, 2020, to discuss broad implementation issues, including those that would apply to private companies, to determine whether the Board needs to take further action.
2. Current Expected Credit Losses (CECL)—The staff has conducted 4 public meetings and issued 23 educational papers through the CECL Transition Resource Group (TRG). The staff also has conducted outreach with various types of stakeholders. The Board has issued five Updates aimed at improving Topic 326, Financial Instruments—Credit Losses. Additionally, the Board deferred the effective date of Topic 326 for public business entities that do not meet the definition of a U.S. Securities and Exchange Commission (SEC) filer, private companies, and not-for-profit organizations. The staff has issued two staff Q&As: Whether the Weighted-Average Remaining Maturity Method is an Acceptable Method to Estimate Expected Credit Losses, and Developing an Estimate of Expected Credit Losses on Financial Assets. Currently, the staff is monitoring the adoption of CECL by public companies by listening to earnings calls, reading 10-Qs, collecting data, and speaking to investors. The staff plans to hold a roundtable in the first half of 2021.
3. Revenue Recognition—The revenue recognition TRG has responded to 100 submissions, resulting in 60 TRG papers. The Board issued two Updates to defer the effective date of Topic 606, Revenue from Contracts with Customers, and four Updates to clarify or simplify the standard. Most recently, the Board added Revenue Recognition—Practical Expedient for Private Company Franchisors to the technical agenda.