February 2017

Accounting for financial instruments: hedging

The purpose of this project is to “make targeted improvements to the hedge accounting model based on the feedback received from preparers, auditors, users and other stakeholders.”

On September 8, 2016, the FASB issued a proposed ASU that would make targeted improvements to the accounting for hedging activities. The proposed amendments “would expand and refine hedge accounting for both nonfinancial and financial risk components and would align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.” Comments on the proposal were due by November 22, 2016. For more information, see Deloitte’s September 14, 2016, Heads Up.

On January 25, 2017, the FASB discussed the feedback received on the proposed ASU. Further, the Board affirmed a number of the proposed amendments, rejected others, and agreed on a plan for redeliberation. On February 15, 2017, the Board decided to (1) allow an entity to return to a qualitative assessment of hedge effectiveness in certain circumstances after performing a quantitative assessment and (2) give private companies additional relief related to the timing of hedge documentation. For more information, see Deloitte’s February 1, 2017, and February 16, 2017, journal entries.

Accounting for interest income associated with the purchase of callable debt securities

This project aims “to enhance the transparency and usefulness of the information provided in the notes to the financial statements about interest income on purchased debt securities and loans“ and “will also consider targeted improvements regarding the accounting for the amortization of premiums for purchased callable debt securities.“

On September 22, 2016, the FASB issued a proposed ASU that would shorten the amortization period for investments in callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. Comments on the proposal were due by November 28, 2016.

On February 1, 2017, the Board discussed feedback received on the proposed ASU and directed the staff to draft a final ASU for a vote by written ballot. The final ASU is expected to be issued in the second quarter of 2017. For public business entities, the ASU will be effective for fiscal years, and interim periods within those fiscal years, starting after December 15, 2018. For all other entities, it will be effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, All entities will be permitted to early adopt the guidance.

For more information, see Deloitte’s September 23, 2016, Heads Up and February 3, 2017, journal entry.

Clarifying the scope of ASC 610-20 and accounting for partial sales of nonfinancial assets (formerly clarifying the definition of a business phase 2)

The purpose of this project is to clarify the scope of ASC 610-20 and the accounting for partial sales of nonfinancial assets.

On February 22, 2017, the FASB issued ASU 2017-05, which amends the guidance on nonfinancial assets in ASC 610-20. The amendments clarify that (1) “a financial asset is within the scope of [ASC] 610-20 if it meets the definition of an in substance nonfinancial asset,” (2) “nonfinancial assets within the scope of [ASC] 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty,” (3) “an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it,” and (4) “an entity should allocate consideration to each distinct asset by applying the guidance in [ASC] 606 on allocating the transaction price to performance obligations.” Further, ASU 2017-05 provides guidance on accounting for partial sales of nonfinancial assets.

The amendments are effective at the same time as the amendments in ASU 2014-09.

For more information, see Deloitte’s February 28, 2017, Heads Up.

Collaborative arrangements: targeted improvements

The purpose of this project is “to clarify when transactions between partners in a collaborative arrangement (that is within the scope of [ASC 808]) should be accounted for as revenue transactions in [ASC 606].”

The Board added this project to its technical agenda on November 16, 2016.

Conceptual framework: measurement

The objective of the conceptual framework project is “to develop an improved conceptual framework that provides a sound foundation for developing future accounting standards.”

Beginning in 2014, the Board has deliberated measurement concepts, such as methods of determining initial carrying amounts of assets, liabilities, and equity. In addition, the Board has discussed concepts related to measuring changes in carrying amounts. On November 30, 2016, the Board made tentative decisions related to initial measurement concepts and asked the staff to develop a revised project plan.

Consolidation reorganization and targeted improvements

The purpose of this project is to clarify and make targeted improvements to the consolidation guidance in ASC 810.

On November 2, 2016, the Board added this project to its technical agenda. Further, it tentatively decided to (1) “clarify the consolidation guidance in [ASC 810]” by dividing it into separate Codification subtopics for voting interest entities and variable interest entities (VIEs); (2) develop a new Codification topic, ASC 812, that would include those reorganized subtopics and would completely supersede ASC 810; (3) rescind the subsections on consolidation of entities controlled by contract in ASC 810-10-15 and in ASC 810-30 on research and development arrangements; (4) “further clarify that power over a VIE is obtained through a variable interest”; and (5) “provide further clarification of the application of the concept of ‘expected,’ which is used throughout the VIE consolidation guidance.” The Board directed the staff to prepare a staff draft of the proposed amendments, which would also include a “discussion of a potential scope exception for private companies under common control and potential proposed amendments to all other entities under common control.” For more information, see Deloitte’s November 8, 2016, journal entry.

Determining the customer of the operation services in a service concession arrangement (EITF Issue 16-C)

The purpose of this project is to resolve diversity in practice related to the accounting for service concession arrangements.

On November 4, 2016, the FASB issued a proposed ASU in response to the consensus-for-exposure reached by the EITF at its September 22, 2016, meeting. A service concession arrangement is an arrangement between a grantor (a government or public-sector entity) and an operating entity (a private-sector entity) under which the operating entity will operate the grantor’s infrastructure (e.g., airports, roads, bridges, and hospitals). Under the proposed ASU, the grantor (rather than any third-party user) is considered the customer of the operation services when the revenue recognition guidance in ASC 606 is applied to a service concession arrangement within the scope of ASC 853. Accordingly, payments made by the operating entity to the grantor are treated as a reduction of revenue rather than as an operating expense.

Comments on the proposed ASU were due by January 6, 2017. For more information, see Deloitte’s September 2016 EITF Snapshot.

Insurance: targeted improvements to the accounting for longduration contracts

The purpose of this project is to “develop targeted improvements to insurance accounting. Those improvements may address recognition, measurement, presentation, and disclosure requirements for long-duration insurance contracts.“

On September 29, 2016, the FASB issued a proposed ASU that would make targeted improvements to the recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by insurance entities. The proposed approach would affect the assumptions used to measure the liability for future policy benefits, the measurement of market risk benefits, and the amortization of deferred acquisition costs. Comments on the proposal were due by December 15, 2016. On February 8, 2017, the Board discussed feedback received. No technical decisions were made. For more information, see Deloitte’s October 2016 Insurance Spotlight.

Liabilities and equity: targeted improvements

The purpose of this project is to “simplify the accounting guidance related to financial instruments with characteristics of liabilities and equity.“

On December 7, 2016, the Board issued a proposed ASU that would replace (1) the existing guidance on “downround“ features in ASC 815-40 with a new accounting model and (2) the indefinite deferrals in ASC 480-10 with scope exceptions that have the same applicability. Comments on the proposal were due by February 6, 2017. For more information, see Deloitte’s December 8, 2016, Heads Up.

Nonemployee share-based payment accounting improvements

The purpose of this project is “to reduce cost and complexity and improve the accounting for nonemployee share-based payment awards issued by public and private companies.“

At its May 4, 2016, meeting, the Board tentatively decided to expand the scope of ASC 718 to include all share-based payment arrangements related to acquiring goods and services from nonemployees. At its June 15, 2016, meeting, the Board made tentative decisions about transition methods for applying the proposed guidance and disclosures. On November 30, 2016, the Board tentatively decided to require the use of the contractual term (rather than the expected term) as an input for measuring nonemployee share-based payment transactions and directed the staff to draft a proposed ASU for a vote by written ballot. The FASB expects to issue the proposed ASU in the first quarter of 2017. For more information, see Deloitte’s December 16, 2015; May 4, 2016; and June 15, 2016, journal entries.

Revenue recognition: grants and contracts by not-for-profit entities

The purpose of this project is to “improve and clarify existing guidance on revenue recognition of grants and contracts by not-for-profit entities.”

At its April 20, 2016, meeting, the FASB decided to add this project to its technical agenda. Stakeholders have raised two main issues: (1) characterizing grants and contracts with governmental agencies and others as (a) reciprocal transactions (exchanges) or (b) nonreciprocal transactions (contributions) and (2) differentiating between conditions and restrictions for nonreciprocal transactions. The Board deliberated these issues on June 15, 2016; August 31, 2016; December 14, 2016; and February 22, 2017. For more information, see Deloitte’s June 16, 2016, journal entry.

Share-based payments: scope of modification accounting in ASC 718

This project is intended to reduce the cost and complexity of applying modification accounting in ASC 718.

On November 17, 2016, the FASB issued a proposed ASU that would clarify which changes to the terms or conditions of a share-based payment award should require an entity to apply modification accounting under ASC 718. Modification accounting would not apply if a change to an award does not affect the total current fair value (or other applicable measurement), vesting requirements, or the classification of the award. Comments on the proposed ASU were due by January 6, 2017. On February 22, 2017, the Board discussed comments received on the proposed ASU and decided to reaffirm and clarify a number of the proposed amendments. The Board asked the staff to draft a final ASU for a vote by written ballot. For all entities, the final ASU will be effective prospectively for awards modified in fiscal years beginning after December 15, 2017, and interim periods within those annual periods. Early adoption will be permitted. The FASB expects to issue a final ASU in April 2017. For more information, see Deloitte’s November 18, 2016, Heads Up and February 22, 2017, journal entry.

Technical corrections and improvements

The purpose of this project is to “provide regular updates and improvements to the [Codification] based on feedback received from constituents.“

The Board has not yet commenced deliberations of its next technical corrections and improvements.

Conceptual framework: presentation

The objective of the conceptual framework project is to develop an improved conceptual framework that provides a sound foundation for developing future accounting standards.

On August 11, 2016, the FASB issued a proposed concepts statement that would add a new chapter on presentation of financial statement information to the FASB’s conceptual framework. Comments were due by November 9, 2016.

Disclosure framework

The disclosure framework project consists of two phases: (1) the FASB’s decision process and (2) the entity’s decision process. The overall objective of the project is to “improve the effectiveness of disclosures in notes to financial statements by clearly communicating the information that is most important to users of each entity’s financial statements. (Although reducing the volume of the notes to financial statements is not the primary focus, the Board hopes that a sharper focus on important information will result in reduced volume in most cases.)“

On March 4, 2014, the FASB issued an ED of a proposed concepts statement that would add a new chapter to the Board’s conceptual framework for financial reporting that contains a decision process for the Board and its staff to use in determining what disclosures should be required in notes to financial statements. Comments on the ED were due by July 14, 2014. For more information, see Deloitte’s March 6, 2014, Heads Up.

On September 24, 2015, the FASB issued an ED of proposed amendments to chapter 3 of Concepts Statement 8 that would add a statement that materiality is a legal concept and include a brief summary of the U.S. Supreme Court’s definition of materiality. Comments on the ED were due by December 8, 2015.

On September 24, 2015, the FASB issued a proposed ASU that would amend the Codification to indicate that the omission of disclosures about immaterial information is not an accounting error. The proposal notes that materiality is a legal concept that should be applied to assess quantitative and qualitative disclosures individually and in the aggregate in the context of the financial statements taken as a whole. Comments on the proposal were due by December 8, 2015. For more information, see Deloitte’s September 28, 2015, Heads Up.

The Board began its discussion of comments received on December 14, 2016.

Disclosure framework: disclosure review — defined benefit plans

The purpose of this project is to improve the effectiveness of disclosure requirements that apply to defined benefit plans.

On January 26, 2016, the FASB issued a proposed ASU that would modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Comments on the proposal were due by April 25, 2016. For more information, see Deloitte’s January 28, 2016, Heads Up.

At its July 13, 2016, meeting, the FASB discussed feedback on its proposed ASU and directed its staff to conduct additional research.

Disclosure framework: disclosure review — fair value measurement

The purpose of this project is to improve the effectiveness of fair value measurement disclosures.

On December 3, 2015, the FASB issued a proposed ASU that would modify the disclosure requirements related to fair value measurement. Comments on the proposal were due by February 29, 2016. For more information, see Deloitte’s December 8, 2015, Heads Up.

At its June 1, 2016, meeting, the FASB discussed comments received on its proposed ASU and directed its staff to reach out to investors and other financial statement users regarding the proposal.

Disclosure framework: disclosure review — income taxes

The purpose of this project is to improve the effectiveness of income tax disclosures.

On June 26, 2016, the FASB issued a proposed ASU that would modify existing and add new income tax disclosure requirements. The proposed requirements include describing an enacted change in tax law; disaggregating certain income tax information between foreign and domestic; explaining the circumstances that caused a change in assertion about the indefinite reinvestment of undistributed foreign earnings; and disclosing the aggregate of cash, cash equivalents, and marketable securities held by foreign subsidiaries. Comments on the proposed ASU were due by September 30, 2016. For more information, see Deloitte’s July 29, 2016, Heads Up.

On January 25, 2017, the Board discussed the feedback received on the proposed ASU. No technical decisions were made.

Disclosure framework: disclosures — interim reporting

The purpose of this project is to improve the effectiveness of interim disclosures.

At its May 28, 2014, meeting, the FASB decided to amend ASC 270 “to reflect that disclosures about matters required to be set forth in annual financial statements should be provided on an updated basis in the interim report if there is a substantial likelihood that the updated information would be viewed by a reasonable investor as significantly altering the ’total mix’ of information available to the investor.”

Disclosure framework: disclosure review — inventory

The purpose of this project is to improve the effectiveness of inventory disclosures.

On January 10, 2017, the FASB issued a proposed ASU that would modify or eliminate certain disclosure requirements related to inventory and establish new requirements. Comments on the proposed ASU are due by March 13, 2017. For more information, see Deloitte’s January 12, 2017, Heads Up.

Disclosures by business entities about government assistance

The purpose of this project is to “develop disclosure requirements about government assistance that improves the content, quality and comparability of financial information and financial statements and that is responsive to the emerging issues in the changing financial and economic environment in which reporting entities operate.“

On November 12, 2015, the FASB issued a proposed ASU that would increase financial reporting transparency by requiring specific disclosures about government assistance received by businesses. The objective of the proposed disclosure requirements is to enable financial statement users to better assess (1) the nature of the government assistance, (2) the accounting policies for the government assistance, (3) the impact of the government assistance on the financial statements, and (4) the significant terms and conditions of the government assistance arrangements. Comments on the proposed ASU were due by February 10, 2016.

At its June 8, 2016, meeting, the FASB made tentative decisions about the project’s scope, whether to require disclosures about government assistance received but not recognized directly in the financial statements, and omission of information when restrictions preclude an entity from disclosing the information required.

For more information, see Deloitte’s November 20, 2015, Heads Up and June 14, 2016, journal entry.

Employee benefit plan master trust reporting (EITF Issue 16-B)

The purpose of this project is to improve the presentation and disclosure guidance for employee benefit plans that have investments held in master trusts.

On February 27, 2017, the FASB issued ASU 2017-06 in response to the EITF consensus on employee benefit plans’ presentation and disclosures related to interests in a master trust.

The ASU is effective for fiscal years beginning after December 15, 2018; early adoption is permitted.

For more information, see Deloitte’s November 2016 EITF Snapshot.

Financial statements of not-for-profit entities (phase 2)

The purpose of this project is to “reexamine existing standards for financial statement presentation by not-for-profit entities.”

The FASB issued a proposed ASU on April 22, 2015, on which comments were due by August 20, 2015. On October 28, 2015, the FASB discussed feedback received on the proposal and decided to split the project into two phases. The Board completed the first phase on August 18, 2016, when it issued ASU 2016-14, which simplifies and improves how a not-for-profit organization classifies its net assets, as well as the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows.

ASU 2016-14 indicates that the second phase of the project is “expected to address more protracted issues surrounding whether and how to define the term operations and align measures of operations (or financial performance) as presented in a statement of activities with measures of operations in a statement of cash flows.”

Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost

The purpose of this project is to “simplify and improve the reporting of net periodic pension cost and net periodic postretirement benefit cost (’net benefit cost’).“

On January 26, 2016, the FASB issued a proposed ASU that would require an entity to (1) disaggregate the current service cost component from the other components of net benefit cost and present it with other current compensation costs for the related employees in the income statement and (2) present the remaining components of net benefit cost elsewhere in the income statement and outside of income from operations, if such a subtotal is presented. In addition, the proposed ASU would limit the portion of net benefit cost eligible for capitalization (e.g., as part of inventory or property, plant, and equipment) to the service cost component. Comments on the proposed ASU were due by April 25, 2016.

On November 2, 2016, the Board decided to provide a practical expedient related to situations in which an entity presents information about prior comparative periods and directed the staff to draft a final ASU for a vote by written ballot. The final ASU will be effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. For other entities, the final ASU will be effective for annual reporting periods beginning after December 15, 2018, and interim periods beginning after December 15, 2019. The FASB expects to issue a final ASU in the first quarter of 2017.

For more information, see Deloitte’s January 28, 2016, Heads Up and November 3, 2016, journal entry.

Simplifying the balance sheet classification of debt

The purpose of this project is to “reduce cost and complexity by replacing the fact-pattern specific guidance in GAAP with a principle to classify debt as current or noncurrent based on the contractual terms of a debt arrangement and an entity’s current compliance with debt covenants.“

On January 10, 2017, the FASB issued a proposed ASU on determining whether debt should be classified as current or noncurrent in a classified balance sheet. In place of the current, fact-specific guidance in ASC 470-10, the proposed ASU would introduce a classification principle under which a debt arrangement would be classified as noncurrent if either (1) the “liability is contractually due to be settled more than one year (or operating cycle, if longer) after the balance sheet date” or (2) the “entity has a contractual right to defer settlement of the liability for at least one year (or operating cycle, if longer) after the balance sheet date.” Under an exception to the classification principle, an entity would not classify debt as current solely because of the occurrence of a debt covenant violation that gives the lender the right to demand repayment of the debt, as long as the lender waives its right before the financial statements are issued (or are available to be issued). Comments on the proposal are due by May 5, 2017. For more information, see Deloitte’s January 12, 2017, Heads Up.