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, March 22, 2017 FASB Board Meeting

Accounting for financial instruments—hedging. The Board discussed the following issues in the proposed Accounting Standards Update, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities:
  1. Should a cross currency basis spread in a currency swap be added to the list of amounts that may be excluded from assessments of hedge effectiveness (excluded components)?
  2. Should the base recognition model for excluded components be changed from a mark-to-market through earnings approach to an amortization approach? Should there be an option to use either the mark-to-market or amortization approach on a similar hedging relationship basis?
Cross Currency Basis Spread

The Board decided that it would add a cross currency basis spread to the list of excluded components.

Excluded Component Recognition

The Board decided that the base recognition model for excluded components would be an amortization approach and that entities would also be allowed, as an accounting policy election, to apply a mark-to-market through earnings approach.

Additionally, the Board decided that when a hedging relationship is discontinued and an amortization approach is used, the changes in fair value of excluded components recorded in accumulated other comprehensive income would be released to earnings consistent with existing GAAP for each respective type of hedging relationship, specifically:
  1. For a cash flow hedge in which the hedged forecasted transaction is still probable of occurring, at the time that the hedged forecasted transaction affects earnings
  2. For a fair value hedge, consistent with how fair value hedge basis adjustments are recognized in earnings for the related hedged item.
Liabilities and equity—targeted improvements. The Board discussed the comment letter feedback received on the December 2016 proposed Accounting Standards Update—Distinguishing Liabilities from Equity (Topic 480): I. Accounting for Certain Financial Instruments with Down Round Features, and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.

Accounting for Instruments with Down Round Features

The Board instructed the staff to perform additional research. That research includes developing a potential alternative that would affect the measurement of these instruments but would not affect the classification.

Indefinite Deferral in Topic 480 Related to Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests

The Board affirmed its decision to replace the indefinite deferral in Topic 480, Distinguishing Liabilities from Equity, with a scope exception to improve the readability of the FASB Accounting Standards Codification®. These amendments will not have an accounting effect.

Navigation of the Codification

The Board decided to move the next phase of this project, improving the navigation of the guidance within the Codification, to the Distinguishing Liabilities from Equity project on its research agenda.