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, January 25,
2017 FASB Board Meeting
consultation. The Board discussed feedback received on its 2016 Invitation
to Comment, Agenda Consultation, and the topics of (1) intangible
assets (including research and development), (2) pensions and other
postretirement benefit plans, and (3) distinguishing liabilities from equity.
The Board also discussed additional research or analysis to perform for each
topic for discussion at future Board meetings. Today's meeting was educational
and no technical decisions were made.
Board will discuss feedback received on the topic of reporting performance and
cash flows in the Invitation to Comment at a future meeting.
framework: disclosure review —income taxes. The Board discussed a summary of
comments received on the proposed Accounting Standards Update, Income Taxes
(Topic 740): Disclosure Framework —Changes to the Disclosure Requirements for
Income Taxes. No technical decisions were made at this meeting.
The Board has scheduled a public roundtable
meeting on the Disclosure Framework to discuss (1) the effectiveness of the
concepts used as part of the Board's decision process in identifying relevant
disclosures and (2) materiality's role in the notes to the financial statements.
The disclosure reviews of four topics (fair value measurement, defined benefit
plans, income taxes, and inventory) will help inform those discussions.
Following the roundtable, the Board plans to direct the staff to conduct
additional outreach regarding the proposed disclosure requirements for income
for financial instruments —hedging. The Board discussed the feedback received
on the September 2016 proposed Accounting Standards Update, Derivatives and
Hedging (Topic 815): Targeted Improvements to Accounting for Hedging
Activities. The Board made the following decisions and agreed on a plan for
Affirmation of Amendments in the Proposed
Amendments in the Proposed
Update That the Board Rescinded and Decided Not to Redeliberate
- An entity would be permitted to designate the hedged risk as the
variability in cash flows attributable to changes in a contractually specified
component in a cash flow hedge of a forecasted purchase or sale of a
- An entity would be required to present all effects of a hedging instrument
included in the assessment of effectiveness in the same income statement line
item as the earnings effect of the hedged item for all hedging relationships.
For fair value and cash flow hedges, an entity would be required to present
amounts excluded from the assessment of effectiveness in the same income
statement line item in which the earnings effect of the hedged item is or will
- Fair value hedges of interest rate risk:
- An entity may measure the hedged item in a partial-term fair value hedge
of interest rate risk by assuming the hedged item has a term that reflects
only the designated cash flows being hedged.
- For prepayable financial instruments, an entity may consider only how
changes in the benchmark interest rate affect a decision to settle a debt
instrument before its scheduled maturity in calculating the change in the
fair value of the hedged item attributable to interest rate risk.
- An entity is permitted to measure the change in the fair value of the
hedged item either on the basis of the benchmark rate component of the
contractual coupon cash flows determined at hedge inception or on the full
contractual coupon cash flows as required by current GAAP. (The Board plans
to redeliberate one aspect of this proposed amendment, the "market yield
test." See Issues for Redeliberation below.)
- The concept and definition of the term benchmark interest rate
and a list of eligible benchmark rates in the United States would be
- The Securities Industry and Financial Markets Association (SIFMA)
Municipal Swap Rate would be added to the list of eligible benchmark interest
rates in the United States.
- For cash flow hedges of interest rate risk of a variable-rate financial
instrument, an entity could designate as the hedged risk the variability in
cash flows attributable to the contractually specified interest rate.
- A public business entity would be given more time to perform the initial
prospective quantitative assessment of hedge effectiveness. A public business
entity could perform that assessment at any time after hedge designation, but
would be required to perform that assessment no later than the quarterly
effectiveness testing date, using data applicable as of the date of hedge
- For purposes of assessing whether the qualifying criteria for the critical
terms match method are met for a group of forecasted transactions, an entity
may assume that the hedging derivative matures at the same time as the
forecasted transactions if both the derivative maturity and the forecasted
transactions occur within the same 31-day period.
- If an entity that applies the shortcut method determines that use of that
method was not or no longer is appropriate, the entity would be permitted to
apply a long-haul method for assessing hedge effectiveness as long as the
hedge is highly effective and the entity documents at hedge inception which
long-haul method it would use.
- An entity would be required to disclose information regarding cumulative
basis adjustments for fair value hedges and provide the revised tabular
disclosure for fair value and cash flow hedges.
- In instances in which an initial quantitative effectiveness assessment is
required, an entity would be allowed to perform subsequent qualitative
assessments of hedge effectiveness.
Issues for Redeliberation
- The Board rescinded the proposed amendment that would have required an
entity to present the change in the fair value of a hedging instrument for a
hedged forecasted transaction that is probable of not occurring in the income
statement line item in which the hedged forecasted transaction would have been
presented had it occurred. This decision would retain current GAAP and not
prescribe presentation guidance for missed forecasts.
- The Board rescinded the proposed disclosure that would have required
qualitative disclosures of quantitative hedge accounting
Issue for Potential
- The Board will consider whether to retain or eliminate the proposed market
yield test. This test would require the use of total coupon cash flows in
calculating the change in the fair value of the hedged item attributable to
interest rate risk in instances in which the benchmark rate is greater than
the market yield of the hedged item at hedge inception.
- The Board will consider whether to retain or amend the recognition model
for amounts excluded from the assessment of hedge effectiveness.
- The Board will consider whether to retain or eliminate the proposed
prohibition on returning to qualitative testing. Under the proposed
amendments, an entity would be prohibited from returning to performing
qualitative assessments of hedge effectiveness in a period after it begins
performing quantitative hedge effectiveness assessment because of a change in
facts and circumstances.
- The Board will consider alternatives that would amend the timing of the
preparation of hedge documentation for private companies.
- The Board will decide whether a cross-currency basis spread in a
cross-currency swap may be considered to be an amount that may be excluded
from the assessment of hedge effectiveness.
Board Decisions Related to Other Feedback Received
- The Board decided that the staff should perform further research to
determine whether to include in redeliberations potential amendments to the
fair value portfolio hedging model of interest rate risk related to prepayable
- The Board decided not to add the concept that a rate can be "expected to
become widely used" to the current definition of the term benchmark
interest rate. Therefore, the Board would not further amend the
definition of a benchmark interest rate beyond the amendments already
made in the proposed Update.
- The Board decided not to deliberate the issue raised in DIG H17,
Hedging Functional-Currency-Equivalent Proceeds to Be Received from a
Forecasted Foreign-Currency-Denominated Debt Issuance.
- The Board decided that in a cash flow hedge of a hedged forecasted
transaction if the hedged risk component changes from the risk originally
designated (for example, from LIBOR to Prime) and the hedged forecasted
transaction remains probable of occurring, an entity would not need to
dedesignate the hedging relationship if the derivative remains highly
effective at offsetting the cash flows associated with the hedged item. A
change in the hedged risk also would not affect an entity's conclusion of
whether the forecasted transaction remains probable of occurring. This
decision would apply to hedges of both financial instruments and nonfinancial