SUMMARY OF BOARD DECISIONS
Summary of Board decisions are provided for the information and
convenience of constituents who want to follow the Board's deliberations. All of
the conclusions reported are tentative and may be changed at future Board
meetings. Decisions are included in an Exposure Draft for formal comment only
after a formal written ballot. Decisions in an Exposure Draft may be (and often
are) changed in redeliberations based on information provided to the Board in
comment letters, at public roundtable discussions, and through other
communication channels. Decisions become final only after a formal written
ballot to issue an Accounting Standards Update.
November 7, 2012 FASB Board MeetingGoing
concern. The Board decided to adopt a new financial reporting model
for management's assessment of going concern, and related disclosures. The
following represents the Board's decisions pertaining to the new financial
At each reporting period, management would assess an
entity's potential inability to continue as a going concern and the need for
related disclosures. In doing so, management would consider the likelihood of an
entity's potential inability to meet its obligations as they become due for a
reasonable period of time.
Management would start providing
disclosures in its financial statements about an entity's financial difficulties
when existing events or conditions indicate it is near more likely than
not that the entity may be unable to meet its obligations in the
ordinary course of business, within a reasonable period of time
from the balance sheet date. In assessing the need for disclosures, the
mitigating effect of management's plans would be considered unless such plans
involve actions that are outside the ordinary course of
Management would assert in the financial statements that
there is substantial doubt about an entity's ability to continue as a
going concern when the likelihood of the entity's inability to meet its
obligations within a reasonable period of time reaches probable. In
evaluating the need for this assertion, management would consider the effect of
all management plans.
In performing the assessment, management
would consider existing events or conditions that may result in an entity's
inability to meet its obligations within a reasonable period of time.
Reasonable period of time would represent 12 months from the financial
statement (period end) date. In addition, the assessment would consider the
effect of existing events or conditions that are probable of resulting
in an entity's inability to meet its obligations beyond the initial 12 months.
Reasonable period of time would be limited to a practical amount of
time in which the future impact of existing events or conditions can be
identified, not to exceed a period of 24 months from the period end
The Board plans to discuss the following
issues at a later date: (1) applicability to nonpublic entities, (2) further
analysis of the nature of disclosures and its interaction with the MD&A for
public companies, (3) guidance on how management's plans should be distinguished
and considered, and (4) effective date and transition.
for financial instruments: liquidity and interest rate disclosures.
The Board discussed the comments received on Proposed Accounting Standards
Update, Financial Instruments (Topic 825): Disclosures about Liquidity Risk
and Interest Rate Risk. No decisions were made.
and servicing: repurchase agreements and similar transactions. The
Board discussed the transition methods for the proposed Accounting Standards
Update and decided on a cumulative-effect approach for repo-to-maturity
transactions and repurchase financings involving a repo-to-maturity. Under this
approach, an entity would recognize a cumulative-effect adjustment to beginning
retained earnings as of the date of adoption. For all other repurchase
agreements and similar transactions, the revised guidance would be applied
prospectively to repurchase agreements and similar transactions entered into or
modified after the effective date.
The Board also decided to require
entities to disclose, in the period of adoption, a description of the accounting
change and the effect on the balance sheet. The Board decided not to permit
early adoption. The comment period for the proposed Update would end on March
Additionally, the Board discussed an analysis of the effect on
financial reporting complexity of the decisions reached in this project and
decided that the proposed Update does not create an unacceptable level of
financial reporting complexity for the accounting for repurchase agreements and
The Board directed the staff to draft a proposed
Update for vote by written ballot.