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, October 5, 2016 FASB Board Meeting
Ratification of EITF consensus and tentative conclusion.
The Board ratified the consensus reached at the September 22, 2016
Emerging Issues Task Force meeting on the following EITF Issue. The
Board directed the staff to draft an Accounting Standards Update
reflecting the consensus for vote by written ballot.
Issue No. 16-A, "Restricted Cash"
Presentation
The Task Force reached a consensus that a statement of cash flows should
explain the change during the period in the total of cash, cash
equivalents, and amounts generally described as restricted cash or
restricted cash equivalents. That is, amounts generally described as
restricted cash and restricted cash equivalents would be included with
cash and cash equivalents when reconciling the beginning-of-period and
end-of-period amounts shown on the statement of cash flows.
Disclosure
The Task Force reached a consensus that certain disclosures should be
required to supplement the statement of cash flows. Specifically, an
entity should (1) disclose information about the nature of the
restrictions on cash, cash equivalents, and amounts generally described
as restricted cash or restricted cash equivalents and (2) when cash,
cash equivalents, and amounts generally described as restricted cash or
restricted cash equivalents are presented in more than one line item
within the statement of financial position, for each period that a
statement of financial position is presented, present on the face of the
statement of cash flows or disclose in the notes to the financial
statements the line items and amounts of cash, cash equivalents, and
amounts generally described as restricted cash or restricted cash
equivalents reported within the statement of financial position. The
amounts, disaggregated by the line item in which they appear within the
statement of financial position, should sum to the total amount of cash,
cash equivalents, and amounts generally described as restricted cash or
restricted cash equivalents at the end of the corresponding period
shown in the statement of cash flows.
The Task Force decided not to require disclosure of the amounts of gross
transfers between cash and restricted cash. The Task Force also decided
not to require any additional disclosures on the basis that requiring
other disclosures would go beyond the primary focus of this Issue, which
is to provide narrow guidance about the presentation of changes in
restricted cash or restricted cash equivalents on the statement of cash
flows, thereby reducing diversity in practice.
Transition and Effective Date
The Task Force reached a consensus that the amendments in the Update
should be applied retrospectively to all periods presented. The Task
Force believes that there is a significant benefit to retrospective
transition because it will enhance the interperiod consistency and
comparability of financial information.
The Task Force also reached a consensus to require the transition
disclosures in paragraphs 250-10-50-1(a) and (b)(1) and 250-10-50-2, as
applicable, in the interim and annual periods in which the amendments in
the Update are adopted.
The Task Force decided that the amendments in the Update should be
effective for public business entities for fiscal years beginning after
December 15, 2017, and interim periods within those fiscal years. For
all other entities, the amendments are effective for fiscal years
beginning after December 15, 2018, and interim periods within fiscal
years beginning after December 15, 2019. Early adoption is permitted,
including adoption in an interim period. If an entity early adopts the
amendments in an interim period, any adjustments should be reflected as
of the beginning of the fiscal year that includes that interim period.
The Board ratified the consensus-for-exposure reached at the September
22, 2016 EITF meeting on the following EITF Issue. The Board directed
the staff to draft a proposed Update reflecting the
consensus-for-exposure for vote by written ballot. The Board decided to
expose the proposed Update for public comment for a period of 60 days.
Issue No. 16-C, "Determining the Customer of the Operation Services in a Service Concession Arrangement"
The Task Force reached a consensus-for-exposure that the grantor is the
customer of the operation services in all cases for service concession
arrangements (SCA) within the scope of Topic 853. The Task Force also
considered whether additional disclosures would be required about the
identification of the customer of the operation services. On the basis
of the Task Force's consensus-for-exposure that the grantor is the
customer of the operation services in all cases and the existing
disclosure requirements in GAAP, the Task Force decided not to require
any additional disclosures.
Considering the consensus-for-exposure described above, the Task Force
noted that it therefore had addressed the diversity in practice observed
by some stakeholders about the recognition of revenue from construction
services in certain service concession arrangements in which the
third-party users were considered the customer of the operation
services. Accordingly, the Task Force determined that no additional
guidance is necessary for that particular aspect of the revenue
guidance. The Task Force also considered whether it was necessary to
clarify other aspects of the revenue guidance, such as determining
whether major maintenance performed by the operating entity in an SCA is
a separate deliverable under Topic 605 (or a performance obligation
under Topic 606) or evaluating whether major maintenance can be
capitalized when it is not a separate deliverable (or a separate
performance obligation). The Task Force noted that the clarification
provided by the consensus-for-exposure described above addresses the
added complexity, and resulting diversity in practice, observed in the
application of those other aspects of the revenue guidance. Therefore,
the Task Force decided that there is currently sufficient accounting
guidance in GAAP and that no further standard setting is necessary on
those other aspects.
Transition and Effective Date
The Task Force reached a consensus-for-exposure that if an entity has
not adopted the amendments in Topic 606 by the time the amendments in
the proposed Update are finalized, the entity would be required to adopt
the amendments in the proposed Update at the same time that it adopts
the amendments in Topic 606, and it would apply the same transition
method elected for the application of Topic 606. An entity that elects
to early adopt Topic 606 before the finalization of the proposed
amendments would apply the amendments in the proposed Update using
either (1) a modified retrospective approach by recording a
cumulative-effect adjustment to equity as of the beginning of the annual
reporting period of adoption or (2) a retrospective approach. The Task
Force will determine the effective date for entities that have elected
to early adopt Topic 606, including whether to permit early adoption of
the proposed amendments, after it considers stakeholder feedback on the
proposed amendments.
The minutes of the September 22, 2016 EITF meeting, which will be posted
to the FASB website by the end of October 2016, describe the consensus
on Issue 16-A and the consensus-for-exposure on Issue 16-C.
Scope of modification accounting in Topic 718.
The Board decided that an entity should not apply modification
accounting under Topic 718 on stock compensation if the change to an
award does not affect the total current fair value (or total calculated
value or total intrinsic value, if such an alternative measurement
method is used), vesting requirements, or classification of the award.
Recurring Disclosures
The Board decided to retain the existing recurring disclosures in Topic 718.
Transition
The Board decided that the proposed changes should be applied
prospectively beginning in the period of adoption for all entities. The
Board also decided not to require transition disclosures.
Analysis of Benefits, Perceived Costs, and Complexities
The Board concluded that it has received sufficient information and
analysis on the proposed changes to make an informed decision on the
issues presented. The Board also concluded that the expected benefits of
the proposed changes would justify the costs.
Next Steps
The Board directed the staff to draft a proposed Accounting Standards
Update for vote by written ballot, with a comment period of at least 30
days but ending no earlier than January 6, 2017.