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 16, 2011 — Joint FASB/IASB Videoconference Board
contracts. The IASB and the FASB continued their discussions on
insurance contracts by considering the accounting for explicit account balances
within insurance contracts. In addition, the IASB and FASB received an oral
update of the feedback received at the IASB’s Insurance Working Group held on
October 24, 2011.
Disaggregation of Explicit Account
The FASB tentatively decided to separate explicit account
balances from the insurance contract liability. Explicit account balances are
account balances within a contract that meet both of the following criteria:
IASB members indicated their preference to measure
explicit account balances as part of the insurance contract and to disaggregate
them for presentation or disclosures. IASB members indicated that they would
like to explore an approach in which some other deposit components of insurance
contracts could be disaggregated in the same way. The Boards plan to consider at
a future meeting:
- The balance is an accumulation of the monetary amount of transactions
between the policyholder and an insurer.
- The balance is credited with an explicit return. A return is explicit if
it is determined by applying either of the following to the balance:
- A contractual formula in which the insurer may have the ability to reset
the return rate during the life of the contract.
- An allocation determined directly by the performance of specified
- Whether there are additional account balances that should be separated
from the insurance contract liability.
- How income and expense items related to the explicit account balances
should be recognized in the statement of comprehensive income.
- Whether to measure separated account balances:
- Using requirements other than those being developed in the insurance
contracts project; or
- As part of the insurance contract and to disaggregate those account
balances for presentation or disclosure.
Both Boards will continue their joint discussions on insurance
contracts in the week commencing December 12, 2011. The FASB plans to hold an
education session on participating contracts on November 22, 2011, with the
Board meeting to follow on November 30, 2011.
The FASB and the IASB discussed consequential amendments to the business
combinations guidance and the borrowing costs guidance in IFRSs and U.S. GAAP
and transition issues related to business combinations.
Combinations and Borrowing Cost Consequential Amendments
tentatively decided the following in relation to the measurement of lease assets
and lease liabilities acquired in a business combination:
Boards tentatively decided that, upon transition, a lessee that previously
recognized assets or liabilities relating to favorable or unfavorable terms in
acquired operating leases should derecognize those assets or liabilities and
adjust the carrying amount of the right-of-use asset by the amount of any asset
or liability derecognized.
- If the acquiree is a lessee, an acquirer should recognize a liability to
make lease payments and a right-of-use asset. The acquirer should
- The liability to make lease payments at the present value of future
lease payments in accordance with the proposed leases guidance, as if the
associated lease contract is a new lease at the acquisition
- The right-of-use asset equal to the liability to make lease payments,
adjusted for any off-market terms in the lease
- If the acquiree is a lessor applying the receivable and residual approach,
an acquirer should recognize a right to receive lease payments and a residual
asset. The acquirer should measure:
- The right to receive lease payments at the present value of future lease
payments in accordance with the proposed leases guidance, as if the
associated lease contract is a new lease at the acquisition
- The residual asset as the difference between the fair value of the
underlying asset at the acquisition date and the carrying amount of the
right to receive lease payments.
- If the acquiree is a lessor of investment property, an acquirer should
apply the guidance in IFRS 3, Business Combinations, or Topic 805, Business
Combinations, that relates to acquired operating leases.
- If the acquiree has short-term leases (that is, leases for which, at the
date of acquisition, the maximum remaining term of the lease contract is 12
months or less), an acquirer should not recognize separate assets or
liabilities related to the lease contract at the acquisition date.
The FASB tentatively decided that, upon
transition, a lessor applying the receivable and residual approach that
previously recognized assets or liabilities relating to favorable or unfavorable
terms in acquired operating leases should derecognize those assets or
liabilities and adjust retained earnings upon transition.
tentatively decided that interest expense incurred in a lease should be included
in the scope of IAS 23, Borrowing Costs, and Topic 835, Interest, for the
purposes of determining the interest costs or borrowing costs that could be
tentatively decided that, on transition to the new leases guidance, a lessor
would continue to account for the securitization of lease receivables associated
with current operating leases as secured borrowings in accordance with existing
U.S. GAAP and IFRSs. This tentative decision applies to a lessor regardless of
whether the lessor elects a fully retrospective approach to transition.