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, September 13, 2017 FASB Board Meeting
Simplifying the balance sheet classification of debt. The Board completed redeliberations of proposed Accounting Standards Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent). The Board made the following decisions.
The Board affirmed the proposed amendments that debt and other
instruments within the scope of the final Update should be classified as
noncurrent liabilities in a classified balance sheet if either of the
following criteria is met as of the balance sheet date:
- The liability is contractually due to be settled more than one
year (or operating cycle, if longer) after the balance sheet date.
- The entity has a contractual right to defer settlement of the
liability for at least one year (or operating cycle, if longer) after
the balance sheet date.
The Board decided to clarify the following:
- The issuance of equity instruments does not constitute
settlement when determining whether debt should be classified as current
- If, before the balance sheet date, an arrangement is in place
with a third party (for example, a line of credit) that would result in
the entity avoiding the transfer of current assets within 12 months from
the balance sheet date, the debt should be classified as noncurrent
because the entity has a contractual right to defer settlement.
The Board decided to modify the proposed scope to clarify that the
classification principle also should apply to lease liabilities (under
Topic 842, Leases).
Waivers of Debt Covenant Violations
The Board affirmed the proposed amendments to provide an exception to
the classification principle for waivers of debt covenant violations
received after the balance sheet date but before the financial
statements are issued. That exception would continue to require an
entity to classify a debt arrangement as a noncurrent liability when
there has been a debt covenant violation, if the entity receives a
waiver of that violation that meets certain conditions before the
financial statements are issued (or are available to be issued). The
Board also affirmed the conditions that must exist for an entity to
qualify for that exception.
Separate Presentation in a Classified Balance Sheet
The Board affirmed the proposed amendments that an entity should
separately present, in a classified balance sheet, the amount of debt
that is classified as a noncurrent liability because of waivers obtained
after the balance sheet date.
Refinancing after the Balance Sheet Date
The Board affirmed the proposed amendments for short-term debt that is
refinanced on a long-term basis after the balance sheet date. The
classification principle should apply to those debt arrangements, which
would result in an entity classifying those debt arrangements as current
The Board affirmed the proposed amendments that would require an entity to disclose information about events of default.
Implementation Guidance and Illustrative Examples
The Board affirmed the proposed implementation guidance and illustrative
examples with revisions to conform and clarify that guidance, as
Transition Method and Transition Disclosures
The Board affirmed the proposed transition guidance that an entity
should apply a prospective method of transition. That transition would
be applied to all debt arrangements and other instruments within the
scope that exist at the date of initial adoption and after that date.
The Board also affirmed the proposed amendments on transition disclosures.
The Board decided that the effective date:
- For public business entities will be for fiscal years beginning
after December 15, 2019, and interim periods within those fiscal years.
- For all other entities will be for fiscal years beginning after
December 15, 2020, and interim periods within fiscal years beginning
after December 15, 2021.
The Board affirmed that early adoption is permitted.
Costs and Benefits
The Board decided that the benefits justify the costs of the changes and
directed the staff to draft an Accounting Standards Update for vote by