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, March 22, 2017 FASB Board Meeting
Accounting for financial instruments—hedging. The Board discussed the following issues in the proposed Accounting Standards Update, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities:
Cross Currency Basis Spread
- Should a cross currency basis spread in a currency swap be added
to the list of amounts that may be excluded from assessments of hedge
effectiveness (excluded components)?
- Should the base recognition model for excluded components be
changed from a mark-to-market through earnings approach to an
amortization approach? Should there be an option to use either the
mark-to-market or amortization approach on a similar hedging
The Board decided that it would add a cross currency basis spread to the list of excluded components.
Excluded Component Recognition
The Board decided that the base recognition model for excluded
components would be an amortization approach and that entities would
also be allowed, as an accounting policy election, to apply a
mark-to-market through earnings approach.
Additionally, the Board decided that when a hedging relationship is
discontinued and an amortization approach is used, the changes in fair
value of excluded components recorded in accumulated other comprehensive
income would be released to earnings consistent with existing GAAP for
each respective type of hedging relationship, specifically:
Liabilities and equity—targeted improvements. The Board discussed the comment letter feedback received on the December 2016 proposed Accounting Standards Update—Distinguishing
Liabilities from Equity (Topic 480): I. Accounting for Certain
Financial Instruments with Down Round Features, and II. Replacement of
the Indefinite Deferral for Mandatorily Redeemable Financial Instruments
of Certain Nonpublic Entities and Certain Mandatorily Redeemable
Noncontrolling Interests with a Scope Exception.
- For a cash flow hedge in which the hedged forecasted transaction
is still probable of occurring, at the time that the hedged forecasted
transaction affects earnings
- For a fair value hedge, consistent with how fair value hedge
basis adjustments are recognized in earnings for the related hedged
Accounting for Instruments with Down Round Features
The Board instructed the staff to perform additional research. That
research includes developing a potential alternative that would affect
the measurement of these instruments but would not affect the
Indefinite Deferral in Topic 480 Related to Mandatorily Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Noncontrolling Interests
The Board affirmed its decision to replace the indefinite deferral in
Topic 480, Distinguishing Liabilities from Equity, with a scope
exception to improve the readability of the FASB Accounting Standards Codification®. These amendments will not have an accounting effect.
Navigation of the Codification
The Board decided to move the next phase of this project, improving the
navigation of the guidance within the Codification, to the
Distinguishing Liabilities from Equity project on its research agenda.