In redeliberations of its proposed Accounting Standards Update, Insurance Contracts (Topic 834), the FASB focused on the staff’s proposed approaches to the overall direction of the project and whether the scope should include all entities that issue insurance contracts or only insurance entities.
The Board tentatively decided to (1) generally limit the scope of insurance accounting to insurance entities, (2) retain the existing recognition and measurement model for short-duration contracts under U.S. GAAP and make targeted improvements to the disclosure requirements for such contracts, and (3) make targeted improvements to the recognition, measurement, and disclosure model for long-duration contracts.
For more information, see the related Deloitte Accounting Journal entry, Heads Up newsletter, and the meeting minutes on the FASB's Web site.
Financial instruments — Impairment
The FASB continued deliberating its proposed Accounting Standards Update, Financial Instruments — Credit Losses (Subtopic 825-15). Specifically, the Board discussed its proposed nonaccrual guidance, purchased credit-impaired (PCI) financial assets, and troubled debt restructurings (TDRs).
The Board tentatively decided (1) to exclude the nonaccrual guidance from the current expected credit losses (CECL) model, (2) not to make any changes to the proposed PCI guidance but include a requirement in the CECL model that “the non-credit-related discount or premium resulting from acquiring a pool of PCI financial assets should be allocated to each individual financial asset,” and (3) to add a requirement to the CECL model for certain TDRs when an entity may need to “increase the cost basis of the restructured financial asset through a corresponding increase in the entity’s allowance for expected credit losses.”
In addition, the Board decided to allow an entity to consider expectations about prepayments in determining the basis adjustment upon execution of a TDR.
For more information, see the meeting minutes on the FASB's Web site.
Endorsement of PCC 13-02
The FASB has endorsed PCC Issue No. 13-02, Applying Variable Interest Entity Guidance to Common Control Leasing Arrangements. In addition, it reaffirmed its decision to remove an example derived from FSP FIN 46(R)-5 (codified in ASC 810-10-55-87 through 55-89).
For more information, see the related Deloitte Accounting Journal entry and the meeting notes on the FASB’s Web site.
The FASB continued deliberating its proposed Accounting Standards Update, Consolidations (Topic 810): Principal Versus Agent Analysis. The Board tentatively decided to exclude from the primary benefit determination fees that are at-market and commensurate with the services provided. In addition, the Board tentatively decided that the evaluation of a decision maker’s other interests should focus on whether the decision maker has the “obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.” The Board also tentatively decided that in the evaluation of a decision maker’s other interests, the existing threshold for evaluating a reporting entity’s economic exposure under ASC 810-10-25-38A(b) should be retained.
For more information, see the related Deloitte Accounting Journal entry and the tentative board decisions on the FASB's Web site.