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Highlights from the FASB’s July 30 meeting

  • FASB meeting Image

Aug 01, 2014

At its July 30, 2014, meeting, the FASB discussed (1) disclosures about investments in another investment company, (2) technical corrections and improvements, (3) classification and measurement, (4) liabilities and equity, and (5) cash balance plans.

 

Investment companies — disclosures about investments in another investment company

The Board directed the staff to draft a proposed Accounting Standards Update (ASU) and is seeking comments on its previous tentative decisions that (1) "[a] feeder fund should attach the master fund’s financial statements along with its [own] financial statements” and (2) “[a]ll investments companies should disclose each investment owned by an investee fund that exceeds 5 percent of the reporting investment company’s net assets at the reporting date.”

For more information, see the meeting minutes on the FASB’s Web site.

 

Technical corrections and improvements

The FASB discussed technical corrections and improvements related to its guidance on (1) employee stock ownership plans, (2) fair value, (3) transition, and (4) references in SEC-related Codification content. The Board tentatively decided to:

  • Amend ASC 718-40 (which provides guidance on employee stock ownership plans) to link its definition of fair value to the definition in ASC 820 rather than to the definitionin FASB Statement No. 123(R), Share-Based Payment.
  • Retain both definitions of fair value in the Codification (one definition is used in ASC 718 and ASC 505-50 and the other definition is used in ASC 820), since the two definitions “do not appear to be causing confusion in practice.”
  • Require entities to initially account for some of the changes resulting from the technical corrections project “as a change in accounting principle, with the cumulative effect of the change reflected as an adjustment to the opening balance of retained earnings.” In addition, entities would be required to disclose “the nature of and reason for the change as well as the cumulative effect of the change” but would have the option of retrospectively applying the changes.
  • Correct errors in FASB guidance references within SEC-related Codification content.

The Board has directed the staff to draft a proposed ASU on technical corrections for a vote by written ballot.

For more information, see the meeting minutes on the FASB’s Web site.

 

Financial instruments — classification and measurement

The FASB continued redeliberating certain aspects of its proposed ASU Recognition and Measurement of Financial Assets and Financial Liabilities, including (1) whether fair value through other comprehensive income should be an available measurement attribute for certain equity investments and (2) disclosures regarding core deposit liabilities.

In discussing item (1), the Board reaffirmed its decision that investments in equity securities should not be accounted for at fair value through other comprehensive income, but at fair value through net income with certain specified exceptions.

In discussing item (2), the Board reaffirmed its decision to require public business entities to disclose “for each annual period the balance of [their] core deposit liabilities disaggregated by significant types of deposit accounts.” Nonpublic business entities would not be required to disclose information about core deposit liabilities. In addition, the Board tentatively decided to:

  • Not define core deposit liabilities; however, an entity would be required to qualitatively disclose what it believes are its core deposits.
  • Include qualitative characteristics of core deposit liabilities in the final standard’s implementation guidance.
  • Require that entities disclose, on the basis of their historical experience, “the weighted-average life of the core deposit liabilities.”
  • Remove the proposed requirement that “entities disclose the all-in-cost-to-service rate for the core deposit liabilities.”

For more information, see the meeting minutes on the FASB’s Web site.

 

Liabilities and equity — short-term improvements

The Board asked the staff for its input on the potential goals of this project, which is still in the preagenda research phase. The FASB requested the staff to conduct research to determine whether complexity can be reduced in the guidance (1) in ASC 815-40 (formerly EITF Issue 00-19) on accounting for derivatives indexed to, and potentially settled in, an entity’s own stock and (2) on accounting for convertible debt.

For more information, see the meeting minutes on the FASB’s Web site.

 

Pensions — cash balance plans

The FASB held an educational session to discuss its preagenda research project on cash balance pension plans. Topics discussed included (1) the measurement of an employer’s defined benefit obligation and (2) whether diversity in practice related to measurement of the “obligation at the walkaway amount” is such that the Board needs to add the project to its agenda.

At its August 13, 2014, meeting, the FASB plans to decide whether to add this project to its technical agenda.

For more information, see the meeting minutes on the FASB’s Web site.

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