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Highlights from the FASB’s August 27 meeting

  • FASB meeting Image

Aug 28, 2014

At its August 27, 2014, meeting, the FASB discussed its projects on (1) targeted improvements to the accounting for long-duration insurance contracts, (2) leases, and (3) financial statements of not-for-profit entities (NFPs).

 

Insurance — Targeted improvements to the accounting for long-duration contracts

The FASB began discussing targeted improvements to its guidance on accounting for long-duration insurance contracts and tentatively decided that insurance entities should:

  • Update all assumptions they used to calculate (1) the liability for future policy benefits for traditional long-duration contracts, limited-payment contracts, and participating life insurance contracts and (2) the additional liability for universal life-type contracts. Such assumptions would be updated annually in the fourth quarter.
  • Recognize the impact of changes in assumptions in net income.
  • Not include a provision for adverse deviation in calculating the liability for future policy benefits for traditional long-duration contracts, limited-payment contracts, and participating life insurance contracts.
  • Not be required to perform a premium-deficiency test.

For more information, see the related Deloitte Accounting Journal entry and meeting minutes on the FASB’s Web site.

 

Leases

The FASB discussed (1) considerations related to the discount rate for nonpublic business entities (NBEs), (2) related-party leasing transactions, (3) accounting for sale-leaseback transactions, and (4) leveraged leases. The Board tentatively decided that:

  • A seller-lessee’s option of repurchasing an asset would not preclude the seller-lessee from concluding that the underlying asset was sold unless the asset is a nonspecialized asset and the exercise price is at fair value. In addition, the Board tentatively decided that the final standard would include application guidance on how repurchase options should be evaluated.
  • The current leveraged-lease guidance would continue to apply to leveraged-lease arrangements that exist as of the final standard’s effective date.

Further, the Board reaffirmed the guidance in its May 2013 ED concerning the NBE lessee discount rate, related-party leases, “failed” sale-leaseback transactions, and the elimination of leveraged-lease accounting for all new arrangements.

For more information, see the related Deloitte Accounting Journal entry and meeting minutes on the FASB’s Web site.

 

Financial statements of not-for-profit entities

The FASB discussed not-for-profit disclosures including cost allocations, and tentatively decided to:

  • Require entities to disclose any internal salaries and benefits that have been netted against investment return.
  • Require entities to disclose, in the notes to the financial statements, a description of the method used to allocate costs to program and support function costs.
  • Amend the definitions of the terms “management” and “general activities.”
  • Add implementation guidance to clarify “which support costs should be allocated among program and/or support functions.”

The Board also affirmed its previous decision not to require a not-for-profit entity to disclose its tax-exempt status.

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

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