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Highlights from the FASB’s October 29 meeting

Oct 31, 2014

At its October 29, 2014, meeting, the FASB discussed its projects related to impairment and extraordinary items.


Financial instruments — impairment

The FASB discussed credit impairment disclosures and the scope of the project and tentatively decided to:

  • Retain the requirement that an entity must disclose information that “influenced management’s current estimate of expected credit losses,” including forward-looking information used to record the estimate of expected credit losses.
  • Require an entity to continue to disclose its write-off policy for uncollectible receivables.
  • Not require an entity to disclose the period over which it performed a reasonable and supportable forecast.
  • Retain existing requirements for U.S. GAAP nonaccrual policy disclosures.
  • Require qualitative disclosures for collateralized financial assets to only apply to collateral-dependent financial assets.
  • Require an entity to disclose past-due information on held-to-maturity and held-for-investment financial assets.

In addition, the Board made tentative decisions about which types of debt instruments would be included within the scope of the proposed current expected credit loss model.

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


Simplifying income statement presentation by eliminating the concept of extraordinary items

The FASB affirmed its decision to remove extraordinary items from U.S. GAAP and voted to issue final guidance in an ASU for this project. The Board tentatively decided to allow either prospective or retrospective application of the guidance (prospective application will require disclosure of “both the nature and amount of an item included in income from continuing operations after adoption that relates to an adjustment of an item previously separately classified and presented as an extraordinary item before adoption, if applicable”). The ASU will be effective for periods beginning after December 15, 2015, for both public and private entities. Early adoption is permitted when the guidance is applied from the beginning of the reporting period in the year of adoption.

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


FASB announces outreach plan to assess effective date of new revenue guidance

Oct 31, 2014

At today’s meeting of the FASB/IASB joint transition resource group for revenue recognition, James Kroeker, the FASB vice chairman, announced that the FASB and its staff plan to conduct further outreach with both public and private companies over the next several months to gauge their progress in preparing to implement the guidance in ASU 2014-09.

Mr. Kroeker emphasized that the Board is considering whether to defer the effective date of the new revenue guidance and noted that a decision will be made no later than the second quarter of 2015.

For additional information on the TRG meeting, see Deloitte’s TRG Snapshot newsletter.

FASB issues two proposals in response to EITF consensuses-for-exposure

Oct 30, 2014

The FASB has issued the following two proposed ASUs in response to consensuses-for-exposure reached at the EITF’s September 19, 2014, meeting: (1) “Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions” and (2) “Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” Comments on both proposals are due by January 15, 2015.


Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions

This proposal was issued in response to the EITF’s consensus-for-exposure on Issue 14-A1 that, upon the occurrence of a dropdown transaction occurring after initial formation of a master limited partnership (MLP) and accounted for as a reorganization of entities under common control, an MLP would allocate “the net income (loss) of the transferred business prior to the date of the dropdown transaction entirely to the [general partner] as if only the [general partner] had rights to that net income (loss).” As a result, there would be no adjustment to historical earning per unit reported for limited partner units.

For more information, see the proposed ASU on the FASB’s Web site.


Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

This proposal was issued in response to the EITF’s consensus-for exposure on Issue 14-B2 that entities would no longer categorize within the levels of the fair value hierarchy table all investments that a reporting entity has measured under the NAV practical expedient. Instead of categorizing these investments within the levels of the fair value hierarchy table, reporting entities would be required to include those investments measured at NAV under the practical expedient in a reconciling line item in arriving at the amounts measured at fair value in the balance sheet.

For more information, see the proposed ASU on the FASB’s Web site.


1 EITF Issue No. 14-A, “Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions.”

2 EITF Issue No. 14-B, “Fair Value Hierarchy Levels for Certain Investments Measured at Net Asset Value.”

Summary of the September ASAF meeting now available

Oct 30, 2014

The IASB has published a summary of the Accounting Standards Advisory Forum’s (ASAF’s) September 25–26, 2014, meeting in London. Topics discussed include leases; discount rates; the post-implementation review of IFRS 3, “Business Combinations”; the conceptual framework; the disclosure initiative; insurance contracts; financial instruments with the characteristics of equity; the IFRS taxonomy; and the IASB's agenda.

Details of the meeting include the following:

  • Leases — Participants discussed the IASB's leases project and feedback from a report on additional outreach by the European Financial Reporting Advisory Group. Mixed views were expressed on various aspects of the report as well as on the definition of a lease (including defining a lease as a financing arrangement). Participants also noted the importance of achieving convergence between the IASB and FASB.
  • Discount rates General support was expressed for the IASB's intended scope and approach related to research in this project. Participants also made a number of suggestions about topics to be considered and emphasized the importance of interaction between this project and the IASB's projects on the conceptual framework and insurance contracts.
  • Post-implementation review of IFRS 3 — Participants discussed a number of updates and reports and highlighted critical issues related to the subsequent accounting for goodwill (about which they had mixed views) and the definition of a business.
  • Conceptual framework — While participants expressed support for the direction being taken by the IASB in this project, they noted a number of concerns. They also discussed tentative decisions made by the IASB on measurement and the implications of long-term investment for the conceptual framework.
  • Disclosure initiative — Discussion included the purpose and order of notes to the financial statements, the role of materiality with respect to disclosures, the nature of significant accounting policies, and improving accounting policy disclosures.
  • Insurance contracts —The IASB sought feedback from ASAF members on accounting for contracts with participating features and transition (most noting that they preferred retrospective application as of the date of transition).
  • Financial instruments with characteristics of equityParticipants discussed whether the project could proceed as a fundamental review of IAS 32, Financial Instruments: Presentation, or whether IAS 32 should be maintained with improvements to presentation and disclosure requirements. Many ASAF members noted the necessity of a fundamental review to provide a better foundation that focuses on identifying the objectives of the distinction between liabilities and equity. One participant noted, however, that the IASB "should not necessarily start from an entirely blank sheet of paper."

A full report of the meeting is available on the IASB's Web site.

Highlights from the FASB’s October 22 meeting

Oct 24, 2014

At its October 22, 2014, meeting, the FASB discussed its projects related to (1) classification and measurement and (2) income taxes. In addition, the FASB jointly discussed leases with the IASB.


Financial instruments — classification and measurement

The FASB tentatively decided that (1) investments accounted for under the equity method would be removed from the scope of its project (the current requirements would be retained) and (2) for equity securities for which an entity has elected the practicability exception, an entity would use a one-step method to assess whether the securities are impaired. The assessment would focus on qualitative impairment indicators in the FASB’s 2013 proposed Accounting Standards Update but would not include a threshold for when impairment should be recognized.

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


Accounting for income taxes

The FASB voted to issue a proposed ASU on the tax effects of intra-entity transfers of assets and the balance sheet classification of deferred taxes. The Board’s tentative decisions included the following:

  • An entity would no longer be required to defer the income tax consequences of intra-entity asset transfers until the assets are ultimately sold to an outside party; tax consequences of such transfers would be recognized in tax expense when the transfers occur.
  • All deferred taxes would be classified as noncurrent; jurisdictional netting would still be required.

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



The FASB and IASB continued redeliberating their revisions to lease accounting and made certain tentative decisions, including the following:

  • When evaluating its right to direct the use of an identified asset, a customer should focus on its ability to direct “how and for what purpose” the asset is used. In performing this evaluation, the customer would consider its ability to control certain key aspects of the identified asset, including the purpose, time frame, and location associated with the asset’s use or deployment.
  • A supplier’s protective right (e.g., a contract that specifies the maximum use of an asset or requires prudent operating practices) would not, in itself, prevent the customer from directing the use of the identified asset.

In addition, the Board decided to defer making a decision on the two different approaches for evaluating whether a customer has obtained, or has the ability to obtain, substantially all of the economic benefits from directing the use of the underlying asset.

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

Federal agencies adopt credit risk retention requirements

Oct 23, 2014

The SEC and five other federal agencies (the Office of the Comptroller of the Currency in the Department of the Treasury; the Board of Governors of the Federal Reserve System; the Federal Deposit Insurance Corporation; the Federal Housing Finance Agency; and the Department of Housing and Urban Development) have adopted Final Rule Release No. 34-73407, “Credit Risk Retention,” which requires securitizers, under certain conditions, to retain a portion of the credit risks associated with the assets collateralizing an asset-based security (ABS). The final rule is being issued in response to a mandate of Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which added new credit risk retention requirements to Section 15G of the Securities Exchange Act of 1934.

The final rule addresses what some believed to be a critical weakness in the securitization market that led to the financial crisis — namely, that certain meaningful risks need to be retained to ensure that securitizers have the incentives to monitor the quality of the securities. Therefore, under the final rule, securitizers would be:

    • Required to retain no less than 5 percent of the credit risk of assets within an ABS.
    • Prohibited from hedging or transferring the credit risk they are required to retain.

In addition, the final rule permits securitizers to select a form of risk retention obligation from a menu of specified options. The options available include (1) an eligible vertical interest, (2) an eligible horizontal residual interest, or (3) a combination of both when the combined interest is no less than 5 percent of the fair value of all ABSs issued.

ABSs that are collateralized solely by “qualified residential mortgages” (QRMs) are exempt from the risk retention requirements. The final rule alters the definition of a QRM to align it with the Consumer Financial Protection Bureau’s definition of a “qualified mortgage.”

For more information, see the press release, final rule, and the speeches by SEC Chair Mary Jo White and commissioners Luis A. Aguilar, Michael S. Piwowar, Kara M. Stein, and Daniel M. Gallagher on the SEC’s Web site.

SEC updates Financial Reporting Manual

Oct 21, 2014

The SEC's Division of Corporation Finance published an update to its Financial Reporting Manual (FRM).

Revised sections contain the designation "Last updated: 10/20/2014."  Changes include:

  • The deletion of interpretive guidance on development-stage entities (for consistency with U.S. GAAP).
  • Clarifications to the definition in Regulation S-X, Rule 3-05, of “individually insignificant acquisitions.”
  • Modifications to certain guidance on applying Regulation S-X, Rule 3-14, for real estate acquisitions.

For more information, including a complete list and a brief description of the recent changes, see the FRM on the SEC's Web site.

SEC updates EDGAR filer manual and technical specifications

Oct 21, 2014

The SEC has issued a final rule updating its Electronic Data Gathering, Analysis, and Retrieval (EDGAR) System Filer Manual (Volumes I, II, and III) and has issued Version 13 of the EDGARLink Online XML Technical Specification and Version 1 of the EDGAR ABS XML Technical Specification.

Updates to the EDGAR Filer Manual include the following:

  • New submission form types.
  • New exhibits on EDGARLink Online.
  • Item 6.06 of Form 8-K (“Static Pool”) on EDGARLink Online for additional submission types.
  • Removal of references to leased-line filings, since EDGAR no longer supports the leased-line filing method.
  • Minor, documentation-only corrections.

For more information, see the final rule and EDGAR page on the SEC’s Web site.

New issue of “FASB Outlook” published

Oct 21, 2014

The FASB has published the latest issue of its quarterly e-newsletter, "FASB Outlook," which provides high-level information about the FASB’s projects and key activities.

This issue features:

  • Chairman Russ Golden’s discussion of the importance of evaluating costs and benefits during the standard-setting process.
  • Information about the FASB’s consolidations project.
  • How non-GAAP metrics in financial statements could be used to measure performance.
  • Updates on the FASB’s financial instruments (credit losses) project, the upcoming meeting of the FASB’s and IASB’s revenue recognition transition resource group, and the EITF’s pushdown accounting project.

 The "FASB Outlook" e-newsletter is available on the FASB’s Web site.

Agenda for the Joint Transition Resource Group for Revenue Recognition meeting

Oct 20, 2014

The agenda has been released for the second meeting of the Joint Transition Resource Group for Revenue Recognition (TRG), which is being jointly held at the offices of the IASB and FASB on October 31, 2014. The TRG will discuss a number of topics related to the boards’ new revenue standard, “Revenue From Contracts With Customers” (issued as IFRS 15 by the IASB and ASU 2014-09 by the FASB).

The TRG was formed in June 2014 and is responsible for soliciting, analyzing, and discussing stakeholder issues arising from implementation of the new standards to assist the IASB and the FASB in determining what, if any, action will be needed to address those issues.

The agenda for the meeting is as follows:

Friday, October 31, 2014

  • Introductory remarks.
  • Customer options for additional goods and services and nonrefundable up-front fees.
  • Presentation of a contract as a contract asset or a contract liability.
  • Determining the nature of a license of intellectual property.
  • Distinct in the context of the contract.
  • Contract enforceability and termination clauses.

Agenda papers from this meeting are available on the IASB's Web site.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.