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Highlights from the FASB’s February 25 meeting

Feb 27, 2015

At its February 25, 2015, meeting, the FASB discussed its projects on (1) hedging, (2) financial performance reporting, (3) leases, and (4) financial statements for not-for-profit entities.

  • Financial instruments — hedging — The FASB held an educational session on this topic to discuss (1) the hedge effectiveness threshold and whether to require a quantitative or qualitative assessment of hedge effectiveness and (2) component hedging. For more information, see the ten­ta­tive Board de­ci­sions on the FASB’s Web site.
  • Financial performance reporting — The FASB dis­cussed the staff’s research on alternative ways to define operating activities and indicated that this research should focus on distinguishing between recurring and nonrecurring/infrequent items. For more information, see the meeting minutes on the FASB's Web site.
  • Leases — The FASB dis­cussed the reassessment of variable lease payments and transition requirements. The following remaining items will be addressed at an upcoming meeting: Private Company Council feedback, the cost and complexity of the leases proposal, and the final standard’s effective date. For more information, see the related De­loitte journal entry and the meeting minutes on the FASB's Web site.
  • Financial statements for not-for-profit entities — The FASB discussed the results of an external review of its proposed ASU as well as the proposed transition requirements, effective date, and comment period. For more information, see the meeting minutes on the FASB's Web site.

FAF trustees seek comments on PCC

Feb 27, 2015

The FAF board of trustees has released a request for comment on whether the PCC, which was established in May 2012, is accomplishing its objectives.

The request for comment solicits stakeholders’ views on potential improvements to the PCC, including:

  • Continuing “to establish working groups for select FASB projects.”
  • Creating “a consistent and continuous feedback mechanism” between the FASB and PCC with respect to active FASB projects.
  • Continuing to provide feedback on projects on the active FASB agenda.
  • Participating with the FASB in outreach with private-company stakeholders.

Comments are due by May 11, 2015.

For more information, see the press release and request for comment on the FASB’s Web site.

FASB proposes enhancements to disclosures about bifurcated embedded derivatives

Feb 25, 2015

The FASB has issued a proposed ASU that would amend ASC 815 by requiring entities to disclose useful information about hybrid financial instruments with bifurcated embedded derivatives.

Specifically, the proposal would require entities to disclose “the carrying amount, measurement attribute, and line item within the balance sheet and the income statement in which each bifurcated embedded derivative and related host contracts are presented.”

Comments on the proposed ASU are due by April 30, 2015.

For more information, see Deloitte's Heads Up and the proposed ASU on the FASB’s Web site.

FASB issues proposed taxonomy implementation guide on offsetting assets and liabilities

Feb 24, 2015

The FASB has issued a proposed U.S. GAAP financial reporting taxonomy (UGT) implementation guide to help entities apply the taxonomy’s modeling structure to XBRL disclosures about offsetting assets and liabilities.

The im­ple­men­ta­tion guide contains ex­am­ples illustrating four disclosure scenarios:

    1. Offsetting of financial assets and liabilities, disaggregation by type of instrument.
    2. Offsetting of financial assets, disaggregation by type of instrument and type of transaction.
    3. Offsetting of financial assets and liabilities, disaggregation by type of instrument, policy election not to offset.
    4. Offsetting of financial liabilities, including instruments not subject to master netting arrangement, alternative.

Com­ments on the UGT implementation guide are due by April 27, 2015. The guide is avail­able on the FASB’s Web site.

Highlights from the FASB’s February 18 meeting

Feb 20, 2015

At its February 18, 2015, meeting, the FASB discussed its projects on (1) the conceptual framework, (2) cloud computing arrangements, (3) long-duration insurance contracts, (4) fair value measurement disclosures, and (5) debt issuance costs. In addition, the FASB and IASB discussed their joint revenue research projects.

Con­cep­tual frame­work

The FASB dis­cussed methods of identifying, and recognizing changes in, carrying amounts. The Board tentatively decided to include the following methods in the measurement section of the proposed chapter of its concepts statement on the conceptual framework:

  1. “Prices in transactions in which the entity participated
  2. Current prices observed or estimated by the entity
  3. Discounted or undiscounted estimates of future cash flows other than estimates of market prices
  4. Other adjustments to carrying amount: accruals, systematic allocations, and allowances for impairments.”

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

Cloud computing arrangements

The FASB discussed constituents’ feedback on its proposal on fees paid in a cloud computing arrangement and tentatively decided that:

  • Up-front costs will not be within the scope of the final ASU.
  • Clarification of the application criteria in ASC 350-40-15-4A and 15-4B is unnecessary.
  • The accounting for acquired software licenses should be similar to that for other acquired intangible assets.

In addition, the Board affirmed that:

  • In the determination of “whether a contract is a software license or a service contract,” a customer would apply “the guidance that cloud service providers currently use.”  
  • Entities would be permitted to use either a retrospective or a prospective transition method and that “an entity electing the prospective transition method should disclose, in the period of the change, the nature of and reason for the change in accounting principle, the transition method, and a qualitative description of the financial statement line items affected by the change.”
  • The effective date would be (1) “annual periods, including interim periods within those annual periods, beginning after December 15, 2015,” for public business entities and (2) “the first annual period beginning after December 15, 2015, and interim periods thereafter” for all other entities.

The Board has directed the staff to draft a final ASU for a vote by written ballot.

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

Long-duration insurance contracts

The FASB dis­cussed three alternatives for amortizing deferred acquisition costs (DAC) for long-duration insurance contracts (including retention of current U.S. GAAP) and tentatively decided that DAC “would be amortized over the expected life of a book of contracts in proportion to the amount of insurance in force, or on a straight-line basis (in proportion to the number of contracts outstanding) if the amount of insurance in force is variable and cannot be reliably predicted or is otherwise not readily determinable.”

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

Fair value measurement disclosure requirements

The FASB discussed how to amend the fair value measurement disclosure requirements throughout the Codification in a way that promotes “the use of discretion by reporting entities.” The Board’s tentative decisions included the following:

  • “An entity should provide the disclosures to the extent material.”
  • An entity’s use of discretion would not be limited.
  • ASC 235 would include “additional guidance on applying materiality to note disclosures.”
  • Jurisdictional variations in materiality would not be acknowledged.
  • There would be no distinction “between a minimum and expanded set of disclosures.”
  • The disclosure objectives of each Codification topic would be developed by “using the decision questions from the proposed concepts that are used to identify relevant disclosure requirements.”

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

Presentation of debt issuance costs

The FASB discussed constituents’ feedback on its proposal to simplify the presentation of debt issuance costs in the financial statements and decided to draft a final ASU that would require an entity to:

  • Present debt issuance costs in the balance sheet as a direct deduction from the debt liability in a manner consistent with the entity’s accounting treatment of debt discounts.
  • Apply the new guidance retrospectively to all prior periods.
  • Provide transition disclosures, including (1) the nature of, and reason for, the change in accounting principle; (2) a description of the prior-period information that has been retrospectively adjusted; and (3) the effect of the change on the financial statement line item.

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

Revenue recognition research projects

The FASB and IASB made tentative decisions related to their joint revenue recognition research projects on licenses of intellectual property and identifying performance obligations. The FASB directed its staff to draft a proposed ASU.

For more in­for­ma­tion, see the related Deloitte Heads Up and the meeting minutes on the FASB's Web site.

IASB and FASB discuss potential clarifications to joint revenue recognition guidance

Feb 20, 2015

At their meeting on Wednesday, the IASB and FASB discussed issues that their joint revenue transition resource group (TRG) has identified in connection with implementation of their converged standard, “Revenue From Contracts With Customers” (issued as IFRS 15 by the IASB and as ASU 2014-09 by the FASB). Specifically, the boards addressed whether to clarify certain aspects of the standard that seem to be causing implementation problems for some preparers.

Topics that one or both boards may consider revising or clarifying include de­ter­min­ing the nature of an entity’s promise in granting a license of in­tel­lec­tual property, iden­ti­fy­ing per­for­mance oblig­a­tions related to the level at which promised goods or services are iden­ti­fied in a contract with a customer, evaluating whether promised goods and services are distinct, and de­ter­min­ing whether shipping and handling services are promised services in the contract or a ful­fil­lment cost.

For more information, see Deloitte’s February 19, 2015, Heads Up.

FASB updates its consolidations requirements

Feb 18, 2015

The FASB has issued Accounting Standards Update (ASU) No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which amends the consolidation requirements in ASC 810.

While the Board’s focus during deliberations was largely on the investment management industry, the ASU could have a significant impact on the consolidation conclusions of reporting entities in other industries. For example:

  • Limited partnerships will be variable interest entities (VIEs), unless the limited partners (LPs) have either substantive kick-out or participating rights. Although more partnerships will be VIEs, it is less likely that a general partner (GP) will consolidate a limited partnership.
  • The ASU amends the effect that fees paid to a decision maker or service provider have on the consolidation analysis. Specifically, it is less likely that the fees themselves would be considered a variable interest, that an entity would be a VIE, or that consolidation would result.
  • The ASU significantly amends how variable interests held by a reporting entity’s related parties or de facto agents affect its consolidation conclusion. Specifically, the ASU will result in less frequent performance of the related-party tiebreaker (and mandatory consolidation by one of the related parties) than under current U.S. GAAP.
  • For entities other than limited partnerships, the ASU clarifies how to determine whether the equity holders (as a group) have power over the entity (this will likely result in a change to current practice). The clarification could affect whether the entity is a VIE.
  • The deferral of ASU 2009-17 for investments in certain investment funds has been eliminated. Therefore, investment managers, GPs, and investors in these investment funds will need to perform a drastically different consolidation evaluation.

Although the ASU is expected to result in the deconsolidation of many entities, reporting entities will need to reevaluate all their previous consolidation conclusions.

For more information, see Deloitte's February 19, 2015, Heads Up, as well as the press release, ASU, FASB in Focus newsletter, and the cost and benefits report, on the FASB’s Web site.

iGAAP 2015 now available

Feb 16, 2015

Deloitte has released the latest edition of its iGAAP series, “iGAAP 2015,” which provides comprehensive guidance for entities reporting under IFRSs. The new edition (1) focuses on the practical issues faced by reporting entities; (2) clearly explains the requirements of IFRSs; (3) adds interpretation and commentary on topics about which IFRSs are silent, ambiguous, or unclear; and (4) contains many illustrative examples.

The iGAAP 2015 volumes cover IFRS re­quire­ments existing as of July 31, 2014, and discuss and analyze sig­nif­i­cant recent changes. Such changes include:

  • IFRS 9, Financial In­stru­ments, which revises the re­quire­ments for hedging, clas­si­fi­ca­tion and mea­sure­ment, and im­pair­ment.
  • IFRS 15, Revenue From Contracts With Customers, which will affect almost all entities reporting under IFRSs.
  • Sig­nif­i­cant de­vel­op­ments in in­te­grated reporting.

More in­for­ma­tion about the volumes in the iGAAP series, including details regarding how to order them, can be found here.

Summary of the February 2015 PCC meeting

Feb 13, 2015

At today’s meeting, the Private Company Council (PCC) discussed (1) the definition of a public business entity, (2) balance sheet classification of debt, (3) effective dates of PCC accounting alternatives, (4) share-based payments, and (5) uncertain tax positions.

For more in­for­ma­tion, see the media recap on the FASB’s Web site.

Highlights from the FASB’s February 11 meeting

Feb 13, 2015

At its February 11, 2015, meeting, the FASB discussed its projects on (1) revenue recognition (research projects), (2) impairment, and (3) the income taxes disclosure framework.

Revenue recognition research projects  

The FASB held an educational session on revenue recognition research projects related to (1) licenses and (2) identifying performance obligations. Although no tentative decisions were made, the FASB will discuss these projects at its next meeting to decide whether to add them to its technical agenda.

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

Financial instruments — impairment

The FASB continued to redeliberate the disclosure requirements in its proposed credit impairment guidance and made tentative decisions on the following:

  • Available-for-sale debt securities.
  • Rollforward of amortized cost.
  • Rollforward of allowance for expected credit losses.
  • Definition of originations.
  • Financial guarantee contracts.
  • Programmatic loans.
  • Reinsurance receivables.
  • Nonpublic business entities.

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

Disclosure framework — disclosure review: income taxes

The FASB discussed income tax disclosures, particularly those related to unremitted foreign earnings, and made tentative decisions regarding disclosures about foreign earnings, taxes on foreign earnings, unremitted foreign earnings, and indefinitely reinvested foreign earnings.

For more information, see the related Deloitte journal entry and the meeting minutes on the FASB’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.