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Highlights from the FASB’s February 18 meeting

  • FASB meeting Image

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.

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