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FASB launches "Pending Content System" for use with Codification

May 29, 2015

The FASB has announced the beta launch of its Pending Content System (PCS) for use with the FASB Accounting Standards Codification. The PCS allows users to “tailor their their Codification display by hiding pending content that is not effective, based upon selected criteria.” It also lets users “selectively integrate pending content related to ASUs eligible for early adoption.”

For more information, see the press release and PCS page on the FASB’s Web site.

Highlights from the FASB’s May 27 meeting

May 28, 2015

At its May 27, 2015, meeting, the FASB discussed its projects on (1) pensions and other postretirement benefits and (2) hedging.

  • Pensions and other postretirement benefits: presentation and disclosure — The FASB discussed various ways to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The Board advised the staff to perform additional research on three alternatives discussed during the meeting. The FASB also discussed changes to current disclosure requirements for pension plans, other postretirement plans, and nonretirement postemployment benefits. No decisions were made.
  • Financial instruments: hedging — The FASB held an educational session to discuss presentation, disclosure, and hedge documentation requirements. No decisions were made.

For more information on these sessions, see the tentative Board decisions on the FASB’s Web site.

IASB proposes updates to its conceptual framework

May 28, 2015

The IASB has published two exposure drafts (EDs) related to its conceptual framework. ED/2015/3, “Conceptual Framework for Financial Reporting,” would (1) revise the definitions of the terms “asset” and “liability,” (2) provide guidance on measurement and derecognition, and (3) establish a framework for presentation and disclosure. ED/2015/4, “Updating References to the Conceptual Framework,” would amend references to the conceptual framework in other IASB pronouncements.

Under ED/2015/3, the structure of the conceptual framework would consist of an in­tro­duc­tion, eight chapters, and two ap­pen­dixes. According to the IASB’s press release, key enhancements to the conceptual framework would include:

  • “A new chapter on measurement that describes appropriate measurement bases (historical cost and current value, including fair value), and the factors to consider when selecting a measurement basis;
  • Confirming that the statement of profit or loss is the primary source of information about a company’s performance, and adding guidance on when income and expenses could be reported outside the statement of profit or loss, in ‘Other Comprehensive Income (OCI)’; and
  • Refining the definitions of the basic building blocks of financial statements—assets, liabilities, equity, income and expenses.”

For more information about ED/2015/3, see the ED’s Basis for Conclusions, the IASB’s May 2015 Snapshot newsletter, and the related webcast on the IASB’s Web site.

ED/2015/4 would change ref­er­ences to and quotes from the conceptual framework in nine pro­nounce­ments. To give preparers time to identify, un­der­stand, and adjust to possible im­pli­ca­tions of the changes, the IASB is proposing a tran­si­tion period of ap­prox­i­mately 18 months.

Comments on both EDs are due by October 26, 2015. The IASB aims to finalize the revised conceptual framework in 2016.

Former chairmen of IASB and FASB share thoughts on convergence

May 26, 2015

On Wednesday April 1, 2015, former IASB Chairman Sir David Tweedie and former FASB Chairman Robert Herz discussed their vision of convergence in a discussion, “Accounting Standards for Global Capital Markets: Past, Present, and Future,” at Baruch College in New York City.

Mr. Herz noted that “right now, for good or for bad, in the U.S. we have become very com­fort­able with the idea that we’ll have U.S. GAAP. If there are things in IFRS that we kind of like or the markets like, maybe we’ll consider adopting those, but there’s no sys­tem­atic program to further converge at this point." Mr. Tweedie replied, “You can have international standards without the U.S., but you can’t have global standards without the U.S.”

The recording of the discussion is available on the Baruch College Web site.

SEC proposes new rules for investment companies and investment advisers

May 22, 2015

The SEC issued two proposed rules that would “modernize and enhance” the reporting and disclosure requirements for investment companies and investment advisers. The purpose of the proposals is to improve the “quality of information available to investors” and facilitate the Commission’s collection and use of data that such companies and advisers provide.

The proposed rule on investment-company reporting would require “mutual funds, ETFs and other registered investment companies” to report information in a new structured format that would be easier for the SEC and the public to analyze. Further, this proposal “would permit but not require registered investment companies to transmit periodic reports to their shareholders by making the reports accessible on a website and satisfying certain other conditions.”

The proposed rule for investment advisers would require disclosures that allow the SEC and investors to get a better picture of the advisers’ risk profiles. In addition, this proposal “would require advisers to maintain records of performance calculations and communications related to performance.”  

Com­ments on both pro­posals are due 60 days after the date of their publication in the Federal Register. For more information, see Deloitte's related journal entry and the press release on the SEC’s Web site.

Highlights from the FASB’s May 21 meeting

May 22, 2015

At its May 21, 2015, meeting, the FASB discussed its projects on (1) clarifying the definition of a business and (2) long-duration insurance contracts.

  • Clarifying the definition of a business — The FASB discussed whether to develop a framework for indicating when a set has “inputs and processes that substantively contribute to the ability to create outputs.” For more information, see Deloitte’s related journal entry and the meeting minutes on the FASB’s Web site.
  • Long-duration insurance contracts — The FASB discussed methods for calculating and recording the impact of assumption updates for traditional long-duration, limited-payment, and universal life-type contracts. For more information, see the meeting minutes on the FASB's Web site.


FASB issues ASU on short-duration insurance contract disclosures

May 22, 2015

The FASB has issued Accounting Standards Update (ASU) No. 2015-09, “Disclosures About Short-Duration Contracts,” which amends ASC 944 to expand the disclosures that an insurance entity must provide about its short-duration insurance contracts.

Under the ASU, insurance entities with short-duration insurance contracts must annually provide the following disclosures:

  • ‟Incurred and paid claims [and allocated claim adjustment expense] development information by accident year, on a net basis after risk mitigation through reinsurance, for the number of years for which claims incurred typically remain outstanding (that need not exceed 10 years, including the most recent reporting period presented in the statement of financial position). Each period presented in the disclosure about claims development that precedes the current reporting period is considered to be supplementary information.” For the most recent reporting period presented, an insurer also must disclose the total net outstanding claims for all accident years before those presented in the claims development tables (i.e., collectively, for those accident years not separately presented in the development tables).

  • A reconciliation of the claims development disclosures to the aggregate carrying amount of the liability for unpaid claims and CAEs, with separate disclosure of reinsurance recoverable on unpaid claims.
  • For each accident year presented in the claims development tables, disaggregated information about (1) claim frequency (unless impracticable) and (2) the amounts of incurred-but-not-reported (IBNR) liabilities plus the expected development on reported claims.
  • A description of the methods for determining (1) both IBNR and expected development on reported claims and (2) cumulative claim frequency, and any significant changes to those methods.
  • For all claims except health insurance claims, the historical average annual percentage payout of incurred claims by age, net of reinsurance, for those accident years presented in the claims development tables.
  • Information about any significant changes in methods and assumptions used in the computation of the liability for unpaid claims and CAEs, including reasons for the changes and the impact of the changes on the most recent reporting period in the financial statements.
  • The carrying amounts of  liabilities for unpaid claims and CAEs that are presented at present value and the effects of the discounting, including (1) the aggregate discount deducted from the liabilities, (2) the amount of interest accretion recognized during each period, and (3) the line item(s) in the statement of comprehensive income in which the interest accretion is classified.

In addition, insurance entities must disclose the following in both interim and annual periods:

  • The rollforward of the liability for unpaid claims and CAEs.
  • Total IBNR liabilities, plus expected development on reported claims, included in the liability for unpaid claims and CAEs for health insurance claims, either as a separate disclosure or as a component of the disclosure of the rollforward of the liability, at an appropriate level of disaggregation

The ASU is effective for public business entities for annual periods beginning on or after December 31, 2015, and interim periods within annual reporting periods beginning after December 15, 2016. The effective date is deferred by one year for all other entities. Early application is permitted.

For more information, see the related Deloitte Industry Spotlight as well as the press release, ASU, FASB in Focus newsletter, and Understanding Costs and Benefits document on the FASB’s Web site.

FAF trustees reappoint FASB members

May 21, 2015

The FAF board of trustees has reappointed FASB members Daryl E. Buck and R. Harold Schroeder for a second term that begins on July 1, 2015, and ends on June 30, 2021.

Before joining the FASB in 2011, Mr. Buck was a senior vice president and chief financial officer at Reasor’s Holding Company while Mr. Schroeder was a partner at Carlson Capital LP.

For more information, see the press release on the FAF’s Web site.

FASB issues a proposed ASU to simplify the accounting for measurement-period adjustments

May 21, 2015

The FASB has issued a proposed Accounting Standards Update (ASU), “Simplifying the Accounting for Measurement-Period Adjustments,” as part of its simplification initiative (i.e., the Board’s effort to reduce the cost and complexity of certain aspects of U.S. GAAP).

ASC 805-10-25-13 states that “[i]f the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete.” Under the proposal, during the measurement period, the acquirer is no longer required to retrospectively adjust the provisional amounts recognized as of the acquisition date. Instead, the acquirer would need to “record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.”

Comments on the proposed ASU are due by July 6, 2015. For more information, see the proposed ASU on the FASB’s Web site.

IASB amends IFRS for SMEs

May 21, 2015

The IASB has published amendments to its “International Financial Reporting Standard for Small and Medium-sized Entities” (the "IFRS for SMEs"). The amendments are the result of the first comprehensive review of that standard, which was originally issued in 2009. Although the changes affect 21 of the standard’s 35 sections (not counting consequential amendments) as well as the glossary, they are generally minor. The amendments are effective for annual periods beginning on or after January 1, 2017, with earlier application permitted.

Most of the changes constitute clar­i­fi­ca­tions and do not affect the accounting for trans­ac­tions and events. The following are three of the more significant amendments:

  • An entity would be permitted to use the reval­u­a­tion model for property, plant, and equipment.
  • The main recog­ni­tion and mea­sure­ment re­quire­ments for deferred income taxes would be aligned with the current re­quire­ments in IAS 12, Income Taxes.
  • The main recog­ni­tion and mea­sure­ment re­quire­ments for ex­plo­ration and eval­u­a­tion assets would be aligned with those in IFRS 6, Ex­plo­ration for and Eval­u­a­tion of Mineral Resources; thus, the IFRS for SMEs would provide the same relief as full IFRSs do for these ac­tiv­i­ties.

The IASB will issue a complete, revised version of the IFRS for SMEs in the next few months.

For more information, see Deloitte's IFRS in Focus newsletter as well as the press release, final amendments, Basis for Conclusions, and project summary and feedback statement on the IASB’s Web site.

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