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Highlights from the FASB’s October 28 meeting

  • FASB meeting Image

Oct 30, 2015

At its October 28, 2015, meeting, the FASB discussed (1) financial statements of not-for-profit entities, (2) insurance, and (3) business combinations.

Financial statements of not-for-profit entities

The FASB discussed feedback received on its proposed Accounting Standards Update Presentation of Financial Statements of Not-for-Profit Entities and tentatively decided to split its redeliberations into two workstreams. The first workstream would contain issues that do not depend on other projects and that the Board would consider finalizing in the near term. The second workstream would consist of proposed changes that the Board would most likely need more time to resolve because they either were not previously considered or are similar to issues that the Board is addressing as part of other projects.

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

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

The FASB tentatively decided to change the accounting model for certain types of participating contracts by requiring insurers to:

  • Expand the assumptions they use to measure the liability for future policy benefits to include investment yields, expected mortality, termination (lapse), expense, and dividend payments. 
  • Discount such liabilities by using a high-quality fixed-income instrument yield.
  • Calculate the effect of assumption updates by using a retrospective approach under which an insurer would (1) immediately recognize in earnings the effects of changes in cash flow assumptions and (2) initially record in other comprehensive income the effects of changes in the discount rate.

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

Business combinations

The FASB discussed its two projects related to business combinations:

  • Accounting for identifiable intangible assets in a business combination for public business entities and not-for-profit entities — The FASB directed its staff to conduct additional research on whether the “usefulness of information provided by the recognition of acquired intangible assets” for U.S. investors differs from that for international investors and, if so, why such differences exist. The Board deferred its decision on “whether not-for-profit entities should have the option to use the accounting alternative currently available to private companies (under which an entity can elect not to separately identify and recognize customer-related intangible assets that are not capable of being sold or licensed independently from the other assets of a business and noncompetition agreements) or be required to use the guidance for public business entities until decisions are made regarding whether to change the accounting for identifiable intangible assets for public business entities.”  For more in­for­ma­tion, see the meeting minutes on the FASB’s Web site.
  • Accounting for goodwill for public business entities and not-for-profit entities— The FASB tentatively decided to:
    • Split the project into two phases in which the Board would (1) simplify the impairment test and (2) address additional issues on subsequent goodwill accounting with the IASB.
    • Prohibit not-for-profit entities from using the accounting alternative available to private companies.
    • Require an entity to write off the full carrying amount of goodwill allocated to a reporting unit  “if the reporting unit has zero or negative carrying value and it is more likely than not that goodwill is impaired.”
    • Retain the current U.S. GAAP presentation requirements.
    • Require prospective application of the simplified impairment test.
    For more in­for­ma­tion, see the meeting minutes on the FASB’s Web site.

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