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FASB revises proposal on simplifying the balance sheet classification of debt

  • FASB document Image

Sep 12, 2019

The FASB has issued a revised version of its proposed Accounting Standards Update (ASU) “Simplifying the Classification of Debt in a Classified Balance Sheet (Current Versus Noncurrent).”

The proposed ASU “would introduce a principle for determining whether debt or other instruments within the scope of the proposed amendments would be classified as a noncurrent liability as of the balance sheet date.” The proposal is part of the FASB’s simplification initiative (i.e., the Board’s effort to reduce the cost and complexity of certain aspects of GAAP for financial statement users).

The proposed ASU is a revised version of the FASB’s January 2017 exposure draft (ED). The press release on the proposal notes the following regarding the changes the FASB made to the guidance in the original ED:

Much of the guidance in this revised proposal is similar to the original 2017 proposal on which the Board has received extensive feedback. Based on input received from stakeholders — including the Private Company Council — the Board added proposed requirements related to unused long-term financing arrangements, such as a line of credit, and grace periods. The revised proposal reflects and seeks comments on these changes, as well as the expected costs and expected benefits of the proposed amendments. [Emphasis added]

Comments on the proposed ASU are due by October 28, 2019.

On September 16, 2019, the FASB issued for comment Proposed Accounting Standards Update (Revised)—Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent) (Revision of Exposure Draft Issued January 10, 2017. Comments on the proposed taxonomy improvements are due by October 28, 2019.

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