FASB to issue final standard on classification and measurement
At its meeting yesterday, the FASB directed the staff to draft a final standard on classification and measurement of financial instruments, which is expected to be issued by the end of the year. Further, the Board discussed the comments received on its external review draft and made tentative decisions regarding the final standard’s effective date and early application provisions.
Effective Date
For public business entities (PBEs), the new standard would be effective for fiscal years beginning after December 15, 2017, including interim periods therein. For all other entities, including not-for-profit entities and employee benefit plans within the scope of ASC 9601 through ASC 965 on plan accounting, the effective date would be in line with the recommendation of the private-company decision-making framework — that is, fiscal years beginning one year after the effective date for PBEs (i.e., December 15, 2018) and interim reporting periods within fiscal years beginning two years after the PBE effective date (i.e., December 15, 2019).
Early Application
Early adoption would be permitted for all entities, but only with respect to the following changes made to ASC 825:
- For financial liabilities measured under the fair value option, fair value changes resulting from an entity’s own credit would be recognized through other comprehensive income.
- The fair value disclosure requirements for financial instruments not recognized at fair value would be eliminated for non-PBEs.
Non-PBEs may elect to early adopt all the provisions of the final standard once the standard becomes effective for PBEs.
Next Steps
We expect the FASB to issue a final standard in late December. See Deloitte’s February 2, 2015, Heads Up for a summary of the key changes that are expected to be made to the guidance on classification and measurement of financial instruments.
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1 For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.”
