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Financial Instruments – FASB Discusses Credit Losses Implementation NEW!

Financial Instruments – FASB Discusses Codification Improvements to Financial Instruments 

FASB Accounting Standards Updates - No. 2020-02 —Financial Instruments —Credit Losses (Topic 326) and Leases (Topic 842) —Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) 

FASB Accounting Standards Updates - Accounting Standards Update No. 2019-10 —Financial Instruments —Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) —Effective Dates 

FASB Accounting Standards Updates - Accounting Standards Update No. 2019-11 

EITF Flash Report – EITF Reaches Final Consensus 

FASB Proposed Accounting Standards Update 2019-750 —Financial Instruments —Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) 

Financial Instruments – FASB Proposes Clarification to the Interaction between the Recognition and Measurement of Financial Instruments and the Accounting for Equity Method Investments 

FASB Staff Q&A: Topic 326, No. 2 - Developing an Estimate of Expected Credit Losses on Financial Assets 

FASB Proposed ASU 2019-710 - Codification Improvements to Topic 326, Financial Instruments - Credit Losses 

FASB Discusses Credit Loss Standard Implementation 

FASB ASU No. 2019-05 - Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief 

CECL Transition Resource Group 

FASB Proposed Accounting Standards Update 2019-100 —Targeted Transition Relief for Topic 326, Financial Instruments —Credit Losses 

FASB Proposed Accounting Standards Update 2018-270 —Codification Improvements to Topic 326, Financial Instruments —Credit Losses 

Insurance - FASB Discusses Targeted Improvements to Accounting for Long-Term Duration Contracts 

Codification Improvements to Topic 942, Financial Services - Depository and Lending - FASB ASU No. 2018-06 

Recognition and Measurment of Financial Assets and Financial Liabilities - FASB ASU No. 2018-03 - Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10) 

Financial Instruments - FASB Discusses Hedging Implementation and Other Matters 

Financial Instruments - FASB Discusses Codification Improvements 

Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets - FASB ASU 2017-05 

Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities - FASB ASU 2016-01 

Technical Corrections and Improvements to Recently Issued Standards - Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities - FASB Proposed ASU 2017-300 

FASB Accounting Standards Update No. 2017-05 - Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets 

FASB Accounting Standards Updates No. 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities 

FASB Accounting Standards Update No. 2017-05 - Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets 

FASB Proposed Accounting Standards Update 2016 -330 - Financial Services - Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts

FASB Proposed Accounting Standards Update 2016-250 - Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets 

FASB Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

FASB Accounting Standards Updates No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities 

Articles

Financial Instruments – FASB Discusses Credit Losses Implementation

Summary - As discussed in its “Summary of Board Decisions” publication, the FASB met on March 11, 2020, and discussed a technical inquiry that its staff received on freestanding insurance contracts. Additionally, the FASB staff provided an update on the credit losses workshops. The meeting was educational and no decisions were made.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Financial Instruments – FASB Discusses Codification Improvements to Financial Instruments

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on January 29, 2020, and discussed a summary of comments on seven financial instrument amendments and decided to finalize these amendments separately from the November 2019 proposed Accounting Standards Update (ASU), Codification Improvements.
The FASB affirmed its decision on a number of items, including the following:

  • Fair value option disclosures;
  • Applicability of portfolio exception in Topic 820, Fair Value Measurement, to nonfinancial items;
  • Disclosures for depository and lending institutions;
  • Cross-reference to line-of-credit or revolving debt arrangements guidance in Subtopic 470-50, Debt—Modifications and Extinguishments; and
  • Cross-reference to net asset value practical expedient in Subtopic 820-10, Fair Value Measurement—Overall.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Updates - No. 2020-02 —Financial Instruments —Credit Losses (Topic 326) and Leases (Topic 842) —Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842)

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842). This ASU adds an SEC paragraph pursuant to the issuance of SEC Staff Accounting Bulletin No. 119 to the FASB Codification. This ASU also updates the SEC section of the Codification for the change in the effective date of Topic 842.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Accounting Standards Updates - Accounting Standards Update No. 2019-10 —Financial Instruments —Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) —Effective Dates

Summary - The FASB issued an Accounting Standards Update (ASU) that finalizes various effective date delays for standards on current expected credit losses (CECL), leases, and hedging. ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, finalizes various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), leases, and hedging standards.

The effective dates for each of the standards are now as follows:CECL (ASU No. 2016-13): For public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The one-time determination of whether an entity is eligible to be a smaller reporting company should be based on an entity’s most recent determination as of November 15, 2019, in accordance with SEC regulations.

For all other entities, for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early application is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

Leases (ASU No. 2016-02): A public business entity, a not-for-profit entity that has issued or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and an employee benefit plan that files or furnishes financial statements with or to the U.S. Securities and Exchange Commission, for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Earlier application is permitted.

All other entities for financial statements issued for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Earlier application is permitted.

Derivatives and Hedging (ASU No. 2017-12): For public business entities, for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

For all other entities, for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.

Early adoption, including adoption in an interim period, is permitted.

For more information, click here.

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FASB Accounting Standards Updates - Accounting Standards Update No. 2019-11

Summary - The FASB issued an Accounting Standards Update (ASU) that addresses issues raised by stakeholders during the implementation of ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

Among other narrow-scope improvements, the new ASU clarifies guidance around how to report expected recoveries. “Expected recoveries” describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset, but then later determines that the amount written off, or a portion of that amount, will in fact be recovered. While applying the credit losses standard, stakeholders questioned whether expected recoveries were permitted on assets that had already shown credit deterioration at the time of purchase (also known as PCD assets).

In response to this question, the ASU permits organizations to record expected recoveries on PCD assets.

In addition to other narrow technical improvements, the ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities.

The ASU includes effective dates and transition requirements that vary depending on whether or not an entity has already adopted ASU 2016-13.

For more information, click here.

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EITF Flash Report – EITF Reaches Final Consensus

Summary - At its November 7, 2019 meeting, the EITF reached a final consensus on Issue No. 19-A, Financial Instruments-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The guidance:

  • Requires entities to consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of the measurement alternative under Topic 321 immediately before applying or upon discontinuing the equity method of accounting under Topic 323, Investments―Equity Method and Joint Ventures.
  • Provides that an entity, when determining the appropriate Topic to apply, should not consider whether the equity security underlying a forward contract or purchased option would, individually or with existing investments, be accounted for under the equity method upon settlement of the forward contract or exercise of the purchased option.
  • Requires prospective transition and disclosure of the nature of and reasons for the change in accounting principle, the transition method, and a qualitative description of the financial statement line items affected by the change.

The consensus provides staggered effective dates. The final consensus must still be ratified by the FASB. The EITF is expected to present the final consensus on Issue 19-A for ratification at the FASB meeting scheduled for November 20, 2019.

The EITF also discussed Issue No. 19-B, Revenue Recognition-Contract Modifications of Licenses of Intellectual Property. This project examines the following two issues: (1) accounting for contract modifications under which the contract term for existing rights is extended, while also adding rights; and (2) accounting for the revocation of licensing rights (including conversion of term software licenses to SaaS [software as a service] arrangements).

The EITF did not reach any consensus on this issue and is expected to discuss further FASB staff research and outreach in the future.

For more information, please click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Proposed Accounting Standards Update 2019-750 —Financial Instruments —Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)

Summary - The FASB issued a proposed Accounting Standards Update (ASU) that would grant private companies, most not-for-profit organizations, and certain small public companies additional time to implement FASB standards on current expected credit losses (CECL), leases, and hedging. Stakeholders are encouraged to review and provide comment on the proposed ASU by September 16, 2019.

The proposed ASU describes a new FASB philosophy that extends and simplifies how effective dates for major standards are staggered between larger public companies and all other entities. Those other entities include private companies, smaller public companies, not-for-profit organizations, and employee benefit plans. Under this philosophy, a major standard would first be effective for larger public companies. For all other entities, the FASB would consider requiring an effective date staggered at least two years later. Generally, it is expected that early application would continue to be permitted for all entities.

"Based on what we’ve learned from our stakeholders, including the Private Company Council and the Small Business Advisory Committee, private companies, not-for-profit organizations, and some small public companies would benefit from additional time to apply major standards,” stated FASB Chairman Russell G. Golden. “This represents an important shift in the FASB’s philosophy around effective dates, one we believe will support better overall implementation of these standards.”

Based on that philosophy, the FASB proposes to amend the effective dates for hedging, leases, and CECL as follows (assumes calendar-year end):

Hedging: SEC Filers, January 2019; All Other Public Business Entities, January 2019, Private and All Others, January 2021.

Leases: SEC Filers, January 2019; All Other Public Business Entities (Including Employee Benefit Plans and Not-for-Profit Conduit Bond Obligors that file or furnish financial statements with or to the SEC), January 2019, Private and all Others, January 2021.


CECL: SEC Filers (Except SRCs, January 2023), January 2020; All Other Public Business Entities, January 2023, Private and all Others, January 2023.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Financial Instruments – FASB Proposes Clarification to the Interaction between the Recognition and Measurement of Financial Instruments and the Accounting for Equity Method Investments

Summary - The FASB issued a proposed Accounting Standards Update (ASU) that would clarify the interaction between the accounting standard on recognition and measurement of financial instruments and the accounting standard on equity method investments. Stakeholders are asked to review and provide comment on the proposed ASU, which is based on a consensus of the FASB’s Emerging Issues Task Force (EITF), by August 29, 2019.

In 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which added Topic 321, Investments—Equity Securities, and made targeted improvements to address certain aspects of accounting for financial instruments. One of those improvements provided a company with the ability to measure certain equity securities without a readily determinable fair value at cost, minus impairment, if any, unless an observable transaction for an identical or similar security occurs (the measurement alternative).

The proposed ASU results from stakeholder questions about the interaction of Topic 321 and Topic 323, Investments—Equity Method and Joint Ventures, and would clarify that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323 for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The proposed ASU also provides guidance on questions received about how to apply the guidance in Topic 815, Derivatives and Hedging, for certain forward contracts and purchased options to purchase securities that, upon settlement or exercise, would be accounted for under the equity method of accounting. These proposed amendments would reduce diversity in practice and increase comparability of the accounting for these interactions.

For more information, click here.
© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Staff Q&A: Topic 326, No. 2 - Developing an Estimate of Expected Credit Losses on Financial Assets

Summary - The FASB has published a FASB Staff Q&A, Topic 326, No. 2 - Developing an Estimate of Expected Credit Losses on Financial Assets. This document provides guidance from the FASB regarding the guidance in Topic 326, Financial Instruments—Credit Losses. This Q&A does not address other regulatory, rules, or compliance requirements that entities may need to consider when preparing and issuing financial statements.
For more information, click here.
© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Proposed ASU 2019-710 - Codification Improvements to Topic 326, Financial Instruments - Credit Losses

Summary - The FASB issued for public comment a proposed Accounting Standards Update (ASU) that addresses items raised by stakeholders during the implementation of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Stakeholders were encouraged to review and provide input on the proposed ASU by July 29, 2019.

A negative allowance describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset, but then later determines that the amount written off, or a portion of that amount, will in fact be recovered. While applying the credit losses standard, stakeholders questioned whether negative allowances were permitted on assets that had already shown credit deterioration at the time of purchase (also known as PCD assets).

If adopted as proposed, this ASU would permit organizations to record negative allowances on PCD assets.

In addition to other narrow technical improvements, the proposed ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Discusses Credit Loss Standard Implementation

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on June 5, 2019 and discussed the following three topics raised by stakeholders during the implementation of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments:

  • Negative Allowances on Purchased Financial Assets with Credit Deterioration;
  • Negative Allowances on Available-for-Sale Debt Securities; and
  • Miscellaneous Technical Improvements Related to Update 2016-13.
For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB ASU No. 2019-05 - Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief

Summary - These amendments provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments—Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently apply the guidance in Subtopics 820-10, Fair Value Measurement—Overall, and 825-10.

For entities that have not yet adopted ASU No. 2016-13, the effective date and transition methodology are the same as in ASU No. 2016-13.

For entities that have adopted ASU No. 2016-13, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim period after the issuance of ASU No. 2019-05 as an entity has adopted the amendments in ASU No. 2016-13.

The amendments should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings balance in the balance sheet as of the date that an entity adopted ASU No. 2016-13.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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CECL Transition Resource Group

Summary - CCH has published to ARM implementation memos issued by the FASB’s CECL Resource Group. These memos provide guidance on various implementation issues associated with ASU 2016-13. This group was formed to solicit, analyze, and discuss stakeholder issues arising from implementation of ASU 2016-13.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Proposed Accounting Standards Update 2019-100 —Targeted Transition Relief for Topic 326, Financial Instruments —Credit Losses

Summary - The Financial Accounting Standards Board (FASB) today issued a proposed Accounting Standards Update (ASU) that would ease transition to the credit losses standard by providing the option to measure certain types of assets at fair value. Stakeholders are asked to review and provide comments on the proposal by Friday, March 8, 2019.

Issued in 2016, the credit losses standard introduced the expected credit losses method for measuring credit losses on financial assets measured at amortized cost, replacing the previous incurred loss method. It also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis.

Some stakeholders, including auto financing institutions that extend credit to borrowers with limited or impaired credit histories, noted that certain financial statement preparers have begun (or are planning) to elect the fair value option on newly originated or purchased financial assets that have historically been measured at amortized cost. They noted that electing the fair value option would require them to maintain dual measurement methods, fair value measurements and amortized cost basis.

The proposed ASU would allow preparers to irrevocably elect the fair value option, on an instrument-by-instrument basis, for eligible financial assets measured at amortized cost basis upon adoption of the credit losses standard. This would increase the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for financial statement preparers while providing more useful information to investors and other users.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Proposed Accounting Standards Update 2018-270 —Codification Improvements to Topic 326, Financial Instruments —Credit Losses

Summary - The FASB has issued a proposed Accounting Standards Update (ASU) that would amend the transition requirements and scope ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Stakeholders are encouraged to review and provide comment on the proposal by September 19, 2018.

The proposed ASU would mitigate transition complexity by requiring entities other than public business entities to implement it for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. This would align the implementation date for their annual financial statements with the implementation date for their interim financial statements.

The proposed ASU also would clarify that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with Topic 842, Leases.

For more information, click here.

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Insurance - FASB Discusses Targeted Improvements to Accounting for Long-Term Duration Contracts

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on June 6, 2018, and redeliberated the amendments in the September 2016 proposed Accounting Standards Update, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.The FASB decided to revise the modified retrospective transition method discount rate whereby as of the beginning of the earliest period presented (that is, the transition date) an insurance entity would retain the discount rate assumption for purposes of calculating net premiums and interest accretion. For balance sheet purposes, the liability would be remeasured at the current upper-medium grade fixed-income instrument yield, resulting in an adjustment to opening accumulated other comprehensive income at the transition date.

The FASB decided that the effective date of the amendments in the final Update should be as follows:

  • For public business entities, the amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.
  • For all other entities, the amendments will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Codification Improvements to Topic 942, Financial Services - Depository and Lending - FASB ASU No. 2018-06

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2018-06, Codification Improvements to Topic 942, Financial Services-Depository and Lending. ASU 2018-06 removes outdated guidance related to the Office of the Comptroller of the Currency's Banking Circular 202, Accounting for Net Deferred Tax Charges (Circular 202) in Subtopic 942-740, Financial Services-Depository and Lending-Income Taxes and should have no effect on reporting entities.

The amendments in ASU 2018-06 are effective immediately.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Recognition and Measurment of Financial Assets and Financial Liabilities - FASB ASU No. 2018-03 - Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10)

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2018-03, Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that clarifies the guidance in ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10), as follows:

  • Issue 1: Equity Securities without a Readily Determinable Fair Value- Discontinuation - The amendment clarifies that an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair value method in accordance with Topic 820, Fair Value Measurement, through an irrevocable election that would apply to that security and all identical or similar investments of the same issuer. Once an entity makes this election, the entity should measure all future purchases of identical or similar investments of the same issuer using a fair value method in accordance with Topic 820.
  • Issue 2: Equity Securities without a Readily Determinable Fair Value- Adjustments - The amendment clarifies that the adjustments made under the measurement alternative are intended to reflect the fair value of the security as of the date that the observable transaction for a similar security took place.
  • Issue 3: Forward Contracts and Purchased Options - The amendment clarifies that remeasuring the entire value of forward contracts and purchased options is required when observable transactions occur on the underlying equity securities.
  • Issue 4: Presentation Requirements for Certain Fair Value Option Liabilities - The amendment clarifies that when the fair value option is elected for a financial liability, the guidance in paragraph 825-10- 45-5 should be applied, regardless of whether the fair value option was elected under either Subtopic 815-15, Derivatives and Hedging- Embedded Derivatives, or 825-10, Financial Instruments- Overall.
  • Issue 5: Fair Value Option Liabilities Denominated in a Foreign Currency - The amendments clarify that for financial liabilities for which the fair value option is elected, the amount of change in fair value that relates to the instrument-specific credit risk should first be measured in the currency of denomination when presented separately from the total change in fair value of the financial liability. Then, both components of the change in the fair value of the liability should be remeasured into the functional currency of the reporting entity using end-of-period spot rates.
  • Issue 6: Transition Guidance for Equity Securities without a Readily Determinable Fair Value - The amendment clarifies that the prospective transition approach for equity securities without a readily determinable fair value in the amendments in ASU No. 2016-01 is meant only for instances in which the measurement alternative is applied. An insurance entity subject to the guidance in Topic 944, Financial Services- Insurance, should apply a prospective transition method when applying the amendments related to equity securities without readily determinable fair values. An insurance entity should apply the selected prospective transition method consistently to the entity's entire population of equity securities for which the measurement alternative is elected.
For public business entities, ASU 2018-03 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018, are not required to adopt ASU 2018-03 until the interim period beginning after June 15, 2018, and public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt these amendments before adopting the amendments in ASU 2016-01. For all other entities, the effective date is the same as the effective date in ASU 2016-01.
All entities may early adopt ASU 2018-03 for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted ASU 2016-01.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Financial Instruments - FASB Discusses Hedging Implementation and Other Matters

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on February 14, 2018, and discussed the status of and issues arising from implementation activities related to Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The FASB discussed its staff's response to:
  • General technical inquiries received that affect many stakeholders. No decisions were made.
  • Technical inquiries received related to prepayable financial instruments. Specifically, the FASB staff presented its interpretation of which financial instruments meet the definition of the term prepayable in the FASB Accounting Standards Codification Master Glossary. Financial instruments that meet the definition of prepayable include the following: (a) instruments that are currently exercisable and prepayable at any time; (b) instruments with certain contingent prepayment features (that is, based on the passage of time, the occurrence of a specified event other than the passage of time, and the movement in a specified interest rate); and (c) instruments with conversion features.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Financial Instruments - FASB Discusses Codification Improvements

Summary - As reported in its "Summary of Board Decision" publication, the FASB met on January 18, 2018, and discussed comments received and redeliberated issues related to the proposed ASU, Technical Corrections and Improvements to Recently Issued Standards: Accounting Standards Update No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

For more information, click here.

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Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets - FASB ASU 2017-05

Summary - The amendments clarify that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments also define the term in substance nonfinancial asset.
 
The amendments clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. A contract that includes the transfer of ownership interests in one or more consolidated subsidiaries is within the scope of Subtopic 610-20 if substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets.
 
The amendments clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it.

Effective - See the effective date information, as amended, under ASU 2015-14 above.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities - FASB ASU 2016-01

Summary - The amendments in ASU 2016-01, among other things:
  • Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.
  • Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
  • Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).
  • Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.
Effective - Effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For private companies, not-for-profit organizations, and employee benefit plans, the new guidance becomes effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019.
 
The new guidance permits early adoption of the own credit provision. In addition, the new guidance permits early adoption of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Technical Corrections and Improvements to Recently Issued Standards - Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities - FASB Proposed ASU 2017-300

Summary - The FASB has issued a proposed ASU, Technical Corrections and Improvements to Recently Issued Standards: Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Among other things, this proposed ASU addresses the following issues:

  • Issue 1: Equity Securities without a Readily Determinable Fair Value- Discontinuation - The proposed amendment would clarify that an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair value method in accordance with Topic 820, Fair Value Measurement, through an election that would apply to that security and all other securities of the same type.
  • Issue 2: Equity Securities without a Readily Determinable Fair Value-Adjustments - The proposed amendment would clarify that the adjustments made under the measurement alternative are intended to reflect the fair value of the security as of the date that the observable transaction for a similar security took place.
  • Issue 3: Forward Contracts and Purchased Options - The proposed amendment would clarify that remeasuring the entire value of forward contracts and purchased options is required when observable transactions occur on the underlying equity securities.
  • Issue 4: Presentation Requirements for Certain Fair Value Option Liabilities - The proposed amendment would clarify that when the fair value option is elected for a financial liability, the guidance in paragraph 825-10-45-5 should be applied, regardless of whether the fair value option was elected under either Subtopic 815-15, Derivatives and Hedging-Embedded Derivatives, or 825-10.
  • Issue 5: Fair Value Option Liabilities Denominated in a Foreign Currency - The proposed amendments would clarify that for financial liabilities for which the fair value option is elected, the amount of change in fair value that relates to the instrument-specific credit risk should first be measured in the currency of denomination when presented separately from the total change in fair value of the financial liability. Then, both components of the change in the fair value of the liability should be remeasured into the functional currency of the reporting entity using end-of-period spot rates.
  • Issue 6: Transition Guidance for Equity Securities without a Readily Determinable Fair Value - The proposed amendment would clarify that the prospective transition approach for equity securities without a readily determinable fair value in ASU 2016-01 is meant only for instances in which the measurement alternative is applied.

The proposed effective date for entities that have early adopted the guidance on the presentation change related to fair value option liabilities and the amendments in this proposed ASU that are relevant to fair value option liabilities would be effective upon issuance of a final ASU and the transition requirements would be the same as those in ASU No. 2016-01. For the remaining proposed amendments, the effective date and transition requirements would be the same as the effective date and transition requirements in ASU No. 2016-01.

Comments on this proposed ASU are due November 13, 2017.

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Accounting Standards Update No. 2017-05 - Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets 

Summary - The amendments clarify that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments also define the term in substance nonfinancial asset.
 
The amendments clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. A contract that includes the transfer of ownership interests in one or more consolidated subsidiaries is within the scope of Subtopic 610-20 if substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets.
 
The amendments clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it.
 
See the effective date information, as amended, under ASU 2015-14 below.
For more information, click here.
 
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Updates No. 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities 

Summary - The amendments in ASU 2016-01, among other things:        
  • Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.
  • Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
  • Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).
  • Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.

Effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For private companies, not-for-profit organizations, and employee benefit plans, the new guidance becomes effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019.

The new guidance permits early adoption of the own credit provision. In addition, the new guidance permits early adoption of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost.


For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Update No. 2017-05 - Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets

Summary - The FASB has issued Accounting Standards Update No. 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.

 
A contract may involve the transfer of both nonfinancial assets and financial assets (e.g., cash and receivables). The amendments clarify that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments also define the term in substance nonfinancial asset.
 
The amendments clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. A contract that includes the transfer of ownership interests in one or more consolidated subsidiaries is within the scope of Subtopic 610-20 if substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets.
 
The amendments clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it.
 
The amendments are effective at the same time Topic 606, Revenue from Contracts with Customers, is effective. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.
For more information, click here.
 
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Proposed Accounting Standards Update 2016 -330 - Financial Services - Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts

Summary - The FASB has issued a proposed ASU, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The proposal is intended to improve financial reporting for insurance companies that issue long-duration contracts, such as life insurance, disability income, long-term care, and annuities. Comments are due by December 15, 2016.
The FASB believes the proposal for improves insurance accounting by:

  • Improving the timeliness of recognizing changes in the liability for future policy benefits by requiring that updated assumptions be used to measure the liability;
  • Eliminating the usage of an asset rate (that is, an insurance company's expected investment yield) to discount liability cash flows, and instead requiring that cash flows be discounted at a high-quality fixed-income instrument yield;
  • Simplifying and improving the accounting for certain options or guarantees in variable products (such as guaranteed minimum death, accumulation, income, and withdrawal benefits) by requiring those benefits to be measured at fair value instead of using two different measurement models;
  • Simplifying the amortization of deferred acquisition costs; and
  • Increasing transparency by improving the effectiveness of disclosures.
The effective date will be determined after the FASB considers comments received during the comment period and from the public roundtable meetings.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Proposed Accounting Standards Update 2016-250 - Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets 

Summary -  The FASB has issued proposed Accounting Standards Update (ASU), Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. Comments are due by August 5, 2016.
 
The proposed amendments would:

  • Clarify the scope of Subtopic 610-20 and partial sales of nonfinancial assets;
  • Improve consistency in determining what constitutes an in substance nonfinancial asset;
  • Simplify GAAP by conforming several accounting differences between transactions involving assets and businesses related to the measurement of retained noncontrolling ownership interests, the measurement of the gain or loss recognized upon transferring a nonfinancial asset to an equity method investee, the gain or loss recognized upon contributions to joint ventures, and transfers of noncontrolling ownership interests;
  • Streamline GAAP by eliminating Section 845-10-30 and removing exceptions to the financial asset derecognition model; and
  • Clarify the accounting for contributions of nonfinancial assets to joint ventures.
Scope of the Nonfinancial Asset Derecognition Guidance
The proposed amendments would clarify the scope of the nonfinancial asset guidance in Subtopic 610-20. Under the clarified scope, entities would apply the guidance to the derecognition of all nonfinancial assets and in substance nonfinancial assets unless other specific guidance applies.
 
Distinct Nonfinancial Assets
The proposed amendments specify that a distinct nonfinancial asset would be the unit of account for applying the nonfinancial asset derecognition guidance. At contract inception, an entity would identify the nonfinancial assets and in substance nonfinancial assets in the contract and apply the guidance from Topic 606 on identifying performance obligations to identify the distinct nonfinancial assets. The proposed amendments also specify that entities would be required to allocate consideration to each distinct nonfinancial asset by applying the guidance from Topic 606 on allocating the transaction price to performance obligations.
 
Partial Sales
The current nonfinancial asset guidance does not address partial sales of nonfinancial assets. The proposed amendments also would provide guidance on the accounting for what often are referred to as partial sales of nonfinancial assets within Subtopic 610-20.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

Summary -  The FASB has issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.
 
The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.
 
Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.
 
The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.
 
In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.
 
The ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). For public companies that are not SEC filers, the ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other organizations, the ASU on credit losses will take effect for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021.
 
Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Updates No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities 

Summary -  The FASB has issued Accounting Standards Update (ASU) No. 2016-01,  Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  The new guidance is intended to improve the recognition and measurement of financial instruments. The ASU affects public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities.  The new guidance makes targeted improvements to existing U.S. GAAP by:

  • Requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income;
  • Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;
  • Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements;
  • Eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities;
  • Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and
  • Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as "own credit") when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For private companies, not-for-profit organizations, and employee benefit plans, the new guidance becomes effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019.

The new guidance permits early adoption of the own credit provision. In addition, the new guidance permits early adoption of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost.
 
For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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