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Exposure Draft - Proposed Accounting Standards Update 2021-007 —Liabilities —Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations

Liabilities and Equity – FASB Discusses Distinguishing Liabilities from Equity 

Liability vs. Equity – FASB Discusses Distinguishing Liabilities from Equity 

Liabilities vs. Equity – FASB Discusses Distinguishing Liabilities from Equity 

Exposure Draft - Proposed Accounting Standards Update (Revised) 2019-780 —Debt (Topic 470) —Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent) 

Convertible Debt – FASB Discusses Distinguishing Liabilities from Equity 

Liabilities —Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products 

Liabilities - Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products - FASB ASU 2016-04 

FASB Accountaing Standards Update No. 2016-04, Liabilities - Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products

FASB Accountaing Standards Update No. 2016-04, Liabilities - Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products

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Exposure Draft - Proposed Accounting Standards Update 2021-007 —Liabilities —Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations

Summary - The FASB issued a proposed Accounting Standards Update (ASU) intended to help investors and other allocators of capital better consider the effect of supplier finance programs on a buyer’s working capital, liquidity, and cash flows. Stakeholders are encouraged to review and provide comment on the proposed ASU by March 21, 2022.

The proposed ASU would affect buyers that use supplier finance programs in connection with the purchase of goods and services. Supplier finance programs allow a buyer to offer its suppliers the option to be paid by a third party in advance of an invoice due date, based on invoices that the buyer has confirmed as valid. These transactions are also commonly known as reverse factoring, payables finance, or structured payables arrangements.

Stakeholders have observed that there is a lack of transparency about supplier finance programs because (1) there are no explicit disclosure requirements in Generally Accepted Accounting Principles (GAAP) for those programs; and (2) a buyer may present obligations covered by those programs in the same balance sheet line item as accounts payable or in another balance sheet line item depending on the facts and circumstances of the arrangement.

The proposal would address these issues by requiring the buyer in a supplier finance program to disclose sufficient information about the program to allow an investor to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. These disclosures would include the key terms of the program, as well as the obligation amount that the buyer has confirmed as valid to the third party that is outstanding at the end of the reporting period, a rollforward of that amount, and a description of where that amount is presented in the balance sheet.
 
For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Liabilities and Equity – FASB Discusses Distinguishing Liabilities from Equity

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on February 3, 2021 and continued initial deliberations by discussing the project direction to help focus the FASB staff’s research and outreach efforts. The FASB decided that the project scope should include the following instruments and features:

  • Freestanding financial instruments that have all the characteristics of a derivative instrument;
  • Freestanding instruments that potentially are settled in an entity’s own stock, regardless of whether the instrument has all the characteristics of a derivative instrument; and
  • Embedded features that have the characteristics of a derivative instrument.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Liability vs. Equity – FASB Discusses Distinguishing Liabilities from Equity

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on September 2, 2020 and affirmed that the objective of its project to improve the accounting for asset acquisitions and business combinations. The objective of this project is to improve the accounting for asset acquisitions and business combinations by narrowing the differences between the two acquisition models (the accounting for acquisitions of assets and for the acquisitions of businesses). The FASB directed its staff to consider the existing acquisition models, as well as other alternatives to narrow the differences and improve the accounting.

The FASB affirmed that the project should address the accounting for contingent consideration, transaction costs, certain recognition and measurement exceptions, as well as the accounting for contingent consideration and in-process research and development (IPR&D) by a primary beneficiary of a variable interest entity that is not a business. The FASB removed from the scope of the project:

  • Narrowing differences between the accounting for IPR&D in acquisitions of assets and acquisitions of businesses.
  • The accounting for reassessments of lease contracts in asset acquisitions and the lease recognition and measurement exception. These lease issues will be considered as part of the FASB’s implementation efforts on leases.

For more information, click here.

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

Liabilities vs. Equity – FASB Discusses Distinguishing Liabilities from Equity

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on December 11, 2019, and discussed comment letter feedback on the July 2019 proposed Accounting Standards Update, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, and began redeliberations.

The FASB affirmed several decisions, including:

  • To account for convertible instruments as a single unit of account, except in circumstances in which the conversion features are required to be bifurcated under Topic 815, Derivatives and Hedging;
  • To remove an entity’s ability to overcome the presumption about share settlement when calculating diluted earnings per share (EPS) for a contract that may be settled in either cash or shares; and
  • To remove certain settlement criteria from Section 815-40-25, Derivatives and Hedging—Contracts in Entity’s Own Equity—Recognition.

For more information, click here.

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

Exposure Draft - Proposed Accounting Standards Update (Revised) 2019-780 —Debt (Topic 470) —Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent)

Summary - The FASB issued for public comment a proposed Accounting Standards Update (ASU) intended to improve guidance used to determine whether debt should be classified as a current or noncurrent liability in a classified balance sheet. Stakeholders are encouraged to review and comment on the proposed ASU by October 28, 2019.

In January 2017, the FASB issued its first proposal on the project, which contained provisions to replace the current, fact-specific guidance with an overarching, cohesive principle for determining whether debt, or other instruments within the scope of the proposal, should be classified as a current or noncurrent liability as of the balance sheet date.

Much of the guidance in this revised proposal is similar to the original 2017 proposal on which the FASB has received extensive feedback. Based on input received from stakeholders, including the Private Company Council, the FASB 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.

For more information, click here.

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

Convertible Debt – FASB Discusses Distinguishing Liabilities from Equity

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on February 13, 2019, and deliberated disclosures for convertible instruments and decided to:

  • Add disclosure objectives for convertible debt and for convertible preferred shares.
  • Amend disclosure guidance related to certain terms and features of convertible instruments.
  • Amend the guidance in Subtopic 825-10, Financial Instruments—Overall (which applies to public business entities) to require disclosure of information about fair value and leveling of convertible instruments at the individual instrument level together with the related carrying amount.
  • Centralize guidance on convertible debt in Subtopic 470-20, Debt—Debt with Conversion and Other Options, and guidance on convertible preferred shares in Topic 505, Equity.
  • Improve the format of disclosing certain quantitative information about convertible instruments.

For more information, click here.

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

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Liabilities —Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products

Summary - The amendments apply to entities that offer certain prepaid stored value products (e.g., prepaid gift cards issued on a specific payment network and redeemable at network-accepting merchant locations, prepaid telecommunication cards, and traveler’s checks).

Liabilities related to the sale of prepaid stored-value products are financial liabilities. The amendments provide a narrow scope exception to the guidance in Subtopic 405-20 to require that breakage for those liabilities be accounted for consistent with the breakage guidance in Topic 606 Revenue from Contracts with Customers. Neither current U.S. GAAP nor the pending guidance in Topic 606 contains specific guidance for the derecognition of prepaid stored-value product liabilities.

The amendments are effective for public business entities, certain not-for-profit entities, and certain employee benefit plans for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Earlier application is permitted, including adoption in an interim period.

The amendments should be applied either: (a) using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective; or (b) retrospectively to each period presented.

For more information, click here.
 
© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 
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Liabilities - Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products - FASB ASU 2016-04

Summary - The amendments apply to entities that offer certain prepaid stored value products (e.g., prepaid gift cards issued on a specific payment network and redeemable at network-accepting merchant locations, prepaid telecommunication cards, and traveler's checks).
 
Liabilities related to the sale of prepaid stored-value products are financial liabilities. The amendments provide a narrow scope exception to the guidance in Subtopic 405-20 to require that breakage for those liabilities be accounted for consistent with the breakage guidance in Topic 606 Revenue from Contracts with Customers. Neither current U.S. GAAP nor the pending guidance in Topic 606 contains specific guidance for the derecognition of prepaid stored-value product liabilities.
 
Effective - The amendments are effective for public business entities, certain not-for-profit entities, and certain employee benefit plans for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Earlier application is permitted, including adoption in an interim period.
 
The amendments should be applied either:
  • Using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective; or
  • Retrospectively to each period presented.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 

FASB Accountaing Standards Update No. 2016-04, Liabilities - Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products

Summary - The amendments apply to entities that offer certain prepaid stored value products (e.g., prepaid gift cards issued on a specific payment network and redeemable at network-accepting merchant locations, prepaid telecommunication cards, and traveler's checks).
 
Liabilities related to the sale of prepaid stored-value products are financial liabilities. The amendments provide a narrow scope exception to the guidance in Subtopic 405-20 to require that breakage for those liabilities be accounted for consistent with the breakage guidance in Topic 606 Revenue from Contracts with Customers. Neither current U.S. GAAP nor the pending guidance in Topic 606 contains specific guidance for the derecognition of prepaid stored-value product liabilities.
 
The amendments are effective for public business entities, certain not-for-profit entities, and certain employee benefit plans for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Earlier application is permitted, including adoption in an interim period.
 
The amendments should be applied either: (a) using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective; or (b) retrospectively to each period presented.
 
For more information, click here.
 
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 
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FASB Accountaing Standards Update No. 2016-04, Liabilities - Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products

Summary - The FASB has issued ASU No. 2016-04, Liabilities - Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products. The amendments apply to entities that offer certain prepaid stored value products (e.g., prepaid gift cards issued on a specific payment network and redeemable at network-accepting merchant locations, prepaid telecommunication cards, and traveler's checks).
 
Liabilities related to the sale of prepaid stored-value products are financial liabilities. The amendments provide a narrow scope exception to the guidance in Subtopic 405-20 to require that breakage for those liabilities be accounted for consistent with the breakage guidance in Topic 606 Revenue from Contracts with Customers. Neither current U.S. GAAP nor the pending guidance in Topic 606 contains specific guidance for the derecognition of prepaid stored-value product liabilities.
 
The amendments are effective for public business entities, certain not-for-profit entities, and certain employee benefit plans for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Earlier application is permitted, including adoption in an interim period.
 
 
The amendments should be applied either: (a) using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective; or (b) retrospectively to each period presented.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 
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