Tentative Board Decisions
Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
Clarifying the Definition of a Business. The Board continued its deliberations and made the following decisions.
The Board decided to include a framework to determine whether a substantive process is included in a set of acquired assets and activities.
The Board decided that when a set does not have outputs (for example, an early stage company that has not generated revenues), in order to have a substantive process, the acquired set should include both of the following:
- An organized workforce that has the skills, knowledge, or experience necessary to complete one or more acquired processes that are critical to the ability to create outputs.
- Rights or access to inputs that are being or could be developed into goods or services that can be provided to customers.
- The set includes an organized workforce that has the skills, knowledge, or experience necessary to complete one or more acquired processes that are critical to the ability to create outputs.
- The acquired process (or group of acquired processes together) is unique, scarce, or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs.
The Board decided to remove the language in the current guidance that states that a business need not include all of the inputs and processes that the seller used in operating the business if market participants are capable of acquiring the business and continuing to produce outputs. This requirement is replaced by the framework that describes when a set has a substantive process.
The Board decided that if substantially all the fair value of the gross assets acquired is concentrated in a single tangible or identifiable intangible asset (or group of similar tangible or identifiable intangible assets), the set is not a business. The Board directed the staff to develop indicators and examples to describe what constitutes similar assets.
Insurance—Targeted Improvements to the Accounting for Long-Duration Contracts. The Board continued redeliberations, specifically discussing the methods for calculating and recording the impact of assumption updates for traditional long-duration and limited-payment contracts.
No technical decisions were made.