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.

July 24, 2015 Board Meeting

Insurance—Targeted Improvements to the Accounting for Long-Duration Contracts. The Board continued redeliberations, specifically discussing the method that should be used to calculate and record the effect of updating assumptions used in determining the liability for future policy benefits for traditional long-duration and limited-payment contracts.

The Board decided to require the updating of cash flow assumptions using a retrospective approach and the updating of discount rate assumptions using an immediate approach.

Under this assumption update method, a revised net premium ratio is calculated as of contract inception using updated cash flow assumptions. The revised net premium ratio is then applied to derive a cumulative catch-up adjustment to be recorded in current-period earnings. In subsequent periods, the revised net premium ratio is used to accrue the liability for future policy benefits. The result is a revised constant ratio for all past and future periods. The net premium ratio is not updated for discount rate changes; rather, the effect of discount rate assumption changes is recorded immediately in other comprehensive income.

Next Steps

The Board will continue to deliberate other targeted improvements to accounting for long-duration contracts.

Financial Performance Reporting. The staff presented its research into different ways the Board could use the concept of a remeasurement as a way to distinguish between earnings components to provide additional disaggregation of the performance statement. No decisions were made. The Board directed the staff to research other methods for distinguishing between different earnings components for discussion at future meetings, including (1) displaying natural and/or functional lines and (2) better describing what can be grouped within a line item.

Disclosures by Business Entities about Government Assistance. The Board continued its deliberations discussing scope, disclosures, transition, and next steps.


The Board decided that the scope would be described as a legally enforceable agreement in which an entity receives value or benefit from the government. Generally, the agreement is negotiated and the government has some discretion over which entities to provide the assistance to and how much to give even if an entity meets the eligibility requirements. The scope would exclude transactions:
  1. In which the government is legally required to provide the assistance to an entity simply because the entity met the eligibility requirements
  2. In which the government is solely a customer.
The Board decided to provide illustrative examples of the types of arrangements that typically would and would not result in a legally enforceable agreement.

Disclosure Objectives

The Board decided that the objectives of the disclosures by business entities about government assistance should be as follows: The proposed disclosure requirements are intended to result in reporting entities providing information about existing government assistance agreements that will enable a user in assessing the:
  1. Nature of the assistance and related accounting policies used to account for government assistance
  2. Significant terms and conditions of the legally enforceable agreement
  3. Effect of government assistance on a reporting entity’s financial statements
  4. Assistance that has not been recognized in the financial statements but may have an effect on the financial statements in future periods.
Annual Disclosures

The Board decided that the following annual disclosures should be required:
  1. Information about the nature of the assistance and the related accounting policies adopted or the method applied to account for government assistance, including where it is presented on the balance sheet and income statement. The disclosure should reflect a description of how the accounting policies relate to the nature of the agreements and include:
    1. The nature of the assistance, including a general description of the significant categories. This could include grants, loans, or tax incentives and mechanisms by which the assistance has been received.
    2. The accounting policy used to account for government assistance.
    3. Where it is presented on the balance sheet and income statement and the amounts recognized.
  2. Significant terms and conditions of the agreement. This could include, but is not limited to, the following:
    1. The duration/period of the agreement, the tax rate, or interest rate
    2. Commitments made by both the reporting entity and the government
    3. Provisions, if any, for recapturing government assistance, including the conditions under which recapture is allowed
    4. Other contingencies.
  3. Amounts not recognized in an entity’s financial statements but that affect cash flows in the current period.
The Board decided not to require quantitative disclosure of amounts of government assistance expected to affect future periods under existing agreements based on predictions, forecasts, or other similar assertions about uncertain or unknown future events that are beyond management’s control.

Materiality and Level of Aggregation

The Board decided that the proposed amendments should refer to the guidance on materiality that is based on the decisions reached in the Disclosure Framework project and the proposed changes to Topic 235, Notes to Financial Statements.


The Board decided to include a question in the proposed Accounting Standards Update about any impediments (for example, legal or otherwise) that may exist in government assistance agreements that would preclude an entity from disclosing the information that would be required by this project.

Interim Disclosures

The Board decided not to amend Topic 270, Interim Reporting, to add any specific interim disclosure requirements.

Private Company Considerations

The Board decided not to prescribe alternative disclosure requirements for private companies.

Transition and Next Steps

The Board decided that in the first set of financial statements following the effective date, an entity would apply the proposed disclosures on a modified prospective basis to:
  1. All agreements existing at the beginning of the current period
  2. All agreements entered into after the beginning of that period.
Retrospective application would be permitted.

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 90 days.