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.

November 11, 2015 FASB Board Meeting

Disclosure Framework: Disclosure Review—Fair Value Measurement. The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.


Financial Instruments—Impairment. The Board continued redeliberating the December 2012 proposed Accounting Standards Update, Financial Instruments—Credit Losses (Subtopic 825-15), specifically discussing the following topics:
  1. Summary of external review comments
  2. Accounting for troubled debt restructurings by creditors
  3. Available-for-sale credit loss model
  4. Effective date and early application.
Summary of External Review Comments

The Board agreed with the staff’s analysis of the significant areas of external review comments and the approach taken to address those comments. The Board separately deliberated two sweep issues (discussed below) raised during the external review process and plans to finalize its redeliberations of remaining sweep issues raised during the external review process at a future meeting.

Accounting for Troubled Debt Restructurings (TDRs) by Creditors

The Board decided that credit losses upon TDRs should be measured using the current expected credit losses model that will be applied to all other financial assets measured at amortized cost. The Board decided not to require a discounted cash flow technique to measure credit losses for TDRs that is required in current GAAP. The Board also decided not to require that a cost-basis adjustment be made upon a TDR. The Board decided to allow entities to recognize the credit losses, including the concession given to the borrower from a TDR through an allowance account.

Available-for-Sale (AFS) Credit Loss Model

The Board decided that a fair value floor should be incorporated into the credit loss model for AFS debt securities. Therefore, the credit losses on AFS debt securities will be limited to the difference between the AFS debt security’s amortized cost basis and its fair value.

The Board also decided to retain the guidance in paragraph 320-10-35-33B that would require an entity to consider whether it more likely than not will be required to sell the security before the recovery of its amortized cost basis.

The Board decided that the requirement to consider the historical or implied volatility should be removed as a factor that is required to be considered when estimating whether a credit loss exists; however, an entity will not be prohibited from considering the historical or implied volatility.

Effective Date and Early Application

The guidance in the credit losses standard will be effective as follows:
  1. Public business entities that meet the definition of an SEC filer will be required to apply the guidance for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
  2. Public business entities that do not meet the definition of an SEC filer will be required to apply the guidance for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
  3. Entities that are not public business entities including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting will be required to apply the guidance for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
Early application of the guidance will be permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.


Financial Instruments—Classification and Measurement. The Board continued redeliberating the February 2013 proposed Accounting Standards Update, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, specifically discussing the summary of external review comments, effective date and early application of the final standard, and permission to begin drafting the final Update for vote by written ballot.

Summary of External Review Comments

The Board agreed with the staff’s analysis of the significant areas of external review comments and the approach taken to address those comments.

Effective Date and Early Application

The guidance in the final standard will be effective as follows:
  1. Public business entities will be required to apply the guidance for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
  2. Entities that are not public business entities including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting will be required to apply the guidance for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early application of the final Accounting Standards Update by these entities is permitted for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
Early application of the following provisions of the final Accounting Standards Update is permitted for all entities upon issuance of the final Update as of the beginning of the fiscal year of adoption:
  1. An entity shall present separately in other comprehensive income the portion of the total change in the fair value of a financial liability measured under the fair value option that results from a change in the instrument-specific credit risk.
  2. Entities that are not public business entities are not required to apply the disclosure guidance in the General Subsection of Section 825-10-50.
Permission to Draft Final Update

The Board concluded that the benefits of the changes justify the related costs and directed the staff to draft a final Accounting Standards Update for vote by written ballot.


Leases. The Board continued redeliberating the proposals in the May 2013 Exposure Draft, Leases, specifically discussing the following topics:
  1. Sweep issue—remaining economic life lease classification criterion
  2. Effective date
  3. Consideration of benefits and costs.
Remaining Economic Life Lease Classification Criterion

The Board’s current decisions would classify a lease as a finance lease (for lessees) or a sales-type lease (for lessors) if the term of the lease is for the major part of the remaining economic life of the underlying asset (the lease term criterion). The Board decided to provide an exception to the lease classification test whereby entities will not consider the lease term criterion when performing the lease classification test for leases that commence “at or near the end” of the underlying asset’s economic life. The Board also decided that the final leases standard should include implementation guidance that one reasonable approach to determining the applicability of this exception would be to conclude that a lease that commences in the final 25 percent of an asset’s economic life is “at or near the end” of the underlying asset’s economic life.

Effective Date

The Board decided that for public business entities, the final leases standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; for nonpublic business entities, the final leases standard will be effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application will be permitted for all public business entities and all nonpublic business entities upon issuance of the final standard.

Consideration of Benefits and Costs

The Board decided that it has received sufficient information and analysis to make an informed decision on the perceived benefits and related costs of the changes to GAAP that will result from the final leases standard. The Board concluded that the benefits of those changes justify the related costs and directed the staff to draft a final Accounting Standards Update for vote by written ballot.