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.
Technical corrections and improvements. The Board discussed proposed technical corrections and improvements to the FASB Accounting Standards Codification® and made the following decisions.
The Board decided to simplify the guidance related to participating insurance by replacing alternate variations of the term participating insurance contract (that is, participating insurance contracts, participating insurance, and participating contract) with the term participating insurance contract.
Similarly, the Board decided to simplify the guidance related to reinsurance receivable/recoverable by using one term, reinsurance recoverable, consistently throughout the applicable guidance.
Troubled Debt Restructuring
The Board decided to remove the term debt from the Master Glossary because the current definition will be embedded within Subtopics 310-40 and 470-60. The amendment will clearly state that the definition is specific to those Subtopics.
Fair Value Measurement
The Board decided to clarify the difference between a valuation approach and a valuation technique as discussed in Topic 820. The proposed amendment also would require an entity to disclose when there has been a change in either or both a valuation approach and valuation technique.
The Board decided to amend the Codification to reflect the final decision of EITF Issue No. 87-9, Profit Recognition on Sales of Real Estate with Insured Mortgages or Surety Bonds, which states that a FHA or VA insured loan does not have to be fully insured for the seller/financer to record profit under the full accrual method.
Sales of Financial Assets
The Board decided to amend the implementation guidance in Subtopic 860-20 to clarify that the decision to put defaulted loans and associated liabilities back on the seller/servicer’s books involves a two-step analysis.
The Board decided to amend Subtopic 350-40 to direct entities to existing guidance that clarifies how to account for arrangements that include a license to internal-use software acquired from third parties.
Other Proposed Amendments
The Board decided to make a number of other amendments that would correct, clarify, or improve existing guidance in the Codification.
The Board decided that some of the proposed changes arising from this project would be initially accounted for as a change in accounting principle, with the cumulative effect of the change reflected as an adjustment to the opening balance of retained earnings. The Board also decided to require disclosure of the nature of and reason for the change as well as the cumulative effect of the change. The Board decided to provide entities with an option of applying the changes retrospectively.
The proposed amendments for Topic 820 related to FHA and VA insured mortgages and the clarification related to fair value measurement would be applied prospectively.
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot. The Board decided that the comment period for the proposed Update would be 75 days.
The Board also discussed the technical corrections related to Revenue from Contracts with Customers (Topic 606) and Consolidation (Topic 810): Amendments to the Consolidation Analysis at the Board meeting. The tentative decisions follow.
Update 2014-09, Revenue from Contracts with Customers
The Board decided to propose the following amendments:
- Supersede the guidance on preproduction costs related to long-term supply arrangements within Subtopic 340-10, Other Assets and Deferred Costs—Overall. As a consequence, an entity would apply the guidance in Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers.
- Amend the impairment testing guidance in Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers, to clarify that:
- Contract renewals and extensions should be considered when measuring the remaining amount of consideration an entity expects to receive.
- An entity would include both the amount of consideration it has already received but has not recognized as revenue and the amount the entity expects to receive in exchange for the goods or services to which the contract asset relates when measuring the consideration the entity expects to receive.
- The order of impairment testing is (1) assets outside the scope of Topic 340 (for example, inventory within the scope of Topic 330), then (2) assets within the scope of Topic 340, then (3) asset groups or reporting units within the scope of Topic 350, Goodwill and Other, and Topic 360, Property, Plant and Equipment.
- Amend the onerous contract test within the guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, so that the contract is the lowest level at which testing is required, while not precluding entities from evaluating onerous contracts at the performance obligation level.
- Amend the scope of Topic 606 to specify that contracts (not only insurance contracts) that are within the scope of the guidance in Topic 944, Financial Services—Insurance, are excluded from the scope of Topic 606.
- Amend Example 7 of Topic 606 on contract modifications to better align the analysis in the example with the guidance in paragraph 606-10-25-12.
- Create a new Subtopic, 924-815, Entertainment—Casinos—Derivatives and Hedging, that would include a scope exception from derivatives guidance for fixed odds wagering contracts of entities within the scope of Topic 924.
- Align the cost capitalization guidance for both public and private funds in Topic 946, Financial Services—Investment Companies.
Update 2015-02, Amendments to the Consolidation Analysis
The Board decided to amend the guidance in paragraph 810-10-25-42 by deleting the last sentence of that paragraph, which states “indirect interests held through related parties that are under common control with the decision maker should be considered the equivalent of direct interests in their entirety.”
The Board also directed the staff to consider whether any amendments to the guidance in Subtopic 810-10 for fees paid to decision makers or service providers were necessary for further clarification as a result of the proposed change.
The Board directed the staff to draft a separate proposed Accounting Standards Update for the issue for vote by written ballot with a 30-day comment period.
Financial performance reporting. The staff presented its research into the current practice of reporting functional and natural lines in the performance statement. The staff also presented its proposal for how the Board could consider disaggregating functional lines into certain natural components. No decisions were made. The Board directed the staff to evaluate and clarify the objective of the project in light of all of the staff’s research in the project for assessment at a future meeting.