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Open Issues

Exposure Documents

Recently Issued Accounting Standards Updates

Description and Status of Current Issues

The following Issues described below are currently on the Task Force's list of Open Issues or have been resolved over the past year.

[15-F] [15-E] [15-D] [15-C] [15-B] [15-A] [14-B] [14-A] [13-G] [10-B] [09-D] [06-12] [03-15] 

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Issue No. 15-F, "Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments."
Status:
Dates discussed:


Issue No. 15-E, "Contingent Put and Call Options in Debt Instruments."
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Dates discussed:


Issue No. 15-D, "Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships."
Status:
Dates discussed:


Issue No. 15-C, "Employee Benefit Plan Simplifications."
Status:
Dates discussed:


Issue No. 15-B, "Recognition of Breakage for Prepaid Stored-Value Cards."
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Dates discussed:


Issue No. 15-A, "Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets."
Status:
Dates discussed:


Issue No. 14-B, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)."
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Dates discussed:


Issue No. 14-A, "Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions."
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Dates discussed:


Issue No. 13-G, “Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.” Under Subtopic 815-15, Derivatives and Hedging—Embedded Derivatives, an entity that issues or invests in a hybrid financial instrument is required to bifurcate an embedded derivative from the host contract and account for the feature as a derivative. One criterion in paragraph 815-15-25-1(a) is that the economic characteristics and risks of the embedded derivative are not clearly and closely related to the economic characteristics and risks of the host contract. When determining whether an embedded derivative is clearly and closely related to the host contract, an entity must first determine the nature of the host contract; for example, whether the host contract is more akin to debt or to equity. The staff received feedback indicating diversity in practice with respect to the methods used in evaluating the nature of the host contract; the use of different methods can result in different accounting outcomes for economically similar instruments. The FASB staff understands that there are two methodologies that exist in practice (the whole-instrument approach and the chameleon approach). In addition, a third approach (the pure-host approach) has been advocated by some who believe that it is the approach that is the most consistent with the principles of Topic 815.
In addition to the diversity in practice with respect to the methods used in evaluating the nature of the host contract, the staff also considered the issue of how an entity should determine the nature of the host contract when an investor in a convertible preferred equity instrument holds a non-contingent, fixed-price redemption option.
Status: At the September 13, 2013 EITF meeting, the Task Force reached a consensus-for-exposure to that an entity would determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances.
The Task Force further reached a consensus-for-exposure that in evaluating the terms and features of a hybrid financial instrument, the existence or omission of any single term or feature, including a fixed-price, noncontingent redemption feature held by the investor, would not necessarily determine the economic characteristics and risks of the host contract. Although the consideration of an individual term or feature may be weighted more heavily in the evaluation on the basis of facts and circumstances, judgment would be required based on an evaluation of all of the relevant terms and features.
The Task Force also reached a consensus-for-exposure that the effects of initially adopting the amendments in this proposed Update would be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the annual reporting period for which the proposed amendments are effective.
At its October 2, 2013 meeting, the Board ratified the consensus-for exposure and approved the issuance of a proposed Update for a 60-day public comment period.
At the March 13, 2014 EITF meeting, the Task Force, the Task Force considered the feedback received from the nine comment letters received on the proposed Update for this Issue, which was issued on October 23, 2013, with a comment period that ended on December 23, 2013.
The Task Force reaffirmed its consensus-for-exposure that the scope of the proposed amendments would apply to both issuers and holders of hybrid financial instruments issued in the form of a share.
The Task Force reaffirmed its consensus-for-exposure that for a hybrid financial instrument issued in the form of a share, an entity should consider all terms and features—including the embedded derivative feature being evaluated for bifurcation—when determining whether the nature of the host contract is more akin to debt or to equity (that is, the whole-instrument approach).
The Task Force discussed but did not favor establishing a feature-specific weighting system, rebuttable presumptions, or other bright-lines as they believe doing so would be inconsistent with the principles of the whole-instrument approach.
Some Board members indicated that they would prefer that the staff further explore the possibility of introducing more determinative guidance under the whole-instrument approach. Consequently, the Task Force directed the staff to research this Issue further and present its findings in a future education session, which is tentatively scheduled for May 15, 2014. At its December 11, 2013 meeting, the Board ratified the consensus reached by the Task Force on this Issue and approved issuance of the final Update. No further EITF discussion is planned.
Dates discussed: September 13, 2013; March 13, 2014; June 12, 2014


Issue No. 10-B, "Accounting for Multiple Foreign Exchange Rates."
Status: At the March 13, 2014 EITF meeting, the EITF chairman reported on the January 29, 2014 FASB Board meeting to discuss agenda prioritization. At that meeting, the Board decided to remove this Issue from the EITF agenda.
Dates discussed: July 29, 2010; September 16, 2010; March 13, 2014


Issue No. 09-D, "Application of the AICPA Audit and Accounting Guide, Investment Companies, by Real Estate Investment Companies." The AICPA Real Estate Funds Project task force worked with AcSEC on a project intended to help industry practitioners understand how real estate funds should apply AICPA Audit and Accounting Guide, Investment Companies. While many real estate funds concluded that their funds were within the scope of the Guide and were applying AICPA Statement of Position 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies, the subsequent deferral of the effective date of SOP 07-1 by FSP SOP 07-1-1, Effective Date of AICPA Statement of Position 07-1, did little to reduce diversity in practice for those funds following the Guide. Some entities carry real estate investments at fair value because (a) they are investment companies that are required to apply the Guide, (b) they are wholly-owned by a pension plan that is required to carry investments at fair value, and (c) they believe prevalent industry accounting practices authorize them to carry such non-financial assets at fair value without regard to investment company attributes or pension plan ownership. The issue is whether an entity that is not in the scope of the Guide can carry real estate and other non-financial investments at fair value through analogy to the Guide or on the basis of industry practice. Also, when carrying real estate investments at fair value, the issues are how an entity should report net investment income and how real estate properties that are owned directly (fee simple) by the entity should be reported.
Status: The Working Group on this Issue No. 09-D, "Application of the AICPA Audit and Accounting Guide, Investment Companies, by Real Estate Investment Companies," met in December 2009. Further Task Force discussion on this Issue was indefinitely deferred pending the Board's deliberations on its investment properties project.
At the March 13, 2014 EITF meeting, the EITF chairman reported on the January 29, 2014 FASB Board meeting to discuss agenda prioritization. At that meeting, the Board decided to remove this Issue from the EITF agenda.
Dates discussed: None


Issue No. 06-12, "Accounting for Physical Commodity Inventories for Entities within the Scope of the AICPA Audit and Accounting Guide, Brokers and Dealers in Securities."
Status: At the March 13, 2014 EITF meeting, the EITF chairman reported on the January 29, 2014 FASB Board meeting to discuss agenda prioritization. At that meeting, the Board decided to remove this Issue from the EITF agenda.
Dates discussed: November 16, 2006; March 15, 2007; March 13, 2014


Issue No. 03-15, "Interpretation of Constraining Conditions of a Transferee in a CBO Structure." Collateralized bond obligations (CBOs) are securitizations of high-yield debt, bank loan participations, or similar financial assets. The CBO issuing vehicle is a special-purpose entity (SPE), typically a corporation domiciled (for security law and tax reasons) in the Cayman Islands. The SPE is not a qualifying SPE (QSPE) because the conditions under which it can sell assets violate the provisions of EITF Abstracts, Topic No. D-66, "Effect of a Special-Purpose Entity's Powers to Sell, Repledge, or Distribute Transferred Financial Assets under FASB Statement No. 125." The SPE has, at all times, the discretion to hold or sell defaulted assets or assets deemed to be "credit risk" or "credit improved" assets. The SPE also can sell up to between 20 percent and 30 percent annually of the aggregate principal balance of collateral (as of the beginning of each year) (known in the industry as the "free trade basket") during the reinvestment period. The free trade basket is in addition to the SPE's ability to trade defaulted credit risk and credit improved securities so that if the collateral manager decided that 50 percent of the SPE's assets were "credit improved," the collateral manager would be able to trade 70 percent of the SPE's assets (assuming a 20 percent free trade basket) in that year. Paragraph 9(b) of Statement 140 provides that with respect to a transferee that is not a QSPE, no condition both constrains the transferee (or holder) from taking advantage of right to pledge or exchange the transferred assets and provides more than a trivial benefit to the transferor. If the constraint is not imposed by the transferor, as would be the case in a typical CBO structure, then that constraint may or may not provide more than a trivial benefit to the transferor. The issue is whether the "free trade basket" violates paragraph 9(b) of Statement 140 and therefore precludes sale treatment by the transferor.
Status: At the March 13, 2014 EITF meeting, the EITF chairman reported on the January 29, 2014 FASB Board meeting to discuss agenda prioritization. At that meeting, the Board decided to remove this Issue from the EITF agenda.
Dates discussed: None