Project Update

Conceptual Framework—Measurement

Project Information Page

Last updated on May 15, 2017. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations. Please refer to the main Conceptual Framework project page for additional information related to the project.

*Project Objective and Overview
Decisions Reached at the Last Board Meeting
Tentative Board Decisions Reached to Date
Board/Other Public Meeting Dates
Next Steps
Contact Information
 

*PROJECT OBJECTIVE AND OVERVIEW

The objective of the conceptual framework project is to develop an improved conceptual framework that provides a sound foundation for developing future accounting standards that are principles based, internally consistent, and that lead to financial reporting that provides the information capital providers need to make decisions in their capacity as capital providers. The new FASB framework will build on the existing framework.

Decisions Reached at the Last Meeting (November 30, 2016)

The Board decided the following related to initial measurement:
  1. There are three categories of initial measurement:
    1. Entry price
    2. Exit price
    3. Estimated future cash flows.
  2. Exit price is appropriate as an initial carrying amount of an asset when the subsequent measure of the asset will be at exit price.
  3. For transactions in which something other than cash is exchanged, the initial measure of an asset may be based on the exit price for the asset transferred.
  4. The overall objective in identifying costs to be included in the initial carrying amount of an asset at entry price should be to capture the costs incurred to bring the asset to the location and condition necessary for it to be capable of operation.
  5. The following categories help identify the types of costs that should be included in an initial carrying amount consistent with the objective described in (4):
    1. Government-imposed charges
    2. Costs of services related to the acquisition of the asset and readying the asset for use
    3. Costs to participate in the market for the asset.
  6. Gains and losses on cash flow hedges are neither part of the entry price of assets nor a cost to be included in initial carrying amounts of assets based on the objective and categories described in (4) and (5), respectively.
The Board directed the staff to develop a revised project plan to address the elements of financial statements (which are currently defined in FASB Concepts Statement No. 6, Elements of Financial Statements) concurrently with presentation and measurement concepts.

Tentative Board Decisions Reached to Date (As of November 30, 2016)

December 16, 2015

The Board discussed two alternatives for determining what should be included in initial carrying amounts of assets, liabilities, and equity:

Alternative A—Include direct and unavoidable incremental costs like taxes, fees, delivery, commissions, and issuance costs

Alternative B—Include the same types of amounts that a third party would have included for all of the acquisition, issuance, and installation services but use the actual amounts instead of estimates of what a third party would have included in an all-in price.

The Board discussed a way to combine the best aspects of the two alternatives and directed the staff to develop that alternative for discussion at a future meeting.

The Board discussed potential wording for a possible Exposure Draft that would address how the qualitative characteristics of useful financial information apply to determining changes in carrying amounts and which changes in carrying amounts might be appropriate in which circumstances. The Board made some suggestions on how to revise the draft for further discussion at a future meeting.

November 2, 2015

The Board discussed how to describe or explain the following:
  1. Estimating market prices and cost-based amounts
  2. The effect on understandability of using different methods of determining carrying amounts
  3. The relationship of information about management performance to the objective of financial reporting.
The Board made no decisions.

August 26, 2015

The Board discussed matters relating to the planned new measurement chapter of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, specifically discussing what might be included in the initial carrying amount of an asset, a liability or an equity instrument. No technical decisions were made.

July 29, 2015

The Board discussed how to describe or explain the following:
  1. The level of relevance for achieving the objective of financial reporting of market exit prices for assets that are not expected to be sold
  2. The level of information about market participants’ views that is provided by market prices estimated by management
  3. Why regularly adjusting to market exit prices is not the appropriate way to determine changes in carrying amounts of inventories that will be sold
  4. How using different methods of determining changes in carrying amounts affects the understandability of a set of financial statements
  5. The reasons for using systematic allocation (for example, depreciation, amortization, or accretion) as a method of determining changes in carrying amounts (subsequent measurements) for assets and liabilities
  6. Why providing information to assess the performance of the reporting entity or its management is not an objective (or the objective) of financial reporting.
No decisions were reached.

March 18, 2015

The Board discussed a concept for determining initial carrying amounts of assets and liabilities. No decisions were reached.

February 18, 2015

The Board decided that the following general categories of methods should be discussed in the proposed Concepts Statement chapter on measurement:
  1. Prices in transactions in which the entity participated
  2. Current prices observed or estimated by the entity
  3. Discounted or undiscounted estimates of future cash flows other than estimates of market prices
  4. Other adjustments to carrying amount: accruals, systematic allocations, and allowances for impairments.
November 19, 2014

The Board discussed a process for establishing standards for determining changes in carrying amounts (remeasurements or subsequent measurements).

June 18, 2014

The Board discussed how to proceed with developing concepts related to measurement, including:
  1. Agreeing on the meanings of key terms and what the objectives and qualitative characteristics imply for measurement
  2. Identifying appropriate types of measurements
  3. Determining which measurements to use in specific circumstances.

BOARD/OTHER PUBLIC MEETING DATES

The FASB meeting minutes are provided for the information and convenience of constituents who want to follow the Boards’ deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final Accounting Standards Update.

November 30, 2016    Board Meeting—The Board discussed the overall project plan going forward and decided on concepts related to initial measurement and initial carrying amount of assets. The Board directed the staff to develop a revised project plan to address the elements of financial statements concurrently with presentation and measurement concepts.
December 16, 2015 Board Meeting—The Board discussed two alternatives for determining what should be included in initial carrying amount of assets, liabilities, and equity. The Board discussed potential wording for a possible Exposure Draft that would address how the qualitative characteristics of useful financial information apply to determining changes in carrying amounts and which changes in carrying amounts might be appropriate in which circumstances.
November 2, 2015 Board Meeting—The Board discussed how to describe or explain the estimation of market prices and cost-based amounts, the effect on understandability of using different methods of determining carrying amounts, and the relationship of information about management performance to the objective of financial reporting
August 26, 2015 Board Meeting—The Board discussed what might be included in the initial carrying amount of an asset, a liability, or an equity instrument.
July 29, 2015 Board Meeting—The Board discussed market prices for items that are not expected to be sold, estimated market prices, changes in carrying amounts of inventories, how using different methods of determining changes in carrying amounts affects understandability, the reasons for using systematic allocation, and why providing information to assess the performance of management is not an objective of financial reporting.
March 18, 2015 Board Meeting—The Board discussed a concept for determining initial carrying amounts of assets and liabilities. No decisions were reached.
February 18, 2015 Board Meeting—The Board continued its deliberations, discussing different methods of determining carrying amounts and changes in carrying amounts. The Board decided that certain categories of methods should be discussed in the proposed Concepts Statement chapter on measurement.
November 19, 2014 Board Meeting—The Board discussed a process for establishing standards for determining changes in carrying amounts (remeasurements or subsequent measurements).
June 18, 2014 Board Meeting—The Board discussed how to proceed with the conceptual framework project

Please refer to the separate presentation, elements, and disclosure project pages for current Board meeting minutes related to each of those topics within the broader conceptual framework project.

Next Steps

The staff will continue to develop concepts related to establishing standards for determining measurement

CONTACT INFORMATION

Nick Cappiello
Supervising Project Manager
ntcappiello@fasb.org

Jill Switter
Senior Project Manager
jmswitter@fasb.org

Jim Leisenring
Senior Advisor
jjleisenring@fasb.org

Ryan J. Carter
Assistant Project Manager
rjcarter@fasb.org

Niteesha Kulshrestha
Postgraduate Technical Assistant
nkulshrestha@fasb.org