SUMMARY OF BOARD DECISIONS
Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.
June 20, 2012 FASB Board MeetingAccounting for financial instruments: classification and measurement.
Presentation of Changes in Fair Value Attributable to Changes in “Own Credit” for Financial Liabilities Measured at FVNI Designated under the Fair Value Option
The Board discussed the presentation of changes in fair value that result from a change in a reporting entity’s own credit risk for financial liabilities that are designated under the fair value option and, thus, measured at fair value with all changes in fair value recognized in net income (FVNI). The Board decided that an entity would present such changes separately in other comprehensive income (OCI). The Board also decided that cumulative gains and losses recognized in OCI associated with changes in own credit will be recognized in net income upon the settlement of the liability. In addition, the entire risk in excess of a base market risk, such as a risk-free interest rate, would be considered as the change in own credit or an alternative method that an entity deems as a more faithful measurement of such a risk.
Nonmarketable Equity Securities Practicability Exception for Public Entities
The Board discussed whether to permit an exception to the measurement approach for nonmarketable equity securities (other than instruments that are measured according to the equity method of accounting or result in consolidation of an entity) held by public entities. The Board decided to provide public entities with the same practicability exception for measuring investments in nonmarketable equity securities as that provided to nonpublic entities.
Presentation of comprehensive income: reclassifications out of accumulated other comprehensive income. The Board discussed feedback received from preparers and users of financial statements about the costs and potential benefits of the presentation requirements for reclassifications out of accumulated other comprehensive income in Accounting Standards Update 2011-05. These requirements were deferred by Accounting Standards Update No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. The Board discussed whether to reinstate the presentation requirements from Update 2011-05. The Board also discussed alternative presentation requirements.
The Board decided that the presentation requirements deferred in Accounting Standards Update 2011-12 would not be reinstated because of the excessive costs to preparers and the potential cluttering effect on the statement(s) where comprehensive income is reported. These requirements would have required an entity to present on the face of the financial statement where net income is presented the effect of items reclassified from accumulated other comprehensive income on the line items of net income. As an alternative, the Board decided that user’s needs for information about items reclassified from accumulated other comprehensive income and their corresponding impact on net income could be aided, with little cost to preparers, by requiring an entity to provide enhanced disclosures to explain the effect of reclassification adjustments on other comprehensive income by component. In addition, an entity would be required to provide a tabular disclosure showing the effect of items reclassified from accumulated other comprehensive income on the line items of net income with references to other disclosures required under U.S. GAAP.
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot. The Board decided that the comment period on the Exposure Draft will be 60 days.