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.

August 13, 2014 FASB Board Meeting

Agenda Prioritization. The Board discussed the results of staff research on seven potential projects and made the following decisions.

The Board added the following four projects to its agenda:
  1. Presentation of debt issuance costs—The project is expected to simplify the accounting by aligning the presentation of debt discount or premium and issuance costs.
  2. Measurement date of defined benefit plan assets—The project is expected to reduce costs by aligning the measurement date of defined benefit plan assets with the date that valuation information and the fair values of plan assets are provided by third-party service providers. An entity with a fiscal year-end that does not fall on the end of a month would be eligible to measure its defined benefit plan assets and liabilities as of the month end that is closest to the employer’s fiscal year-end.
  3. Balance sheet classification of debt—The project is expected to reduce cost and complexity by replacing the fact-pattern specific guidance in GAAP with a principle to classify debt as current or noncurrent based on the contractual terms of a debt arrangement and an entity’s current compliance with debt covenants.
  4. Accounting for income taxes—The project is expected to simplify accounting for income taxes by:
    1. Eliminating the requirement in GAAP for entities that present a classified statement of financial position to classify deferred tax assets and liabilities as current and noncurrent, and instead requiring that they classify all deferred tax assets and liabilities as noncurrent in the statement of financial position.
    2. Eliminating the prohibition in GAAP on the recognition of income taxes for the intra-entity differences between the tax basis of the assets in a buyer’s tax jurisdiction and their cost as reported in the consolidated financial statements, and instead requiring recognition of the income tax consequences associated with an intra-entity transfer when the transfer occurs.
The Board added the following two projects to the EITF’s agenda:
  1. Fair value hierarchy levels for certain investments measured at net asset value (NAV)—The project is expected to reduce diversity in practice related to the categorization of certain investments measured at NAV within the fair value hierarchy.
  2. Effects on historical earnings per unit (EPU) of master limited partnership (MLP) dropdown transactions—The project is expected to address how to calculate EPU for periods before the date of a dropdown transaction accounted for as a reorganization of entities under common control that occurs after formation of the MLP.
The Board decided not to undertake a project about accounting for cash balance pension plans.

In addition to adding projects to its agenda, the Board began deliberations on two of the projects:

Simplifying the Presentation of Debt Issuance Costs

The Board decided that debt issuance costs should be considered a reduction of the debt liability for presentation purposes.

The Board decided that the guidance should be applied retrospectively. Additionally, the Board decided that disclosures in paragraphs 250-10-50-1 through 50-3 should be provided upon transition.

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 60 days.

Simplifying the Measurement Date of Plan Assets and Obligations

The Board decided that an employer with a fiscal year-end that does not fall at the end of a month may make an accounting policy election to (1) measure plans assets as of the end of the month that is closest to its fiscal year-end and (2) measure the defined benefit liability as of that alternative measurement date.

The Board decided that employers should be required to include a reconciling item in the disclosures about the fair value and categories of plan assets and the Level 3 rollforward for contributions made between the measurement date and an employer’s fiscal year-end.

The Board decided that an employer should disclose the accounting policy election, including the measurement date.

The Board decided that the guidance should be applied prospectively.

The Board decided that the only transition disclosure is the nature of and reason for the change in accounting principle.

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 60 days.


Financial Instruments—Impairment. The Board discussed the impairment of debt securities and clarifications to the measurement principle for the Current Expected Credit Losses (CECL) model.

Impairment of Debt Securities

The Board decided that debt securities classified as available-for-sale should be excluded from the scope of the CECL model. The Board affirmed its previous decision that the CECL model should apply to debt securities classified as held-to-maturity.

The Board decided that available-for-sale debt securities should continue to be within the scope of the impairment guidance in Topic 320. In addition, the Board decided that the impairment guidance in Topic 320 should be modified as follows:
  1. An allowance approach should be used for recognizing impairment losses, which would allow an entity to recognize reversals of credit losses.
  2. Subparagraph 320-10-35-33F(a) should be amended to remove the requirement to consider the length of time that the fair value of an available-for-sale debt security has been less than its amortized cost basis when estimating whether a credit loss exists.
  3. Subparagraph 320-10-35-33F(g) should be removed. When estimating whether a credit loss exists, an entity would not be required to consider recoveries or additional declines in the fair value of an available-for-sale debt security after the balance sheet date.
Clarifications to the Measurement Principle

The Board made the following decisions regarding clarifications to the measurement principle in the CECL model:
  1. The Board affirmed the principles of the clarifications to the measurement approach as described in the August 13, 2014 Board meeting handout. Actual wording of the clarifications is subject to change during the drafting of the final standard.
  2. The Board decided that the final standard would not explicitly state for which financial assets a zero allowance of expected credit losses would be appropriate.
  3. The Board decided to include the following collateral-based practical expedients in the final standard:
    1. For a collateral-dependent financial asset, the allowance for expected credit losses would be measured as the difference between the collateral’s fair value (adjusted for selling costs, when applicable) and the amortized cost basis of the asset.
    2. For a financial asset in which the borrower must continually adjust the amount of collateral securing the financial asset, the allowance for expected credit losses would be limited to the difference between the collateral’s fair value (adjusted for selling costs) and the amortized cost basis of the asset.
  4. When developing its estimate of expected credit losses, the Board decided that for periods beyond which the entity is able to make or obtain reasonable and supportable forecasts, an entity is allowed to revert to its historical credit loss experience over (a) the financial asset’s estimated life on a straight-line basis or (b) a period and in a pattern that reflects the entity’s assumptions about expected credit losses over that period. The Board also decided that an entity should disclose the reversion method applied in the notes to the financial statements.


Insurance—Disclosures about Short-Duration Contracts. The Board continued its discussions of disclosures about short-duration contracts and made the following decisions.

Incurred and Paid Claims Development Tables

The Board affirmed its previous decision that incurred and paid claims development tables should be disclosed in the financial statement footnotes and that those disclosures need not go back more than 10 years, but that they should present information for the number of years for which claims incurred typically remain outstanding.

Health Insurance Claims

The Board decided that insurance entities that issue short-duration insurance contracts should disclose in their interim and annual financial statements the incurred but not reported liabilities included in the liability for unpaid claims and claim adjustment expenses for health insurance claims, either as a separate disclosure or as a component of the rollforward of the liability for unpaid claims and claim adjustment expenses. The rollforward should be disaggregated so that useful information is not obscured by either the inclusion of a large amount of insignificant detail or the aggregation of items that have different characteristics.

Effective Date

The Board decided that for public business entities, the final guidance should be effective for annual reporting periods beginning after December 15, 2014, and interim reporting periods within annual reporting periods beginning after December 15, 2015. The Board decided on a one-year delay for all other entities. The Board also decided to allow early adoption for all entities.

Next Steps

The Board directed the staff to draft an Accounting Standards Update for vote by written ballot with an extended time frame for external review by a broad range of stakeholders.