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 27, 2014 FASB Board Meeting

Insurance—Targeted Improvements to the Accounting for Long-Duration Contracts. The Board discussed issues related to the liability for future policy benefits for long-duration insurance contracts.

Periodic Assumption Update

The Board decided to require that insurance entities update all assumptions used in calculating the liability for future policy benefits for traditional long-duration contracts, limited payment contracts, and participating life insurance contracts annually, during the fourth quarter, and include the effects of changed assumptions in the determination of net income. The Board decided that a provision for adverse deviation should not be included in the calculation of the liability. The Board also decided to require that entities disclose information about the liability for future policy benefits and the assumptions used. These disclosures include:
  1. Disaggregated balance of the liability for future policy benefits and the weighted-average discount rates used to measure the liability for future policy benefits in time bands, and any additional information about amounts and rates within the time bands provided that significantly affect the discount rates
  2. Disaggregated quantitative and qualitative information about the methods and inputs used to develop the measurement of the liability for future policy benefits, including disclosure of assumptions used (such as discount rate, mortality, morbidity, termination [lapse], and expense assumptions)
  3. Disaggregated reconciliations from the opening to the closing balance of the liability for future policy benefits, with separate disclosure of changes in the liability for future policy benefits due to new contracts, benefit payments, changes in assumptions, and derecognition of contracts.
The Board decided that the guidance proposed for the periodic assumption update for traditional long-duration contracts, limited payment contracts, and participating life insurance contracts would apply for updating assumptions used to calculate the additional liability for universal life-type contracts.

Premium Deficiency and Loss Recognition

As a result of its decision to require that insurance entities annually update all assumptions used in the calculation of the liability for future policy benefits, the Board decided that a premium deficiency test would not be required.

Next Steps

The Board directed the staff to do additional research on the discount rate used to calculate the liability for future policy benefits. The Board will continue to deliberate the discount rate and other targeted improvements to accounting for long-duration contracts at a future Board meeting.


Leases. The Board continued redeliberating the proposals in the May 2013 Exposure Draft, Leases, specifically discussing the following topics: (1) nonpublic business entity discount rate considerations, (2) related party leasing transactions, (3) accounting for sale and leaseback transactions, and (4) leveraged leases.

Nonpublic Business Entity Discount Rate Considerations

The Board decided to retain the accounting policy election to use the risk-free rate for nonpublic business entities (that is, all other entities beside public business entities).

Related Party Leasing Transactions

The Board decided to retain the related party leases guidance proposed in the 2013 Exposure Draft. The Board reaffirmed that lessees and lessors should be required to account for their related party leases on the basis of the legally enforceable terms and conditions of the lease. The Board decided that lessees and lessors should be required to apply the disclosure requirements for related party transactions in accordance with Topic 850.

Accounting for Sale and Leaseback Transactions

Repurchase Options in a Sale and Leaseback Transaction

The Board decided to follow the recently issued revenue recognition guidance and clarify that a repurchase option exercisable only at the then-prevailing fair market value would not preclude sale treatment, provided that the underlying asset is nonspecialized and readily available in the marketplace. The repurchase option must be substantive in order to affect the accounting for the transaction. In reaching this decision, some Board members thought that this application was consistent with language provided in the basis for conclusions of the recently issued revenue recognition standard.

Application Guidance for Determining Whether a Sale Has Occurred

The Board decided to include application guidance, with respect to determining whether a sale occurs in the context of a sale and leaseback transaction, in the final leases standard.

Accounting for a “Failed” Sale and Leaseback Transaction

The Board decided that if a sale and leaseback transaction does not result in a sale, the “failed” sale should be accounted for as a financing transaction by the seller-lessee and buyer-lessor.

Leveraged Leases

The Board reaffirmed the proposal in the 2013 Exposure Draft that leveraged lease accounting should be eliminated. That is, the lessor should account for leases that currently qualify as leveraged leases consistent with all other leases within the new leases guidance.

The Board decided that existing leveraged leases should be grandfathered during transition.

Next Steps

The FASB and the IASB will continue their redeliberations at a future Board meeting.


Financial Statements of Not-for-Profit Entities. The Board continued its initial deliberations, focusing on whether to require not-for-profit entities (NFPs) to disclose the following information:

Salaries and Benefits Expense


The Board previously decided to require an NFP to report investment returns net of external and direct internal investment expenses and, for practical reasons, to no longer require disclosure of investment-related expenses that have been netted against investment revenues. To address concerns about the potential loss of relevant salary and benefit-related information, the Board decided that an NFP would disclose the amount of internal salaries and benefits, if any, that have been netted against investment return.

Cost-Allocation

The Board decided that notes to financial statements should include a description of the method used to allocate costs among program and support functions. The Board also decided to refine the Codification’s definition of management and general activities and to provide additional implementation guidance to better depict which support costs should be allocated among program and/or support functions.

Tax-Exempt Status

The Board affirmed its previous decision not to require an NFP to disclose its tax-exempt status; thus, a business-oriented NFP health care entity would no longer be required to disclose its tax-exempt status in accordance with paragraph 954-740-50-1.