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.
Wednesday, November 2, 2016 FASB Board Meeting
Consolidation reorganization and targeted improvements—Topic 810. The Board decided to add a project to its technical agenda to clarify the consolidation guidance in Topic 810, Consolidation, by reorganizing the guidance into separate Subtopics for Variable Interest Entities (VIE) and Voting Interest Entities (VOE) guidance. The Board also decided to create a new Topic 812 that would include those reorganized Subtopics, superseding Topic 810 in its entirety.
Additionally, the Board decided to rescind Subsection “Consolidation of Entities Controlled by Contract” in Subtopic 810-10-15 and entire Subtopic 810-30, Consolidation—Research and Development Arrangements. The Board directed the staff to ask a question in a proposed Accounting Standards Update about whether the guidance is still applied and, if so, how.
As part of the reorganization of the consolidation guidance, the Board decided to further clarify that power over a VIE is obtained through a variable interest and to provide further clarification of the application of the concept of “expected,” which is used throughout the VIE consolidation guidance.
The Board instructed the staff to prepare a staff draft of the proposed amendments, which will be discussed at a future public roundtable consisting of both public and private practitioners, preparers, and users. The staff draft would also include the Board’s discussion of a potential scope exception for private companies under common control and potential proposed amendments to all other entities under common control. The focus of this roundtable is to gather feedback about (1) the proposed reorganization and clarification of the consolidation guidance and (2) the Board’s considerations of the VIE guidance for common control arrangements.
Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost. The Board affirmed the following decisions from the proposed Accounting Standards Update, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost:
- To require all employers, including not-for-profit organizations, that offer defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715 to:
- Separate their net periodic pension cost and net periodic postretirement benefit cost into the service cost component and other components.
- Present the service cost component in the same line item (or items) as other compensation costs arising from services rendered by the pertinent employees during the period. Service cost would be the only component eligible for capitalization, if appropriate, as part of an asset such as inventory or property, plant, and equipment.
- Report in the income statement the other components as defined in paragraphs 715-30-35-4 and 715-60-35-9 separately from the service cost component and outside a subtotal of income from operations, if one is presented. If other components are presented in a separate line item (or items) in the income statement, that line item (or items) should be described appropriately.
Transition and Adoption
The Board affirmed its decisions from the proposed Update to:
- Apply the amendments retrospectively for the presentation in the income statement of the service cost component and other components of net periodic pension cost and net periodic postretirement benefit cost.
- Apply the amendments prospectively, on and after the effective date, for the capitalization in assets of the service cost component of net periodic pension cost and net periodic postretirement benefit cost.
- Disclose the nature of and reason for the change in accounting principle in the first interim and annual reporting periods in which the entity adopts the amendments.
- To provide a practical expedient to permit entities that have difficulty in determining the disaggregation of the service cost component and other components for the prior comparative periods to use the amounts disclosed in their pension and other postretirement benefit plan footnote as the basis for applying retrospective presentation requirements.
- If an entity applies the practical expedient, the entity would be required to disclose the reason for applying that practical expedient and other qualitative information about the capitalization of net benefit cost.
- The forthcoming amendments will be effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.
- The forthcoming amendments will be effective for entities other than public business entities for annual reporting periods beginning after December 15, 2018, and interim periods beginning after December 15, 2019.
- Early adoption will be permitted for all entities.
The Board concluded that it has received sufficient information and analysis on the proposed amendments to the guidance for pension cost and other postretirement benefit costs to make an informed decision on the issues presented. The Board also concluded that the expected benefits of the proposed amendments justify the costs.
The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot by December 26, 2016.