Project Update

Application of Asset- or Entity-Based Guidance to Nonfinancial Assets in an Entity

Last updated on August 23, 2012.  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.

Project Objective
Decisions Reached at Last Meeting
Summary of Decisions Reached to Date
Next Steps
Board/Other Public Meeting Dates
Background Information
*Contact Information

Project Objective

The objective of this research project is to explore when a reporting entity should apply asset- or entity-based guidance to nonfinancial assets held in an entity. The results of this research effort will be used by the FASB chairman to decide whether to add a standards-setting project to the Board’s agenda.

Decisions Reached at Last Meeting (November 30, 2011)

The FASB chairman added a research project to the FASB agenda to explore when a reporting entity should apply asset- or entity-based guidance to nonfinancial assets held in an entity. The results of this research effort will be used by the FASB chairman to decide whether to add a standards-setting project to the agenda.

Summary of Decisions Reached to Date

No tentative decisions have been reached by the Board.

Next Steps

This project will include research to explore the distinction between an in-substance asset and an entity and analyze its effect on the application of current accounting guidance. Proposed ASUs that may affect the current guidance and the Board’s project on Conceptual Framework-Reporting Entity also will be considered in this research project.

Board/Other Public Meeting Dates

The Board meeting minutes 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 become final only after a formal written ballot to issue a final standard.

Background Information

Update 2010-02 added a scope exception to Statement 160 (codified in Subtopic 810-10) for deconsolidation/derecognition of sales of in substance real estate. EITF Issue 10-E highlighted a concern for in substance real estate in which there is an event or circumstance other than a sale in which an entity may be required to deconsolidate in substance real estate because the reporting entity has lost a controlling financial interest but the reporting entity would not be able to derecognize the in substance asset under the guidance in Subtopic 360-20. Update 2011-10 codified the consensus in EITF Issue 10-E and resolved diversity in practice by clarifying that when a parent (reporting entity) ceases to have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Further, on the basis of the feedback received, the Task Force recommended that the FASB chairman add a project to its agenda to address lenders’ accounting in situations in which a borrower ceases to have a controlling financial interest in an in substance real estate entity because of a default on its nonrecourse debt. After considering the recommendation of the Task Force and the comments received on Update 2011-10, the FASB chairman added this research project to the Board’s agenda to explore the broader issue of determining when an entity that substantially consists of nonfinancial assets should be accounted for as an in substance asset or as an entity.

*Contact Information