Project Update

Liabilities & Equity—Targeted Improvements

Last updated on February 22, 2016. 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
Due Process Documents
*Decisions Reached at Last Meeting
*Tentative Board Decisions Reached to Date
Next Steps
*Board/Other Public Meeting Dates
*Background Information
Contact Information

*Project Objective

The objective of this project is to make targeted improvements that simplify the accounting guidance related to financial instruments with characteristics of liabilities and equity.

Items currently in the scope of this project are:
  1. Determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, specifically as it relates to features where the strike price adjusts down based the pricing of future equity offerings (Phase 1)
  2. The indefinite deferral in Topic 480 related to mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests by replacing the deferral with a scope exception (Phase 1)
  3. Improving the navigation within the Accounting Standards Codification.

Due Process Documents

No due process documents have been issued.

*Decisions Reached at Last Meeting (February 3, 2016)

At the meeting on the technical agenda Discussion Paper, the Board decided to add a broader project on distinguishing liabilities and equity to its research agenda. Due to the addition of this research project, the Board decided to remove Simplification of EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock from the scope of this project.

*Tentative Board Decisions Reached to Date

Please see the linked PDF for a summary of decisions reached to date.

Next Steps

The staff will proceed to drafting a proposed Accounting Standards Update (for items in Phase 1 scope) for a vote by written ballot, with a comment period minimum of 60 days ending no earlier than February 16, 2016.

*Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Boards' 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.

*February 3, 2016 Board Meeting—Decisions regarding the scope of the Liability & Equity—Targeted Improvements project in the context of the Board’s technical agenda Discussion Paper.
September 16, 2015 Board Meeting—Decisions regarding accounting for instruments with down round features and the indefinite deferral in Topic 480 related to mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests.
November 5, 2014 Board Meeting—Project added to the technical agenda
July 30, 2014 Board Meeting—Presentation of research
January 29, 2014 Board Meeting—Projected added to the research agenda

*Background Information

In 2004, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) added a joint project to their agendas to develop an improved, common conceptual framework. The objective of the joint FASB/IASB project was to improve and simplify the financial reporting requirements for financial instruments with characteristics of equity. On November 30, 2007, the Boards issued their Preliminary Views, Financial Instruments with Characteristics of Equity. In 2010 the Boards acknowledged that they did not have the capacity to devote the time necessary to deliberate the project issues. At that point the project became inactive. A summary of the activities and decisions of the Liabilities & Equity project can be found on the previous project page.

During the intervening period, U.S. stakeholders continued to express support for a project on distinguishing liabilities from equity. At the November 5, 2014 agenda prioritization meeting, the FASB decided to add the project to its technical agenda to address targeted issues with accounting for instruments with characteristics of liabilities and equity.

At the February 3, 2016, Board meeting on the technical agenda Discussion Paper, the Board decided to add a broader project on distinguishing liabilities and equity to its research agenda. Due to the addition of this broader project on liabilities and equity to the research agenda, the Board decided to remove Simplification of EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock from the scope of this project. The Board directed the staff to continue its work on the other areas included in the scope of this project.

Contact Information

Mary Mazzella
Supervising Project Manager
msmazzella@fasb.org

Rosemarie Sangiuolo
Project Consultant
rsangiuolo@fasb.org

Ranee Wiley
Postgraduate Technical Assistant
rawiley@fasb.org