Last updated on March 28, 2022. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.
(Sections updated on the date above are indicated with an asterisk *)
Objective:
The objective of this project is to reduce diversity in practice on measuring the fair value of equity securities that are subject to contractual sale restrictions. The project was previously limited to the effect of underwriter restrictions on fair value measurement.Background:
The Board received an agenda request to address diversity in practice on how to measure the fair value of equity securities that are subject to an underwriter lockup restriction.On July 29, 2020, the Board decided to add this project to its technical agenda to address the effect of underwriter restrictions on fair value measurements.
Exposure Draft(s):
On September 15, 2021, the Board issued a proposed Accounting Standards Update, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to
Contractual Sale Restrictions. The due date for comment letters is November 14, 2021.
- Download the proposed Accounting Standards Update, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
- Read comment letters on the proposed Accounting Standards Update.
Decisions Reached at Last Meeting (March 23, 2022)
The Board began its redeliberations on the effect of contractual sale restrictions on fair value measurement that was included in the proposed Accounting Standards Update, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.
Scope
The Board affirmed the proposed scope that the clarifying amendments would apply to all equity securities subject to any contractual sale restriction.
Measurement
The Board affirmed the proposal that any contractual sale restriction on the sale of an equity security (1) should not be part of the unit of account and therefore would not be considered a characteristic of the asset and (2) would not be incorporated into measuring the fair value of the equity security. The Board decided that an entity would be prohibited from recognizing and measuring the contractual sale restriction as a separate unit of account.
Disclosure
The Board decided to require the following qualitative and quantitative disclosures for equity securities subject to contractual sale restrictions considering the disaggregation principles established in paragraph 820-10-50-1D(c):
- The nature and duration of the restriction
- The circumstances that could cause a lapse in the restriction
- The fair value of equity securities subject to contractual sale restrictions reflected on the balance sheet.
Transition
The Board affirmed the proposed transition approach that all entities, except for investment companies under Topic 946, Financial Services—Investment Companies, would apply the amendments in a final Accounting Standards Update on a prospective basis with any adjustment recognized in earnings on the date of adoption. An entity that qualifies as an investment company under Topic 946 only would apply the amendments in a final Update to investments in equity securities in which the lock-up agreement is executed on or after the adoption date. Equity securities in which a lock-up agreement was executed before the adoption date of the amendments in a final Update would be accounted for in the same manner until the expiration of the lock up. The Board decided to add a requirement that investment companies should disclose the amounts subject to historical accounting policies during the transition period.
Effective Date
The Board concluded that public business entities would be required to adopt the amendments in a final Update for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. All other entities would be required to adopt the amendments in a final Update for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years.
Early adoption would be permitted.
Cost-Benefit Analysis
The Board concluded that it has received sufficient information and analyses to make an informed decision on the expected costs of applying the amendments in a final Update and that the expected benefits of those amendments would justify the expected costs.
Permission to Ballot
The Board concluded that it has received sufficient information and analyses to make an informed decision on the issues presented.
The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.
Tentative Board Decisions Reached to Date
May 26, 2021
The Board began its initial deliberations on the effect of contractual sale restrictions on fair value measurement.
Scope
The Board expanded the scope of the project to all equity securities subject to contractual sale restrictions. The project was previously limited to the effect of underwriter restrictions on fair value measurement.
Measurement
The Board decided to amend Topic 820, Fair Value Measurement, to clarify that lock-up agreements are entity specific and not a part of the unit of account in the measurement of fair value of equity securities.
Transition
The Board decided that all entities, except for investment companies under Topic 946, Financial Services—Investment Companies, would apply the proposed amendments on a prospective basis with any adjustment recognized in earnings on the date of adoption. An entity that qualifies as an investment company under Topic 946 would only apply the proposed amendments to investments in equity securities in which the lock-up agreement is executed on or after the adoption date. Equity securities in which a lock-up agreement was executed before the adoption date would be accounted for in the same manner until the expiration of the lock up.
Cost-Benefit Analysis
The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs of the amendments and that the expected benefits of the amendments would justify the expected costs.
Permission to Ballot and Next Steps
The Board concluded that it has received sufficient information and analysis to make an informed decision on the issues presented.
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot. The Board decided on a 60-day comment period for the proposed Update.
July 29, 2020
The Board decided to add a project to its technical agenda to address the effect of underwriter restrictions on fair value measurements. The Board also decided to add a project to its research agenda to evaluate the effects of other types of sale restrictions on fair value measurements.
The following are links to the minutes for each meeting. To view Board meetings and handouts from the past 90 days, click here.
| March 23, 2022* | Board Meeting—The Board began its redeliberations on this project. Decisions were reached on scope, measurement, disclosure, transition, effective date, cost-benefit analysis, and permission to draft a final Accounting Standards Update for vote by written ballot.
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| May 26, 2021 | Board Meeting—The Board began initial deliberations on this project. Decisions were reached on scope, measurement, transition, cost-benefit analysis, permission to draft a proposed Accounting Standards Update, and the comment period. |
| July 29, 2020 | Board Meeting—The Board added the project to the technical agenda. |
Practice Fellow
stice@fasb.org
Tiffany Wyszkowski
Project Manager
twyszkowski@fasb.org
Matt Nordhoff
Postgraduate Technical Assistant
mnordhoff@fasb.org
The staff has prepared this summary for information purposes only. Any Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.