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, February 14, 2018 FASB Board Meeting

Financial instruments—hedging implementation. The Board discussed the status of and issues arising from implementation activities related to Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The Board discussed the staff’s response to:
  1. General technical inquiries received that affect many stakeholders. No decisions were made.
  2. Technical inquiries received related to prepayable financial instruments. Specifically, the staff presented its interpretation of which financial instruments meet the definition of the term prepayable in the FASB Accounting Standards Codification Master Glossary. Financial instruments that meet the definition of prepayable include the following:
    1. Instruments that are currently exercisable and prepayable at any time
    2. Instruments with certain contingent prepayment features (that is, based on the passage of time, the occurrence of a specified event other than the passage of time, and the movement in a specified interest rate)
    3. Instruments with conversion features.
However, instruments for which contractual maturity can be accelerated due to credit would not meet the definition of prepayable. The Board agreed with the staff’s conclusions. Further information on this issue will be posted to the Hedge Accounting Implementation webpage.
  1. Technical inquiries received on net investment hedges under the spot method as amended by Update 2017-12. The staff presented its interpretation of the guidance related to amortization of excluded components when the hedging instrument is a cross-currency interest-rate swap that is off-market (that is, does not have a fair value of zero) at hedge inception. Specifically, an amortization method should be used that would not violate the guidance in paragraphs 815-35-35-6 through 35-7. That is, at the end of the hedging relationship, only amounts of the swap related to spot changes on the notional amount of the net investment should remain in currency translation adjustment. Therefore, any systematic and rational approach that results in the off-market nature of the swap equaling zero at the end of the hedging relationship is acceptable. However, structuring of cross-currency interest-rate swaps designated in net investment hedges to achieve a specific accounting result is not considered rational in the context of a systematic and rational approach. The Board agreed with the staff’s conclusions.
Next Steps

The Board directed the staff to research a potential technical correction related to the use of the term prepayable.

Revenue recognition of grants and contracts by not-for-profit entities. The Board redeliberated the amendments in the proposed Accounting Standards Update, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, and made the following decisions:

Conditional ContributionsIndicators to Describe a Barrier

The Board decided to clarify and refine the indicators to describe a barrier, including removing the additional actions indicator in the proposed Update.
Contributions Made by a Resource Provider

The Board affirmed that the guidance for distinguishing between conditional contributions and unconditional contributions should be similar for both a recipient and a resource provider.
Recurring Disclosures by Recipients about Conditional Promises to Give

The Board affirmed the existing disclosure requirements about conditional promises to give.
Simultaneous Release of a Condition and a Restriction

The Board decided that the simultaneous release accounting option for restricted contributions could be elected for conditional restricted contributions separately from unconditional restricted contributions.

The Board affirmed that the final amendments should be applied on a modified prospective basis following the effective date to agreements that are either (1) incomplete as of the effective date or (2) entered into after the effective date.
Effective Date

The Board affirmed that for recipients, the effective date of the amendments will align with Topic 606, Revenue from Contracts with Customers. The Board decided that for resource providers, the effective date will be delayed by one year.
Early Adoption

The Board affirmed that early adoption will be permitted.

Disclosure framework: disclosure review—defined benefit plans. The Board redeliberated the proposed Accounting Standards Update, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework: Changes to the Disclosure Requirements for Defined Benefit Plans.
The Board decided to confirm the proposed amendments to remove the following disclosures:
  1. The amount and timing of plan assets expected to be returned to the employer
  2. The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law
  3. The related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employers or related parties and the plan
  4. The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year
  5. For nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy.
The Board also decided to remove the disclosure of the effect of a one-percentage-point increase and the effect of a one-percentage-point decrease in the assumed health care cost trend rate for public entities. The Board requested that the staff conduct further user outreach on the removal of that disclosure. 

The Board decided to:
  1. Add a disclosure of the weighted-average interest crediting rate for cash balance plans and other plans with a promised interest crediting rate, as proposed
  2. Revise the proposed disclosure about the reasons for significant gains and losses by requiring only a narrative description of the reasons for significant gains and losses affecting the benefit obligation.
The Board decided to retain the current disclosure requirements for:
  1. The amount of the accumulated benefit obligation (ABO) for pension plans.
  2. The aggregate ABO and the aggregate fair value of plan assets with ABOs in excess of plan assets.  The Board requested further research on the ways to disclose the aggregate information for underfunded (including unfunded) pension plans based on both the projected benefit obligation (PBO) and ABO benchmarks. 
  3. The organization of disclosures under the current guidance in Subtopic 715-20.
The Board decided not to add the following disclosures (as proposed):
  1. For plan assets, quantitative and qualitative disclosures from Topic 820 on fair value measurement about assets measured at net asset value (NAV) using a practical expedient
  2. A description of the nature of the benefits provided, the employee groups covered, and the type of benefit plan formula.
The Board also decided not to add a mandatory disaggregated disclosure about pension plans or other postretirement benefit plans between domestic and foreign plans. The Board decided to retain the current disclosure requirement in paragraphs 715-20-50-2 and 715-20-50-4. That guidance allows aggregated disclosure unless (1) disaggregating in groups provides useful information or (2) the benefit obligations of the plans outside the United States for a U.S reporting entity or of foreign plans for a foreign reporting entity are significant relative to the total benefit obligation and those plans use significantly different assumptions. 

The Board decided not to consider removing, adding, or amending other disclosure requirements.

The Board also decided to require a retrospective transition method for these disclosure amendments. 
Next Steps
The Board will complete redeliberations at a future meeting.