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, April 10, 2019 FASB Board Meeting

Extending private company accounting alternatives on certain identifiable intangible assets and goodwill to not-for-profit entities. The Board discussed comment letter and other stakeholder feedback and redeliberated the proposed Accounting Standards Update, Intangibles—Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities.
 
The Board decided to permit a not-for-profit entity (NFP) to elect the accounting alternatives described in Accounting Standards Updates No. 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, and No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination.  The Board decided to extend the Topic 805 alternative without modifications and decided to permit an NFP conduit bond obligor to elect the same accounting alternatives.
 
Consistent with the current requirement for NFPs to present expenses by both nature and function, the Board decided that an NFP is required to functionalize goodwill amortization. The Board also decided the guidance on functionalizing goodwill amortization is sufficient.
 
The Board considered comments raised by comment letter respondents concerning the presentation in health care organization financial statements, the amortization period, and  the application of the alternatives in specific financial structures. The Board decided the current guidance is sufficient for these areas.
 
The Board also decided that an NFP should apply the transition guidance in the private company accounting alternatives,  which requires prospective application for new goodwill recognized, prospective amortization of existing goodwill, and prospective application for newly acquired eligible identifiable intangible assets. The Board decided NFPs should not subsume existing customer-related intangible assets and noncompete agreements into goodwill upon adoption of the accounting alternative.
 
The Board decided not to specify an effective date; thus, NFPs electing to adopt these alternatives would not have to demonstrate preferability and would follow the transition guidance above the first time they elect to adopt the alternatives.
 
The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.


Simplifications to accounting for income taxes. The Board considered whether to add a project to its technical agenda to address simplifications to the accounting for income taxes.  
 
The Board decided to add a project to its technical agenda. As part of that project, the Board decided to remove the following exceptions in Topic 740, Income Taxes 
  1. Exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income)   
  2. Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment  
  3. Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary (therefore, an entity would have the ability to assert indefinite reinvestment for the entire basis difference of a subsidiary 
  4. Exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.  
 The Board also decided the following:  
  1. An entity should recognize a franchise tax that is partially based on income in accordance with Topic 740 and account for any incremental amount as a non-income-based tax.
  2. An entity should evaluate when a step up in the tax basis of goodwill should be considered part of the initial recognition of book goodwill and when it should be considered a separate transaction.
  3. An entity should be permitted to forgo the allocation of consolidated current and deferred tax expense to legal entities that are not subject to tax in their separate financial statements.
  4. An entity should reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.  
The Board also decided to make Codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method.  
 
The Board decided to exclude from the scope of the project an issue involving the accounting for nondeductible goodwill by private companies. 
 
Transition  
 
The Board decided that an entity should apply the amendments as follows 
  1. Retrospectively for franchise taxes that are partially based on income and the election to forgo the allocation of consolidated taxes to legal entities that are not subject to tax in their separate financial statements 
  2. Using a modified retrospective approach for ownership changes to a foreign equity method investment or subsidiary  
  3. Prospectively for all other amendments to Topic 740. 
 Next Steps  
 
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 45 days.  
 

Financial instruments—credit losses—targeted transition relief. The Board discussed the comments received on the proposed Accounting Standards Update, Targeted Transition Relief for Topic 326, Financial Instruments—Credit Losses. The Board affirmed its decisions to:
  1. Permit an entity to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments—Overall, for certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. An entity would be required to apply the election on an instrument-by-instrument basis for eligible instruments upon adoption of Topic 326.
  2. Exclude debt securities classified as held-to-maturity from the scope of instruments eligible for the transition relief.
  3. Not provide an option to discontinue fair value measurements for financial assets measured at fair value through net income and instead apply the measurement guidance in Subtopic 326-20. 
Effective Date, Transition Method, Transition Disclosures
 
The Board decided:
  1. For an entity that has not yet adopted the amendments in Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the entity should apply the effective date and transition method for the amendments in this Update using the same effective date and transition method of Update 2016-13.
  2. For an entity that has adopted the amendments in Update 2016-13, the entity should apply the amendments in this Update for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities should apply the amendments on a modified retrospective basis by means of a cumulative-effect adjustment to the opening retained earnings balance as of the beginning of the first reporting period in which Update 2016-13 was adopted. Early adoption will be permitted in any interim period within the fiscal years beginning after December 15, 2018, provided that an entity has adopted Update 2016-13. 
Analysis of Costs and Benefits
 
The Board concluded that it has received sufficient information and analysis to make an informed decision and that the expected benefits of the amendments will justify the expected costs.
 
Next Steps
 
The Board directed the staff to draft an Accounting Standards Update for vote by written ballot.


Segment reporting. As part of developing a study on segment disclosures, the Board discussed options to both expand the list of required disclosures in Topic 280, Segment Reporting, and require those disclosures in a tabular format.

The Board directed the staff to study the following:
  1. Expanding the list of required disclosures in Topic 280 to include cost of revenue, research and development expense, a measure of cash flow, and inventory by reportable segment
  2. Developing principles-based disclosure requirements in addition to the list of required disclosures
  3. Requiring an explanation of the reasons why items from the list of required disclosures are not reported.
The Board decided to exclude from the study further consideration of requiring segment disclosures in a tabular format.

Next Steps 

The Board will continue to develop a study on segment disclosures at a future meeting.