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, July 17, 2019 FASB Board Meeting

Reference rate reform: facilitation of the effects of the interbank offered rate transition on financial reporting. The Board discussed the following topics:
  1. Hedge accounting relief
  2. Transition method, disclosures, and relief period.
Hedge Accounting Relief

The Board decided to:
  1. Allow an entity to continue a hedging relationship without dedesignation upon a change in the critical terms of the hedging instrument due to reference rate reform. 
  2. Allow an entity to change the benchmark interest rate designated as the hedged risk in a fair value hedging relationship without dedesignation if that designated benchmark interest rate is affected by reference rate reform. If this practical expedient is elected, an entity would:
    1. Adjust the fair value hedge basis adjustment due to the change in the designated hedged risk
    2. Make an accounting policy election to recognize the adjustment either immediately in current earnings or in earnings in the same manner as other components of the carrying amount of the hedged asset or liability.
  3. Allow an entity to apply certain practical expedients for the initial and subsequent assessments of hedge effectiveness for a cash flow hedging relationship affected by reference rate reform.
  4. Allow an entity to apply the elections in items 1 through 3 on a hedge-by hedge basis.
Transition Method, Disclosures, and Relief Period

The Board decided that if an entity elects to apply the proposed guidance, the entity would:
  1. Apply the guidance prospectively.
  2. Disclose the nature of and reason for electing the guidance in each interim financial statement of the fiscal year of change and the annual financial statement of the period of the change in accordance with Topic 250, Accounting Changes and Error Corrections
  3. Cease applying the guidance as of January 1, 2023.
Analysis of Costs and Benefits

The Board concluded that it has received sufficient information and analyses to make an informed decision on the perceived costs (or cost savings) of the guidance and that the expected benefits would justify the expected costs (or cost savings) of the optional expedients in the proposed Accounting Standards Update.

Next Steps

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 30 days.


Effective date consideration for private companies, not-for-profit organizations, and small public companies. The Board discussed its research project on the effective dates for private companies, not-for-profit organizations, and small public companies. 

Credit Losses, Leases, and Hedging

The Board decided to add a project to its technical agenda to consider the effective dates for these entities of Topic 326, Financial Instruments—Credit Losses (referred to as CECL), Topic 842, Leases, and the recent amendments to Topic 815, Derivatives and Hedging (referred to as Hedging).

The Board decided to adopt a two-bucket approach to stagger effective dates for major standards as follows:
  1. Bucket One—SEC Filers (GAAP definition), excluding smaller reporting companies (SRCs) as currently defined by the SEC   
  2. Bucket Two—All other entities, which includes:
    1. All other public business entities (PBEs), including SRCs
    2. Private companies
    3. All not-for-profit organizations, including not-for-profit entities that have issued, or are coonduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market
    4. All employee benefit plans, including employee benefit plans that file financial statements with the SEC.
The Board decided that for CECL, Leases, and Hedging, entities within Bucket Two should be afforded an effective date of at least two years after the effective date for Bucket One. The Board agreed with the following application of the two-bucket approach:

CECL—The Board decided that CECL will be effective for PBEs that are SEC Filers, excluding SRCs as currently defined by the SEC, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For calendar-year-end companies, this will be January 1, 2020.  The determination of whether an entity is an SRC will be based on an entity’s most recent assessment in accordance with SEC regulations.  For all other entities, the Board decided that CECL will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early adoption will continue to be permitted; that is, early adoption is allowed for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (that is, effective January 1, 2019, for calendar-year-end companies).   
 
Hedging—The Board decided to retain the existing effective date for Hedging for PBEs, which is for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; that is, effective January 1, 2019, for calendar-year-end companies. The Board decided to defer the mandatory effective date for Hedging for all other entities by an additional year. Therefore, Hedging will be effective for entities other than PBEs for fiscal years beginning after December 15, 2020 (effective January 1, 2021, for calendar-year-end companies), and interim periods within fiscal years beginning after December 15, 2021 (January 1, 2022, for calendar-year-end companies). Early adoption will continue to be allowed.
 
Leases—The Board decided to retain the existing effective date for Leases for (1) all PBEs, (2) not-for-profit bond obligors, and (3) employee benefit plans that file or furnish financial statements with the SEC, which is for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (effective January 1, 2019, for calendar-year-end companies). The Board decided to defer the mandatory effective date for Leases for all other entities by an additional year. Therefore, Leases will be effective for all other entities beginning after December 15, 2020 (January 1, 2021, for calendar-year-end companies), and interim periods within fiscal years beginning after December 15, 2021 (January 1, 2022, for calendar-year-end companies). Early adoption will continue to be allowed.

The Board concluded that it has received sufficient information and analysis to make an informed decision on the perceived costs of the changes and that the expected benefits would justify the expected costs of the amendments in the proposed Accounting Standards Update. The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot on the proposed amendments regarding the effective dates for CECL, Hedging, and Leases. 
 
The Board decided that the comment period for the proposed Update would be 30 days.

Insurance

The Board decided to add a project to the technical agenda to amend the effective dates for the recent amendments made to Topic 944, Financial Services—Insurance (referred to as Insurance).
 
The Board decided to provide PBEs with at least one additional year to transition to Insurance and to apply the two-bucket approach.  
 
Therefore, the Board decided that Insurance will be effective for PBEs that are SEC Filers, excluding SRCs as currently defined by the SEC, for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For calendar-year companies, this will be January 1, 2022.  The determination of whether an entity is an SRC would be based on an entity’s most recent assessment in accordance with SEC regulations.  For all other entities, the Board decided that Insurance will be effective for fiscal years beginning after December 15, 2023 (January 1, 2024, for calendar-year-end companies), and interim periods within fiscal years beginning after December 15, 2024 (January 1, 2025, for calendar-year-end companies). Early adoption will continue to be allowed.
 
The Board concluded that it has received sufficient information and analysis to make an informed decision on the perceived costs of the changes and that the expected benefits would justify the expected costs of the amendments in the proposed Accounting Standards Update. The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot on the proposed amendments regarding the effective dates for Insurance. 
 
The Board decided that the comment period for the proposed Update would be 30 days.


Leases implementation. The Board discussed a recent substantive inquiry related to lessors accounting for impairment of operating lease receivables after the adoption of Topic 842, Leases.
 
The Board decided that standard setting is currently unnecessary for this issue and instructed the staff to continue to monitor this issue for any significant diversity in practice. The Board agreed with the staff’s view on accounting for the impairment of operating lease receivables, which is included in the Board handout.  The Board directed the staff to post the Board handout on the FASB website.  


Revenue implementation. The Board discussed a recent substantive inquiry related to implementation of the contract combination guidance in Topic 606, Revenue from Contracts with Customers, for colleges and universities. No technical decisions were made.


Open discussion.  The acting technical director announced the issuance today of a second FASB staff question-and-answer document (Q&A) on the credit losses standard. The Q&A addresses forecasting and other issues.  The acting director also announced that today the Board authorized the FASB staff to plan a series of CECL workshops to be held around the country.  More information about the workshops will be available on the FASB website in the coming weeks.