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, June 10, 2020 FASB Board Meeting

Insurance accounting implementation. The Board discussed two agenda requests regarding the effective date of Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.
 
The Board decided to:
  1. Add a project to the technical agenda to amend the effective date of the amendments in Update 2018-12.
  2. Propose a one-year deferral of the effective date of the amendments in Update 2018-12 for all insurance entities.
  3. Propose a change to the early application provisions of Update 2018-12 whereby the early application transition date would be the beginning of the prior period. 
The Board decided not to:
  1. Add a project to the technical agenda to introduce an alternative effective date of the amendments in Update 2018-12 for certain reinsurance arrangements. 
Comment Period of the Proposed Accounting Standards Update
 
The Board decided to provide a 45-day comment period for the proposed Update.
 
Next Steps
 
The Board directed the staff to draft a proposed Update for vote by written ballot.


Distinguishing liabilities from equity (including convertible debt). The Board deliberated sweep issues and decided to:
  1. Clarify its intent about paragraph 815-40-25-10A(a) as follows:
    1. If a contract explicitly requires that an entity cash settle the contract if registered shares were unavailable (meaning unregistered shares are an unacceptable settlement to the counterparty), the entity would be precluded from classifying the contract as equity.
    2. If a contract is silent about cash settlement if registered shares are unavailable and/or permits unregistered share settlement, the entity would not be precluded from classifying the contract as equity.
  2. Retain the guidance in paragraph 470-20-25-13 on the presumption that a substantial premium represents paid-in capital and require that an entity disclose the following for a convertible debt instrument with a substantial premium:
    1. Fair value amount and the level of fair value hierarchy of the entire instrument for public business entities
    2. The premium amount recorded as paid-in capital for all entities.
Analysis of Costs and Benefits

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 final Update.
 
Next Steps
 
The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.
 

Not-for-profit gifts-in-kind. The Board discussed feedback received and completed redeliberations on proposed Accounting Standards Update, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets.
 
Scope

The Board affirmed that the scope of the project should be limited to contributed nonfinancial assets that are recognized by not-for-profit entities (NFPs).
 
Presentation

The Board affirmed that an NFP should present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash and other financial assets.
 
Disclosure

The Board decided to:
  1. Clarify that the amount of contributed nonfinancial assets should be disaggregated by category.
  2. Require an NFP to disclose its policy (if any) for monetizing rather than utilizing contributed nonfinancial assets.
  3. Not to add a requirement for an NFP to disclose its intent for future use of contributed nonfinancial assets, as proposed.
  4. Affirm that an NFP should disclose a description of any donor restrictions associated with the contributed nonfinancial assets.
  5. Require an NFP to provide a description of the valuation techniques and inputs used to arrive at a fair value measure for contributed nonfinancial assets in accordance with paragraph 820-10-50-2(bbb)(1), at initial recognition.
  6. Require an NFP to disclose the principal market (or most advantageous market) used to arrive at a fair value measure if it is a market in which the recipient NFP is prohibited by donor restrictions from selling or using the contributed nonfinancial asset.
Transition and Effective Date

The Board affirmed that an NFP should apply a retrospective method of transition.
 
The Board decided that the amendments will be effective for NFPs for annual reporting periods beginning after June 15, 2021, and interim periods within fiscal years beginning after June 15, 2022, with early adoption permitted.  
 
Analysis of Costs and Benefits and Next Steps

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 final Update. The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.
 
The Board also directed the staff to determine whether educational efforts are necessary for valuing contributed nonfinancial assets and to monitor how the Update improves transparency by providing better information to users.