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, December 9, 2020 FASB Board Meeting

Reference rate reform—Topic 848 scope refinement. The Board discussed comment letter feedback received on its proposed Accounting Standards Update, Reference Rate Reform (Topic 848): Scope Refinement, and made the following decisions:

Scope
  1. The Board affirmed its decision to clarify the scope of Topic 848 with the following changes to the proposed guidance to improve the clarity and operability:
    1. Clarify that contract modification relief may be applied to contracts that reference the London Interbank Offered Rate (LIBOR) or another reference rate that is expected to be discontinued as a result of reference rate reform and that are affected by the discounting transition
    2. Simplify the hedge accounting relief by removing the prescriptive guidance in proposed paragraph 848-30-25-9A on the addition of one or more basis swaps.
Additional Issues Identified
  1. The Board decided to provide additional optional relief to allow receive-variable-rate, pay-variable-rate cross-currency interest rate swaps that are affected by reference rate reform to continue to qualify as eligible hedging instruments in net investment hedges.
Transition and Effective Date
  1. The Board affirmed its decision that the optional relief guidance should be effective immediately with retrospective application available as of the date of application of the amendments in Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.
Cost-Benefit Analysis
  1. The Board decided 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 an Accounting Standards Update for vote by written ballot.


Revenue recognition—practical expedient for private company franchisors. The Board discussed the comment letter feedback on the proposed Accounting Standards Update, Franchisors—Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient. The Board also completed redeliberations on the project.

The Board affirmed the following aspects of the proposed guidance:
  1. Provide a practical expedient that allows a franchisor that is not a public business entity to account for pre-opening services as distinct if they are consistent with a predefined list of services. The Board affirmed the list that was included in the proposed Update.
  2. Require disclosure about the use of the practical expedient.
The Board decided to change the following aspects of the proposed guidance:
  1. Remove the screen criterion that was included in paragraph 952-606-25-3 of the proposed Update.
  2. Include an accounting policy election (and related disclosure) for entities to account for pre-opening services as a single bundled performance obligation or perform a Step 2 analysis to determine whether those pre-opening services are distinct from each other.
  3. Remove Case A in Example 1 in the proposed Update.
The Board affirmed the transition and effective date that were included in the proposed Update.
  1. Entities that have not yet adopted Topic 606, Revenue from Contracts with Customers, should apply the transition provisions and effective date in paragraph 606-10-65-1.
  2. Entities that previously adopted Topic 606 should apply a full retrospective method of transition that would include the entity’s first reporting period under Topic 606 and provide the transition disclosures that were included in the proposed Update. For those entities, the amendments will be effective for annual and interim reporting periods beginning after December 15, 2020. Early application will be permitted.
Next Steps

The Board directed the staff to draft an Accounting Standards Update for vote by written ballot.


Conceptual framework—presentation. The Board discussed the feedback from comment letter respondents on several issues related to proposed FASB Concepts Statement No. 8, Conceptual Framework for Financial ReportingChapter 7, Presentation. The Board decided to:
  1. Continue to use the term full set of financial statements, with additional explanatory text added to the proposed Chapter 7 that states not including notes in the definition of a full set of financial statements is not meant to denigrate notes or to change current standards or practice.
  2. Clarify that netting is not the aggregation of individual items into line items and that assets and liabilities should not be aggregated.
  3. Not provide a conceptual basis for netting.
The Board also decided not to address the following:
  1. Operating income at the conceptual framework level.
  2. Subtotals or how the factors are applied to them any further in the proposed Chapter 7.
  3. Cost-benefit, specifically in the proposed Chapter 7.
Next Steps

The Board directed the staff to draft the final Concepts Statement chapter on presentation of financial statements for vote by written ballot.