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, March 24, 2021 FASB Board Meeting

Ratification of an EITF consensus.

EITF Issue No. 19-B, “Revenue Recognition: Contract Modifications of Licenses of Intellectual Property.” The Board discussed the project direction based on the recommendation of the Emerging Issues Task Force (EITF) at its March 11, 2021 meeting. The Board removed the project from its technical agenda and will consider the issue as part of the Post-Implementation Review (PIR) process of Topic 606, Revenue from Contracts with Customers

Ratification of EITF consensus on EITF Issue No. 19-C, “Issuer’s Accounting for Certain Modifications of Freestanding Equity-Classified Written Call Options.” The Board ratified the following consensus reached by the EITF at its March 11, 2021 meeting and directed the staff to draft an Accounting Standards Update reflecting the consensus for vote by written ballot. 
The Task Force reached a consensus to limit the scope of the amendments in the final Update to an issuer’s accounting for modifications of freestanding equity-classified written call options that remain equity classified after modification. The Task Force also reached a consensus on the following:
  1. To affirm the proposed recognition framework in the proposed Accounting Standards Update, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Forwards and Options
  2. To affirm the proposed measurement approach subject to certain conforming changes to ensure consistency with the existing requirements in Subtopic 470-50
  3. To affirm the proposal whereby no specific allocation approach is prescribed for situations in which the substance of the transaction includes multiple elements
  4. To affirm certain clarifying changes to the amendments in the final Update and to add an example in Subtopic 815-40 for modifications related to compensation for goods or services and include a related reference in Topic 718
  5. To require disclosures about the nature and effect of a modification within the scope of the amendments in the final Update.
The Task Force also reached a consensus on other items, including transition (prospective only), an effective date for all entities for fiscal years beginning after December 15 2021, including interim periods within those fiscal years, and permitting early adoption.

Consolidation of a not-for-profit entity by a for profit sponsor. In determining whether a for-profit entity should consolidate a not-for-profit entity (NFP) that it sponsors, the Board observed that for-profit entities, as an accounting policy election, often analogize to Topic 810, Consolidation, or Subtopic 958-810, Not-for-Profit Entities—Consolidation, or refer to nonauthoritative guidance. The staff’s research revealed that for-profit sponsors predominantly do not consolidate such NFPs. The project was added in part because there was a view that there was diversity in practice in making the consolidation determination.  However, the additional research performed by the staff after the Board’s initial agenda decision showed that consolidation of an NFP by a for-profit sponsor is not sufficiently pervasive to amend GAAP. Therefore, the Board removed the project from its technical agenda.

For those for-profit entities that are consolidating an NFP, some Board members stated that the for-profit entity could consider a voluntary change in accounting policy that would result in deconsolidation.