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, November 10, 2021 FASB Board Meeting

Leases implementation. Since issuing Accounting Standards Update No. 2016-02, Leases (Topic 842), in February 2016, the FASB has issued two effective date deferrals for certain entities: one in June 2020 and one in November 2019. Today, the Board decided not to provide a third effective date deferral of Topic 842 for entities within the scope of paragraph 842-10-65-1(b) (generally private companies and certain not-for-profit organizations).



Fair value hedging—portfolio layer method. The Board discussed comment letter feedback and completed its redeliberations on the proposed Accounting Standards Update, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. The Board made the following decisions:
 
Scope
 
The Board decided to expand the scope of assets eligible for portfolio layer method hedging to include all financial assets.
 
Attributes of Assets in the Closed Portfolio
 
The Board decided to remove the requirement that all assets in the closed portfolio have a contractual maturity date on or after the earliest-ending hedge period.
 
Fair Value Hedge Basis Adjustments
 
The Board affirmed the following decisions included in the proposed Update related to fair value hedge basis adjustments to:
  1. Require an entity to maintain fair value hedge basis adjustments at the closed portfolio level for a currently designated hedge
  2. Prohibit an entity from considering portfolio layer method fair value hedge basis adjustments on a currently designated hedge in its determination of credit losses.
 Breaches
 
The Board decided to align the anticipated and actual breach guidance in the following respects to:
  1. Allow partial dedesignation
  2. Require an entity to follow a rational approach to determine which layer or layers to dedesignate in a multiple-layer hedge.
For an actual breach, the Board decided to require that an entity:
  1. Present the fair value hedge basis adjustment associated with a breach in interest income
  2. Disclose the following for each actual breach:
    1. The amount of the fair value hedge basis adjustment recognized in interest income because of the breach
    2. The circumstance(s) that led to the breach.
Disclosures
 
The Board affirmed the following decisions included in the proposed Update to require:
  1.  The disclosure of portfolio layer method fair value hedge basis adjustments related to currently designated hedges as reconciling items in disclosures outside hedge accounting
  2. The same hedge accounting disclosures for multiple-layer hedges that are required for current single-layer hedges in paragraph 815-10-50-4EEE.
Transition and Effective Date
 
Related to transition, the Board decided that an entity would: 
  1. Record the effect of applying the fair value hedge basis adjustment amendments as a cumulative-effect adjustment to the opening balance sheet of retained earnings in the year of adoption
  2. Apply multiple-layer portfolio layer method hedge guidance prospectively
  3. Be allowed to apply the amendments related to disclosures on either a full retrospective or prospective basis
  4. Disclose the nature of and reason for the change in accounting principle in transition and the cumulative effect of the change on the opening balance of each affected component of equity or net assets on the balance sheet as of the date of adoption
  5. Be allowed to reclassify debt securities from held-to-maturity to available-for-sale upon adoption of a final Update only if the entity intends to apply portfolio layer method hedging to a closed portfolio that includes those debt securities. The decision of which securities to reclassify must be made within 30 days after the date of adoption, and the securities must be included in a closed portfolio that is designated in a portfolio layer method hedge within that 30-day period.
Related to effective date, the Board decided that: 
  1. Public business entities would be required to adopt the amendments in a final Update for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. All other entities would be required to adopt the amendments for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.
  2. Early adoption would be permitted on any date on or after issuance of a final Update for an entity that has adopted Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, for the corresponding fiscal and interim period (if applicable).
Cost-Benefit Analysis
 
The Board decided that it has received sufficient information and analysis to make an informed decision on the expected costs of the amendments and that the expected benefits of the amendments justify the expected costs.
 
Next Steps 
 
The Board directed the staff to draft an Accounting Standards Update for vote by written ballot.