Summary of Board Decisions

Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.

August 7, 2013 FASB Board Meeting

FASB Endorsement of Private Company Council (PCC) Proposal. The Board endorsed the following Private Company Council (PCC) decisions reached at the July 16, 2013 PCC meeting.

PCC Issue No. 13-02, “Applying Variable Interest Entity Guidance to Common Control Leasing Arrangements”

A private company lessee can elect the alternative under this proposed guidance and not apply variable interest entity (VIE) guidance for assessing whether it should consolidate the lessor entity when the arrangement between a private company lessee and a lessor entity meets all of the following conditions:

  1. The private company and legal entity are under common control.
  2. The private company has a lease arrangement with the legal entity.
  3. Substantially all activities between the private company and the legal entity are related to the leasing activities (including supporting leasing activities) of the legal entity.

While VIE guidance would no longer apply to the lessor entity, a private company would still have to consider other applicable FASB Accounting Standards Codification® Topics, such as Topic 840, Leases, and Topic 460, Guarantees, for transactions or arrangements between the two entities. In applying this proposed alternative, a private company would have to provide all of the following additional disclosures:

  1. The key terms of the leasing arrangements
  2. The amount of debt and/or significant liabilities of the lessor entity under common control
  3. The key terms of existing debt agreements of the lessor under common control (for example, amount of debt, interest rate, maturity, pledged collateral, and guarantees)
  4. The key terms of any other explicit interest in the lessor entity.

If an entity elects to adopt this proposed accounting alternative, it would be applicable to all of its leasing arrangements that meet the requirements for applying this approach. This proposed alternative would be applied using a full retrospective approach.

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot with a comment period ending on October 14, 2013.

Applicability to Public Business Entities

The Board decided to include a question in the proposed Update that asks public business entity stakeholders whether they lack arrangements similar to those which the accounting alternative would address and, if not, to describe the arrangements that exist for public business entities that the Board should consider in determining the scope of the proposed Update. The Board decided to supersede the Example in paragraphs 810-10-55-87 through 55-89 and to expose that amendment in the proposed Update. The Board directed the staff to conduct outreach during the comment period with public company stakeholders about PCC Issue 13-02 through its customary outreach channels, including advisory groups and other meetings in which the FASB participates.

Disclosure Framework—Board’s Decision Process. The Board discussed (1) whether the decision process as described in Chapter 2 of the FASB Invitation to Comment, Disclosure Framework, appropriately addresses the needs of providers of resources to not-for-profit entities (especially donors) and, if not, what should be added or amended and (2) appropriate disposition of comments received on the decision questions in Chapter 2 about line items in financial statements (Questions L1–L16).

The Board made the following decisions:

  1. The Board’s decision process, including the decision questions and indicated disclosures, in the Invitation to Comment (as adjusted for subsequent Board decisions) is sufficient to address the needs of donors if the wording is modified to refer specifically to (a) donors in addition to investors, lenders, and other creditors and (b) pursuit of the entity’s mission or services it has provided and its ability to provide future services in addition to prospects for future cash flows.
  2. The indicated disclosure in Question L13 regarding the effect of changes in accounting standards that are not yet effective should be revised to make it clearer that an entity would not be expected to expend significant time and money to precisely and supportably estimate the effect if it has not already done so for its own purposes.
  3. A decision question related to the relationships between line items should be added to the Board’s decision process as follows in an Exposure Draft:
Question L17—Does a line item have a direct relationship to another line item or items in another statement that is not otherwise apparent?