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, February 7, 2018 FASB Board Meeting
Collaborative arrangements—targeted improvements. The Board discussed the project scope for potential improvements to Topic 808, Collaborative Arrangements, based on the feedback received during workshops held with stakeholders in December 2017.
The Board decided to retain the current scope of the project. The current scope includes certain transactions between participants of a collaborative arrangement; it excludes transactions directly related to sales to third parties. The current scope clarifies when certain transactions are within the scope of the revenue guidance; it does not include the development of a model for the financial reporting for non-revenue transactions.
On the remaining issues for deliberations, the Board decided the following:
- Entities would be required to apply the amendments resulting from the proposed Accounting Standards Update using a retrospective approach. The amendments would be required to be applied retrospectively as of an entity’s adoption date of Topic 606, Revenue from Contracts with Customers, subject to modification using the practical expedients in paragraph 606-10-65-1(h).
- Additional recurring disclosures should not be required as a result of the targeted improvements, given the existing disclosures in Topics 606 and 808.
Disclosure framework: disclosure review—fair value measurement. The Board redeliberated the amendments in the proposed Accounting Standards Update, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.
The Board made the following decisions:
Level 3 Rollforward
The Board confirmed its decision to retain the Level 3 rollforward and not require a rollforward of Level 1 and Level 2 of the fair value hierarchy.
Change in Unrealized Gains and Losses
The Board confirmed the proposed amendment to require an entity to disclose the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period.
The Board did not confirm the proposed amendment to require an entity to disclose the changes in unrealized gains and losses included in other comprehensive income and earnings (or changes in net assets) for recurring Level 1 and Level 2 fair value measurements held at the end of the reporting period, disaggregated by level of the fair value hierarchy.
The Board confirmed the proposed amendment to clarify that the narrative description should communicate information about the uncertainty in fair value measurements at the reporting date.
The Board confirmed the proposed amendment to require an entity to disclose the range and weighted average used to develop significant unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Board decided to require that an entity disclose how it calculated the weighted average. The Board also decided that if, for certain assets and liabilities (for example, derivative instruments), an entity determined that other quantitative information (such as, the median and arithmetic average) would be a more reasonable and rationale method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements, the entity may disclose such quantitative information in lieu of the range and weighted average. The Board decided that if an entity decides to disclose other quantitative information, the entity would not have to disclose its reason for omitting the range and weighted average.
The Board did not confirm the proposed amendment to require an entity to disclose the time period used to develop significant unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy.
The Board confirmed the proposed amendments to remove the following disclosures:
- The amounts of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy
- The policy for timing of transfers between levels of the fair value hierarchy
- The valuation policies and procedures for Level 3 fair value measurements.
The Board will complete redeliberations at a future meeting.
Reclassification of certain tax effects from accumulated other comprehensive income. The Board discussed feedback received on the proposed Accounting Standards Update, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The Board decided to:
- Clarify that the reclassification amount should include (a) the effect of the change in the U.S. federal corporate tax rate and (b) other stranded tax amounts related to the application of the Tax Cuts and Jobs Act of 2017 that an entity elects to reclassify. An entity will be required to disclose the other stranded tax amounts related to the application of the Tax Cuts and Jobs Act of 2017 that are reclassified.
- Allow entities an option to elect to reclassify the stranded tax amounts related to the application of the Tax Cuts and Jobs Act of 2017. An entity will be required to disclose whether it elects to make the reclassification.
- Require entities with stranded tax effects to disclose their accounting policy for releasing those amounts.
- Allow entities an option to record the reclassification either retrospectively or at the beginning of the annual or interim period in which the amendments are adopted.
- Require the transition disclosures, as proposed.
- Allow early adoption for public business entities for which financial statements have not yet been issued and all other entities for which financial statements have not yet been made available for issuance.
- Affirm the effective date for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
Analysis of Costs and Benefits
The Board concluded that it has received sufficient information and analysis to make an informed decision on the issues presented and that the expected benefits of the amendments justify the expected costs.
The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.
Planned Issuance of Final Update
The Board expects to issue the final Update no later than Friday, February 16, 2018.Ratification of an EITF consensus-for-exposure. The Board ratified the consensus-for-exposure reached at the January 18, 2018 EITF meeting on Issue 17-A. The Board directed the staff to draft a proposed Accounting Standards Update reflecting the consensus-for-exposure for vote by written ballot. The Board decided to expose the proposed Update for public comment for a period of 60 days.
Issue No. 17-A, “Customer’s Accounting for Implementation, Setup, and Other Upfront Costs (Implementation Costs) Incurred in a Cloud Computing Arrangement That Is Considered a Service Contract”
At its January 18, 2018 EITF meeting, the Task Force reached a consensus-for-exposure that would require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 on internal-use software to determine which costs to implement the service contract would be capitalized as an asset related to the service contract and which costs would be expensed. The accounting for the service element of a hosting arrangement that is a service contract would not be affected by this consensus-for-exposure. The amortization period of the capitalized implementation costs of a hosting arrangement that is a service contract would include periods covered by renewal options that are reasonably certain to be exercised. In addition, the Task Force decided that an entity would present the expense related to the capitalized implementation costs of a hosting arrangement that is a service contract in the same line item in the statement of income as the fees associated with the hosting arrangement. The Task Force decided not to propose guidance related to scope of the proposed amendments; however, the Task Force did decide to amend the definition of the term hosting arrangement to remove the reference to licensing. The Task Force decided to remain silent on whether an entity may apply the proposed guidance by analogy to other transactions or activities. The Task Force also decided against defining the term implementation costs in the Master Glossary of the Accounting Standards Codification.
The Task Force also reached a consensus-for-exposure to require an entity (customer) in a hosting arrangement that is a service contract to provide certain qualitative and quantitative disclosures. Those disclosures also would extend to implementation costs incurred for internal-use software.
For transition, the Task Force reached a consensus-for-exposure that would provide an entity with an option to apply the guidance either retrospectively or prospectively. The transition disclosures would depend on the transition approach an entity selects.
Segment reporting. The Board discussed the implications associated with potentially modifying and re-ordering the process for determining reportable segments and moving the quantitative threshold tests earlier in that process. The Board also discussed potential changes to the quantitative thresholds (of revenue, profit or loss, and assets) that require public entities to separately disclose information about operating segments that meet those thresholds. The purpose of the discussion was to establish the parameters of the extended preparer outreach that the Board and staff intend to undertake this year.
The staff will bring an analysis of additional issues in the future.