The Financial Accounting Standards Board (FASB) indicated in its recently released 2016 preview video that 2015 was a big year, with significant progress made on key projects. This FASB Update is designed to provide an overview of recently issued Accounting Standards Updates (ASUs), an overview of certain ASUs that are effective for 2015 financial reporting, and to discuss selected projects that are on the FASB’s agenda for 2016 and beyond.
Seventeen ASUs were released during 2015. Although early adoption is permitted in some cases, all but two of these updates (ASU 2015- 10, Technical Corrections and Improvements and ASU 2015- 15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of- Credit Arrangements) are not effective until sometime after the 2015 reporting period.
The two biggest projects that seem to be permanent fixtures on the FASB’s agenda relate to revenue and leases:
- In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the new revenue standard by one year. It is now effective in 2018 and 2019 for public and nonpublic entities, respectively.
- In November 2015, the FASB voted to send a new lease accounting standard for final drafting, with expectations of completion in the first quarter of 2016. Under the standard, it is likely that lessees will recognize assets and liabilities arising from certain leases, amongst other changes. It becomes effective in 2019.
Newly Effective ASUs
Nine ASUs that were issued during 2014 will be effective for 2015 financial reporting. Of those, three came out of the Private Company Council (PCC), whose goal is to propose alternative treatments under US GAAP for private companies. The three newly effective PCC alternatives are:
- ASU 2014-02, Accounting for Goodwill, allowing private companies to elect to amortize goodwill.
- ASU 2014-03, Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps – Simplified Hedge Accounting Approach, allowing private companies a practical expedient to obtain cash flow hedge accounting treatment for certain swaps.
- ASU 2014-07, Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements, allowing certain private company lessees to elect not to apply variable interest entity guidance to a lessor entity under common control.
Other ASUs that cover areas such as investments in qualified affordable housing projects, discontinued operations, variable interest entities, repurchase financings, certain government-guaranteed mortgage loans, and pushdown accounting will also be effective.
On the Agenda
In addition to the revenue and lease projects noted above, the FASB has a lot on its plate in 2016. Two key projects to mention are as follows:
- Disclosure Framework Project. The goal of the project is to improve the effectiveness of disclosures in the financial statement notes by clearly communicating the information that is most important to users. In connection, the concept of materiality is being deliberated in regards to what role it should play in the notes. The project is being tested within fair value measurement, defined benefit plans, income taxes, and inventory. An exposure draft has already been released regarding fair value measurement and the comment period ends February 29, 2016.
- Final Standards and Exposure Drafts. It is expected that final drafts of at least ten new standards (note that ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, to address certain aspects of financial instruments, has already been released) and exposure drafts covering at least seven different topics will be issued in the first half of 2016. Some of the areas include impairment and hedge accounting for financial instruments, employee share based payments, prepaid stored value cards, simplifying the transition to equity method accounting, goodwill impairment, simplifying the balance sheet classification of debt, and the classification of certain cash receipts and payments on the statement of cash flows.
The FASB also has various other projects that are in initial deliberations, out for public comment, in redeliberations, or in the research phase at this point in time. In the same video mentioned in the opening, the FASB stated it is looking to continue its momentum in 2016, with targeted improvements to the standards as well as educational initiatives on standards about to be finalized.
Craig B. Evans can be reached at Email or 215.441.4600.
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