FASB Votes to Finalize Amended Technical Corrections Proposal

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By Denise Lugo

April 10— Aspects of a “technical corrections and improvements” proposal that includes transition guidance for stock compensation, participating mortgage loans and personal financial statements will be finalized, the Financial Accounting Standards Board said April 7.

The changes apply to all companies for annual periods beginning after Dec. 15, 2015 and interim periods within those annual periods, FASB said April 7. Early adoption is permitted.

FASB issued the proposal September 2014 with a comment deadline that ended in December. Some aspects of the proposal related to pension and multiemployer plans, and recognition guidance to rules for fair value measurement, won't be finalized to avoid possibility of creating confusion, the board decided.

The proposal is part of an ongoing project to provide regular updates and improvements to the FASB's codification literature based on feedback from the board's constituents.

Stock Compensation

As part of the amendments, FASB said it would clarify the transition requirements for Subtopic 718-40, Compensation—Stock Compensation—-Employee Stock Ownership Plans, so that it will be applied prospectively.

A company should recognize and present separately the cumulative effect of the change in accounting principles as an adjustment to the opening balance of retained earnings, the board said.

Also required, is that a company disclose that it was using a framework other than the framework in Topic 820 on fair value measurement in prior valuations, said FASB.

Furthermore, the company will be required to give a qualitative description of how the valuation methodology that was used differs from that of Topic 820and the possible effect on prior valuations.

The nature and reason for the change should also be disclosed, the board agreed.

Participating Mortgage Loans

For Subtopic 470-30, Debt—Participating Mortgage Loans, a company should recognize and present separately the cumulative effect of the change in accounting principle as an adjustment to the opening balance of retained earnings, said FASB.

A company can elect to apply the guidance retrospectively, and will be required to disclose the nature and reason for the change.

Personal Financial Statements

The amendments to Subtopic 274-10, Personal Financial Statements—Overall, should be applied prospectively, the board agreed.

Companies should recognize and present separately the cumulative effect of the change in accounting principle as an adjustment to the opening balance of retained earnings, or net worth, for all estimated current value of investments in real estate on the balance sheet of the effective date.

A disclosure about the nature and reason for the change would also be required.

Making Technical Clarifications

In response to comments received from its constituents, FASB said it would amend Subtopic 255-10, Changing Prices—Overall, to clarify that trading securities can be held in any type of trading account.

In addition the board will remove wording that implies that the securities were held for resale to customers only.

The board said it would also clarify that under Subtopic 320-10, Investments—Debt and Equity Securities—overall, when one of a paired structured note is sold, it should be measured like a participating interest in paragraph 860-20-40-1A.

Additionally, in the Master Glossary, the term “readily determinable fair value” will be changed to provide a parallel sentence structure between all listed components of the definition.

In guidance for not-for-profit entities presentation of financial statements, Subtopic 958-205, the board will clarify an illustration to show the accounting for situations resulting in the expiration of donor imposed restrictions.

Removing Redundancies

The board also voted to remove corrections that have been made in other accounting standards updates for the following:

•  Subtopic 805-50, Business Combinations—Related Issues;

•  Subtopic 810-30, Consolidation—Research and Development Arrangements;

•  Subtopic 970-323, Real Estate—General—Investments—Equity Method and Joint Ventures; and

•  Subtopic 958-605, Not-for-Profit Entities—Revenue recognition.

 

To contact the reporter on this story: Denise Lugo in Norwalk, Conn., dlugo@bna.com

To contact the editor on this story: Laura Tieger Salisbury at lsalisbury@bna.com

For a summary of the board's decisions go to http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FActionAlertPage&cid=1176165916229

For a discussion on grant dates and backdating, see 5109-2nd, Accounting for Share-Based Compensation, at 5109.II.C.1.d.