The FASB and IASB have been working on a joint project on financial instruments. The project includes classification and measurement of financial instruments and impairment of financial assets. However, the boards have not converged on each element, so there are expected to be differences in the final standards.
Key Developments Related to Classification and Measurement
- The FASB has completed redeliberations of its May 2010 proposal for classification and measurement of financial instruments. The FASB's May 2010 exposure draft proposed a full fair value model for all financial instruments. On February 14, 2013 the FASB issued its revised exposure draft, which reflects the FASB’s decision to go back to a mixed measurement model that includes measurement at amortized cost for financial assets that are held to collect contractual cash flows. The exposure draft comment period ended on May 15, 2013.
- The IASB has completed its deliberations on targeted amendments to its classification and measurement standard (IFRS 9) and issued an exposure draft in November 2012. The comment period ended on March 28, 2013.
- The FASB has decided that debt investments (loans and debt securities) will be evaluated under a cash flow characteristics test and business model assessment. Instruments passing the cash flow characteristics test will be classified and measured at amortized cost or fair value with changes in fair value recognized in other comprehensive income (OCI), depending on the entity’s primary objective for holding the investment. Fair value with changes in fair value recognized in net income will be the default category.
- Equity investments (not accounted for under the equity method) will be measured at fair value with changes in fair value recognized in net income. However, entities other than investment companies and broker-dealers will be afforded a practicability exception for investments that do not have readily determinable fair values.
- Financial liabilities will generally be recorded at amortized cost with limited exceptions. The fair value option will remain in limited circumstances; if elected, market adjustments related to an entity’s own credit will be recorded in OCI. Separate accounting for embedded derivative features remains, and embedded derivatives will still be measured at fair value with changes in fair value recognized in net income.
- The FASB’s existing guidance that looks to significant influence in determining whether the equity method of accounting should apply will be retained, except that equity method investments held for sale will be measured at fair value with changes in fair value recognized in net income. A practicability exception would apply for equity method investments that do not have a readily determinable fair value; they would be measured at cost less impairment adjusted for observable prices.
- The IASB's classification and measurement standard for debt investments is substantially the same as the FASB model. Differences between the IASB standard and the FASB proposal will remain, specifically in the accounting for equity investments.
- Comment letters summarized by the FASB indicate that a majority of respondents support the goal of reducing complexity in financial instruments accounting but many believe it would not be achieved under the proposal. Many felt that the cash flow characteristics test would inappropriately limit the number of debt investments that would be eligible for amortized cost or fair value through other comprehensive income measurements. While respondents tended to agree with a business model assessment, a majority felt that the restrictions on sales out of the amortized cost category would inappropriately limit companies' ability to manage their credit risk exposures.
- The IASB's proposal, comprising limited amendments to its classification and measurement standard, generally received support. A majority of respondents supported adding a fair value through other comprehensive income category to the amortized cost and fair value through net income categories for debt investments.
Key Developments Related to Impairment
- In 2012, the FASB and IASB moved in different directions in their approaches to developing a new impairment model for financial assets. The IASB's approach would classify debt investments into categories that reflect the pattern of credit deterioration over time. The categories would determine the amount and timing of when credit losses would be recognized in earnings. Assets would initially be recognized in category one, where a credit loss would be recorded based on the probability of a default in the next twelve months. Assets would move to category two when there has been a significant deterioration in credit risk. At that point an allowance would be recorded to reflect a lifetime of expected credit losses. The IASB issued an exposure draft on its impairment model, referred to as the “credit deterioration model,” in March, 2013.
- The FASB believes that aspects of the IASB's model are difficult to operationalize and would result in a credit allowance that does not fully represent all expected losses on an asset. Prior to experiencing a significant deterioration in credit, the IASB model would only record 12 months of expected losses. Thus, the FASB opted to establish a model that it views as more operational and would result in the full expectation of credit losses being reported on the balance sheet. The FASB's model, referred to as the current expected credit loss (CECL) model, requires an allowance to be recorded to reflect the amount of contractual cash flows not expected to be collected. The FASB issued an exposure draft on the CECL model in the fourth quarter of 2012.
- The comment period for the FASB’s exposure draft ended on May 31, 2013, and the comment period for the IASB’s exposure draft ended on July 5, 2013. Generally, respondents to the IASB model supported the proposed model, but suggested various refinements. The IASB is currently working to address these concerns. With respect to the FASB model, feedback was mixed. Users generally supported the FASB model, as they preferred a model that would require recognition of all credit losses (as opposed to only ‘some’ expected credit losses). Preparers, on the other hand, did not support the FASB’s proposed model. Preparers believed that recognition of a full lifetime of expected credit losses on day 1 would not reflect the economics of lending transactions. Instead, preparers preferred a model that would recognize those losses expected to occur in the ‘foreseeable future’ or some other truncated period.
- Classification & measurement: The Boards discussed the responses in May and June. Joint redeliberations began in September and are expected to run into the first quarter of 2014..
- Impairment: The FASB is in the process of redeliberating and determining what, if any, parts of their proposed model they are willing to revise. Further discussion is expected over the next several months.
In briefIn brief: Hedging: IASB issues final standard (No. 2013-47)
11/21/13 | Assurance services
IASB issues final standard which aligns hedge accounting with risk management.
Private company reporterPrivate company reporter - PCC approves alternative that exempts certain arrangements from VIE guidance
11/15/13 | Assurance services
The PCC approved a final standard that offers private companies an exemption from applying the VIE consolidation model to certain common control leasing arrangements.
Private company reporterPrivate company reporter - September 30 and October 1, 2013
10/7/13 | Assurance services
At its most recent meeting, the PCC approved final standards for the accounting for goodwill and for a simplified hedge accounting model for certain interest rate swaps.
In briefIn brief: FASB changes course on repurchase agreement project (No. 2013-43)
10/4/13 | Assurance services
The FASB decided to retain some aspects of the accounting model for repo agreements in its January 2013 exposure draft -- a significant change from its prior decisions.
Corporate Governance SeriesThe quarter close - Directors edition: A look at this quarter's financial reporting issues - Q3 2013
10/3/13 | Center for Board Governance
The Q3 2013 edition focuses on accounting and reporting issues for private companies that could impact public companies, statement of cash flows, entities under common control, contingencies, new vice-chairman at the FASB, PCAOB proposal on improving auditor reporting, and international developments on auditor rotation and retendering.
Setting the standardSetting the standard - September 2013
9/25/13 | Assurance services
Welcome to the latest edition of Setting the standard. It includes the latest updates on the standard-setting activities of the FASB and IASB. Learn more inside.
Quarter closeThe quarter close — Third quarter 2013: Publication and new video perspectives
9/17/13 | Assurance services
This edition updates you on recent FASB, SEC and other regulatory and corporate governance topics. Learn what's new now, and what to look for in the near future. We invite you to download our Q3 publication and view our new video perspectives.
EITF observerEITF observer - September 13, 2013 meeting highlights
9/17/13 | Assurance services
The EITF met on September 13th, 2013 to discuss three issues. PwC's EITF observer provides you an insightful summary of decisions reached and the changes affecting GAAP.
- Derivatives: Global convergence becomes global confusion
9/9/13 | Financial services regulatory practice
The CFTC offers a road map and timeline for cross border derivatives regulation, but much uncertainty remains.
DatalineDataline: Joint and several liability arrangements – FASB issues new guidance to achieve consistency (No. 2013-20)
9/4/13 | Assurance services
This Dataline discusses the key provisions of a new FASB standard issued in February 2013 to address diversity in accounting for joint and several liabilities.
Accounting guidesGuide to Accounting for Derivative Instruments and Hedging Activities - 2013 edition
8/23/13 | Assurance services
PwC is pleased to offer the 2013 edition of our popular publication, Guide to Accounting for Derivative Instruments and Hedging Activities.
Accounting guidesGuide to Accounting for Transfers and Servicing of Financial Assets - 2013 edition
8/23/13 | Assurance services
PwC is pleased to offer the 2013 edition of our popular publication, Guide to Accounting for Transfers and Servicing of Financial Assets.
Accounting guidesGuide to Accounting for Financing Transactions: What You Need to Know about Debt, Equity, and the Instruments in Between - 2013 edition
8/8/13 | Assurance services
The accounting guidance for the issuance, modification, conversion and repurchase of debt and equity securities has developed over many years into a complex set of rules. Although the guidance is now codified within the FASB’s Accounting Standards Codification, the analysis continues to involve detailed and sequential consideration of the relevant provisions of the guidance. Our Guide provides a roadmap to the applicable accounting literature to help you determine which steps are necessary for a particular transaction.
- Credit exposure: Affiliate transaction rule in sight
8/6/13 | Financial services regulatory practice
Various provisions of Dodd-Frank require banks to incorporate credit exposures from derivatives and securities financing transactions when calculating prudential limits.
DatalineDataline: Responses are in on the FASB and IASB's financial instruments credit loss proposals (No. 2013-18)
8/1/13 | Assurance services
This Dataline provides a high-level summary of the comments received on the board's respective credit loss proposals.
Corporate Governance SeriesBoardroomDirect: Update on current board issues - July 2013
7/31/13 | Center for Board Governance
This issue of BoardroomDirect® focuses on non-financial companies that use over-the-counter (OTC) derivatives to hedge risks, such as currency, interest rates, and fuel costs, are facing myriad decisions regarding the execution and management of those financial tools under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In briefIn brief: FASB updates hedging guidance to allow Fed Funds (or overnight index swap rate) as a benchmark interest rate (No. 2013-37)
7/18/13 | Assurance services
On July 17, 2013, the FASB issued ASU No. 2013-10, which permits an entity to designate the Fed Funds Effective Swap Rate ("Fed Funds rate"), also referred to as the overnight index swap rate ("OIS"), as a benchmark interest rate. In addition, the ASU removes the restriction on using different benchmark interest rates for similar hedges. The ASU is effective immediately. This In brief article provides an overview of the final standard.
DatalineDataline: Responses are in on the FASB and IASB's financial instruments classification and measurement proposals (No. 2013-15)
7/1/13 | Assurance services
This Dataline provides a high-level summary of the of the comments received on the board's respective proposals.
In briefIn brief: IASB provides relief for novation of derivatives (No. 2013-34)
6/28/13 | Assurance services
The IASB has published narrow-scope amendments to IAS 39, Financial instruments: Recognition and measurement. Similar provisions will be incorporated into the forthcoming chapter on hedge accounting in IFRS 9, Financial instruments. The amendments provide relief from parts of the hedge accounting requirements when a derivative is novated to a central counterparty (CCP), such as a central clearing organization, provided certain conditions are met.
In briefIn brief: FASB issues exposure draft on going concern (No. 2013-32)
6/27/13 | Assurance services
On June 26, 2013, the FASB issued a proposal that would require management to perform going concern assessments and provide related footnote disclosures in certain circumstances.
Setting the standardSetting the standard -- What you need to know about the FASB's and IASB's standard setting activities -- June 2013
6/27/13 | Assurance services
This edition includes the latest information on the standard-setting activities of the FASB and IASB. Learn about key accounting and reporting changes being considered.
Quarter closeThe quarter close — Second quarter 2013: Publication and new video perspectives
6/18/13 | Assurance services
This edition updates you on recent FASB, SEC and other regulatory and corporate governance topics. Learn what's new now, and what to look for in the near future. We invite you to download our Q2 publication and view our new video perspectives.
EITF observerEITF observer: A meeting synopsis - June 2013
6/14/13 | Assurance services
The EITF met on June 11, 2013 to discuss six issues. PwC's EITF observer provides you an insightful summary of decisions reached and the changes affecting US GAAP.
Private company reporterPrivate company reporter - June 13, 2013
6/13/13 | Assurance services
On June 10, the FASB endorsed each of the accounting alternatives previously approved by the PCC, related to intangible assets, goodwill and interest rate swaps. This edition of Private company reporter provides further information on the proposed alternatives, as well as highlights of other recent developments related to private company reporting.
In briefIn brief: FASB issues final standard on investment companies (No. 2013-30)
6/11/13 | Assurance services
On June 7, 2013, the FASB issued amendments to ASC 946 that modify the definition of an investment company under US GAAP. This In brief article provides an overview of the new guidance.
- Derivatives: SEFs - Opening bell sounds
6/7/13 | Financial services regulatory practice
This FS Regulatory Brief describes this new regulatory environment for mandatory electronic swaps trading and highlights considerations for the buy-side and sell-side.
PwC comment letter (FASB)PwC comments on FASB's proposed Accounting Standards Update, Financial Instruments — Credit Losses
5/31/13 | Assurance services
PwC does not support the FASB's proposed standard on credit losses and provides recommendations to the boards for an enhanced model.
PwC comment letter (FASB)PwC comments on FASB's Proposed Accounting Standards Update, Recognition & Measurement of Financial Assets & Liabilities
5/15/13 | Assurance services
PwC issued its comment letter on the FASB's Proposed Accounting Standards Update, Recognition & Measurement of Financial Assets & Liabilities.
DatalineDataline: How FASB's financial instruments proposals would affect not-for-profit organizations (No. 2013-08)
4/26/13 | Assurance services
In February 2013, the FASB issued a revised exposure draft of a proposed standard for the classification and measurement of financial instruments (the "C&M proposal"). A proposed impairment model for debt instruments was described in a separate exposure draft issued in December 2012 (the "impairment proposal"). This Dataline discusses how the classification, measurement, and impairment approaches described in those proposals might be applied by most not-for-profit organizations.
DatalineDataline: A summary of the IASB proposal on impairment of financial assets – Including a comparison to the IAS 39 model and the FASB’s credit loss proposal (No. 2013-07)
4/25/13 | Assurance services
In March 2013, the IASB an exposure draft (ED), Financial Instruments: Expected Credit Losses, that proposes an expected loss model to replace the current incurred loss model of IAS 39, Financial Instruments: Recognition and Measurement. In December, 2012, the FASB also released a proposal on impairment of financial assets. This Dataline looks at the IASB's proposal and compares it to the IAS 39 model and the FASB's proposal.
WebcastFASB and IASB proposals on impairment of financial assets webcast – April 25, 2013
The FASB and IASB both recently issued proposals on financial instruments impairment for public comment. On this PwC webcast, we provide an overview of the key elements of both proposals (including the FASB's FAQ) and compare and contrast them.
PwC comment letter (IASB)PwC Comments on Exposure Draft: Novation of Derivatives and Continuation of Hedge Accounting
4/2/13 | Global accounting consulting services
PwC supports the board’s efforts in clarifying whether an entity is required to discontinue hedge accounting when an over-the-counter (OTC) derivative is novated to a central counterparty (CCP) as required by law or regulation. We also appreciate the board’s responsiveness in addressing this urgent issue in a pragmatic way, as requiring entities to treat such novations as a discontinuance of hedge accounting would not provide useful information to investors.
PwC comment letter (FASB)PwC Comments on Proposed ASU: Transfers and Servicing (Topic 860): Effective Control for Transfers with Forward Agreements to Repurchase Assets and Accounting for Repurchase Financings
3/29/13 | Assurance services
PwC fully supports the Board’s continuing efforts to respond in a timely manner to stakeholder concerns over elements of the transfers of financial assets accounting model.
PwC comment letter (IASB)PwC Comments on Exposure draft: Classification and Measurement: Limited Amendments to IFRS 9
3/28/13 | Global accounting consulting services
PwC agrees with the board’s objectives to amend IFRS 9 and commend the board on their progress in achieving those objectives. The letter includes key comments that we would like to raise with the board.
In briefIn brief: FASB issues Q&A and extends comment period for credit impairment proposal (No. 2013-16)
3/28/13 | Assurance services
On March 25, the FASB issued a document that addresses key questions about its proposed impairment model for financial assets. In addition, the FASB reached a decision at its March 28 meeting to extend the comment period for its impairment proposal to May 31, 2013.
Setting the standardSetting the standard -- What you need to know about the FASB's and IASB's standard setting activities -- March 2013
3/25/13 | Assurance services
Our Q1-2013 edition provides updates on the latest developments in revenue recognition, classification and measurement of financial instruments, impairment of financial assets, leases, insurance contracts, and more.
DatalineDataline: Financial instruments classification and measurement – FASB issues its exposure draft (No. 2013-05)
3/22/13 | Assurance services
Classification and measurement is an important part of the FASB and IASB’s joint project on financial instruments. The boards have agreed on changes that will broadly converge the accounting for debt investments and financial liabilities, but significant differences in accounting for equity investments will remain. The FASB issued its exposure draft on February, 14 2013 with a comment period ending May 15, 2013. The comment period on the IASB exposure draft, which was issued in November 2012, ends on March 28, 2013. This Dataline looks at FASB’s proposals as outlined in its exposure draft and compares them to the IASB's model.
Quarter closeThe quarter close — First quarter 2013: Publication and new video perspectives
3/18/13 | Assurance services
This edition of The quarter close highlights current developments in financial reporting, including key standard-setting developments in revenue, financial instruments, and other hot topics, as well as SEC and PCAOB regulatory updates.
In briefIn brief: FASB moves forward with final standard on investment companies (No. 2013-14)
3/14/13 | Assurance services
On March 13, 2013, the FASB met to discuss investment companies, a joint project with the IASB. The FASB discussed certain proposed disclosures designed to increase transparency into an investment company's interest in an investee fund. These investee fund disclosures have been the final area of focus as the FASB finalizes its standard on investment companies. At its meeting, the FASB decided to remove the proposed disclosures from the current project and re-evaluate them at a later date. The FASB also agreed to move forward with issuing a final standard on investment companies.
In briefIn brief: IASB issues exposure draft on impairment of financial instruments (No. 2013-13)
3/8/13 | Assurance services
Following several years of discussions and two previously published proposals, the IASB has issued an exposure draft, Financial Instruments: Expected Credit Losses. The proposed guidance introduces an expected loss impairment model that will replace the incurred loss model used today. This In brief article provides an overview the IASB's proposal.
In briefIn brief: IASB issues exposure draft on novation of derivatives (No. 2013-12)
3/6/13 | Assurance services
The IASB has issued an exposure draft proposing a limited scope amendment to IAS 39, Financial instruments: Recognition and measurement, and to the forthcoming chapter on hedge accounting in IFRS 9, Financial instruments. The exposure draft proposes some relief from the hedge accounting requirements when a derivative is novated to a central counterparty (CCP), such as a central clearing organization, under certain circumstances.
In briefIn brief: FASB proposes a new model for classification and measurement of financial instruments (No. 2013-08)
2/15/13 | Assurance services
On February 14, the FASB issued a revised proposal for the classification and measurement of financial instruments. Classification and measurement is one part of the FASB and IASB’s broader financial instruments project. The other parts consist of impairment and hedge accounting. The IASB previously finalized its classification and measurement approach, but in late 2012, proposed targeted amendments to its guidance. This In brief article provides an overview of the proposal.
In briefIn brief: FASB decides on new accounting model for certain guarantees (No. 2013-06)
2/6/13 | Assurance services
The FASB decided at its February 6 meeting that certain guarantees issued by non-insurers, including certain financial guarantees issued by banks and other financial institutions, should be included in the scope of the proposed insurance contracts standard. The FASB’s tentative decision will be exposed for comment as part of its insurance contracts exposure draft. The exposure draft is expected by the end of the second quarter of 2013. This In brief article provides an overview of the FASB's tentative decision.
In briefIn brief: FASB finalizes amendment to clarify the scope of balance sheet offsetting disclosures (No. 2013-04)
2/1/13 | Assurance services
On January 31, 2013, the FASB issued Accounting Standards Update No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (the "ASU"). The ASU limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement or similar agreement. This In brief article provides an overview of the scope clarification.
In briefIn brief: FASB proposes amendments to repurchase agreement accounting model (No. 2013-02)
1/17/13 | Assurance services
On January 15, the FASB published for public comment an exposure draft to amend the accounting for repurchase agreements (aka “repos”) in an effort to identify those transactions that should be accounted for as a secured borrowing and to improve the associated accounting and disclosure requirements. The proposal will likely affect some companies that engage in certain types of repurchase agreements, including repos-to-maturity. It will also affect companies that engage in repurchase financing agreements and currently account for the components as a linked transaction. This In brief article provides an overview of the key provisions of the proposal.
DatalineDataline: Credit losses on financial assets -- An overview of the FASB's current expected credit loss model (No. 2013-01)
1/16/13 | Assurance services
Impairment is a major component of the FASB and IASB's (the boards’) joint project to revisit most aspects of financial instruments accounting. In the aftermath of the recent financial crisis, the current incurred loss approach has been criticized for delaying the recognition of credit losses. The FASB has issued a new exposure draft on financial asset impairment. Our Dataline explains their "current expected credit loss" model and how it differs from the IASB's model.
In briefIn brief: FASB further clarifies the scope of balance sheet offsetting disclosures (No. 2013-01)
1/10/13 | Assurance services
At its January 9 meeting, the FASB discussed feedback on its exposure draft that proposes clarifications to the scope of the new balance sheet offsetting disclosures required by ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. The exposure draft proposes that the offsetting disclosures only be applied to derivatives, repurchase agreements, and securities lending transactions to the extent that they are subject to a master netting arrangement or similar agreement. The FASB decided to clarify what would be considered a derivative for the purposes of the new offsetting disclosures and proceed with issuing the final scope clarification. This In brief article provides an overview of the board's decisions.
In briefIn brief: FASB proposes new model for accounting for credit losses on debt instruments (No. 2012-60)
12/21/12 | Assurance services
This week, the FASB issued a proposal that introduces a new model for accounting for credit losses on debt instruments. The proposal calls for an entity to recognize an allowance for credit losses based on its current estimate of contractual cash flows not expected to be collected. The FASB’s proposed model eliminates any threshold required to record a credit loss and allows entities to consider a broader information set when establishing their allowance for loan losses. In addition, the model aims to simplify current practice by replacing today’s multiple impairment models with one model that applies to all debt instruments. This In brief article provides an overview of the proposal.
DatalineDataline: Highlights of the 2012 AICPA National Conference on Current SEC and PCAOB Developments (No. 2012-22)
12/13/12 | Assurance services
The 2012 AICPA National Conference on Current SEC and PCAOB Developments (the Conference) was held on December 3, 4, and 5, 2012. Conference presenters included representatives from regulatory and standard-setting bodies, auditors, users, preparers, industry experts, and an investor panel. Remarks centered mainly on the status of potential incorporation of IFRS into the U.S. financial reporting system, updates on regulatory and financial reporting matters, capital formation, and the auditing profession’s impact on the reliability and usefulness of financial statements.
M&A snapshotFinancial risk management considerations in an acquisition (M&A snapshot)
12/13/12 | Assurance services
The acquisition of a business can have a significant impact on both the risk exposures and risk management strategies of the combined entity. In many cases, an acquirer’s financial risk exposure will increase as a result of the acquisition. However, there may be situations in which the acquiree’s operations reduce the acquirer’s current risk exposure. In any event, identifying potential changes in enterprise risks, creating an action plan to address them, and managing changes to risk management strategies post-acquisition are critical to developing short- and long-term solutions for integrating financial risk management considerations in an acquisition.
Quarter closeThe quarter close — Fourth quarter 2012: Publication and new video perspectives
12/12/12 | Assurance services
This edition of The quarter close has the latest updates and timely reminders to help you navigate your year-end reporting process with a number of hot topics, including fair value, asset impairments, pensions, valuation allowances, and more.
- Avoiding hits to earnings when swapping fixed debt to floating (Observations from the front lines)
12/10/12 | US Capital Markets and Accounting Advisory Services
Companies pursuing fair value hedge accounting treatment for transacting interest rate swaps to exchange higher fixed rates on existing debt to lower floating rates are sometimes unaware of the quantitative effort needed because the "shortcut" method is often not available.
10Minutes10Minutes on derivatives reform for non-financial services companies
12/7/12 | Assurance services
For non-financial services companies, regulations introduced by the Dodd-Frank Wall Street Reform and Consumer Protection Act and Basel III will result in significant changes to the derivatives market. Every aspect of a corporation using derivative to manage risk will ultimately be affected—from risk strategies and corporate funding to operations and accounting. This 10Minutes provides insight on the impacts of new regulation on corporate entities and what those entities need to do now in order to meet impending reform deadlines and ensure they're well equipped to manage increased costs and compliance responsibilities.
DatalineDataline: Financial instruments classification and measurement - An update on the FASB's tentative approach to be exposed in Q1 2013 (No. 2012-21)
12/7/12 | Assurance services
Classification and measurement is an important part of the FASB and IASB’s joint project on financial instruments. The FASB expects to issue a revised exposure draft in the first quarter of 2013 for public comment. The board will likely ask for feedback on the amount of time needed to implement the changes before deciding on an effective date for the final standard. The IASB issued an exposure draft of its proposed changes to IFRS 9 in late November 2012 with a proposed effective date of January 1, 2015. The exposure draft has a 120-day comment period. This Dataline provides a summary of the boards' decisions that is based on the project summaries posted on their websites, our observations of their meetings, and our understanding of their intent.
DatalineDataline: 2012 year-end accounting and reporting considerations - Leading practices and lessons learned on key topics (No. 2012-20)
12/3/12 | Assurance services
This year end, entities continue to face many complex financial reporting issues such as providing new fair value disclosures, accounting for debt modifications, and evaluating revenue recognition guidance. Economic challenges around the world continue to have broad financial reporting implications. While not an all-inclusive list, this Dataline is intended to serve as a timely reminder of leading practices and lessons learned on key issues that companies should consider as they navigate the year-end financial reporting process.
DatalineDataline: Accounting and disclosure implications of Hurricane Sandy (No. 2012-17)
11/12/12 | Assurance services
Hurricane Sandy is expected to be the second-costliest Atlantic hurricane in history, only surpassed by Hurricane Katrina in 2005. Many businesses were disrupted by Hurricane Sandy and its aftermath including the New York Stock Exchange, which was closed for two days. While not all-inclusive, this Dataline discusses several accounting and disclosure-related matters companies may encounter in dealing with the financial reporting implications of Hurricane Sandy.
DatalineDataline: Implications to hedge accounting of changes to derivative counterparties or hedging relationships (No. 2012-16)
11/6/12 | Assurance services
Market protocols for derivatives may be changing in the near future. Financial reform legislation could make novations (in this case, substitution of counterparties to a contract) more common as over-the-counter (OTC) transactions are migrated to central exchanges. In anticipation of these changes, the International Swaps and Derivative Association (ISDA) asked the SEC’s Office of the Chief Accountant if the novation of a bilateral OTC derivative contract to a central counterparty "on the same financial terms" would require the designation of a new hedging relationship.
DatalineDataline: Highlights of the 2012 AICPA National Conference on Banks and Savings Institutions (No. 2012-14)
10/18/12 | Assurance services
The 2012 AICPA National Conference on Banks and Savings Institutions was held September 10 through 12, 2012 in Washington, DC. Representatives from the banking regulators, SEC, and standard setters presented at the Conference along with auditors, users, preparers, and industry experts. Presenters expressed views on a wide range of important accounting, auditing, and financial reporting topics. This Dataline provides highlights of topics discussed at the Conference.
Quarter closeThe quarter close — Third quarter 2012: Publication and new video perspectives now available
9/17/12 | Assurance services
This edition of The quarter close highlights the SEC report on IFRS, the latest on conflict minerals, health care reform, and several FASB releases that are sure to keep you busy this fall. Video perspectives are also now available.
EITF observerEITF observer: A meeting synopsis - June 2012
6/22/12 | Assurance services
At the EITF's June 21 meeting, the Task Force discussed the three Issues reaching a consensus-for-exposure on two Issues (12-B and 12-D). Further discussion is expected for one Issue (11-A). This edition of EITF observer provides a synopsis of the meeting.
EITF observerEITF observer: A meeting synopsis - March 2012
3/18/12 | Assurance services
At the EITF's March 15 meeting, the EITF discussed six Issues, reaching a consensus-for-exposure on three Issues. The remaining three Issues will be discussed further at a future meeting.
DatalineDataline: Accounting for derivative instruments -- Treasury and financial reporting implications of using an OIS (not LIBOR) curve in the valuation of certain derivatives (No. 2011-30)
10/27/11 | Assurance services
Methodologies utilized to value derivative instruments continue to evolve, even for "plain vanilla" products. Some derivatives dealers have begun exploring valuing certain derivatives using an overnight index swap ("OIS") curve to discount the cash flows, rather than the LIBOR swap curve that has been used in the past. Derivatives to be valued using the OIS curve include collateralized derivatives and derivatives cleared through a central clearing house. This new method of valuation is the latest in a series of changes in recent years, which if implemented will result in changes for derivatives dealers across all aspects of their organizations and also for the counterparties to these trades. This Dataline addresses...
DatalineDataline: Financial reporting considerations stemming from an uncertain global economy -- Accounting and reporting observations (No. 2011-27)
9/15/11 | Assurance services
In recent months, capital markets and currency exchanges have experienced significant volatility. The downgrade of long-term U.S. Treasuries, the European debt crisis, and slowing gross domestic product (GDP) growth in the world's leading economies have contributed to an uncertain global economy. Companies should consider the impact of the changing economic environment on their accounting and financial reporting and monitor areas of their business that might be affected by an economic slowdown. This Dataline discusses the key areas of financial reporting that could be impacted by a broader economic slowdown.
DatalineDataline: Accounting for certain equity-linked financing transactions (No. 2011-25)
7/7/11 | Assurance services
Many companies, public and private, issue equity-linked securities for a variety of reasons, including obtaining capital to fund current liquidity needs and expand future operations. Including equity-linked features in a financing transaction frequently enables companies to lower cash interest costs due to the value of the equity-linked feature. This Dataline is intended to assist companies in evaluating the accounting for equity-linked financing transactions at issuance and on an ongoing basis.
DatalineDataline: Financial instruments -- An update on the FASB's financial instruments project redeliberations as of June 30, 2011 (No. 2011-26)
7/7/11 | Assurance services
The accounting for financial instruments is a priority joint project of the FASB and IASB; however, the FASB and IASB have reached different conclusions on many aspects of the project to date. This PwC Dataline provides an update on the FASB's rediberations as of June 30, 2011.
Practical tipPractical tip: Deferred tax accounting implications of holding gains from obtaining control of a foreign investee (No. 2011-03)
6/16/11 | Assurance services
When a company obtains control of a foreign investee, it remeasures its previously held equity interest to fair value and recognizes a holding gain in income. This holding gain will generally not result in a current tax event. This Practical tip explains the requirement to freeze any previously recorded deferred tax liability and an accounting policy election that may be available in relation to recording deferred taxes on such holding gains.
DatalineDataline: Hedge accounting -- Applying the shortcut method to "late" hedges (No. 2011-22)
6/2/11 | Assurance services
This Dataline discusses certain considerations in the application of the shortcut method of hedge accounting to a late hedge.
DatalineDataline: Troubled Debt Restructurings -- FASB issues clarifying guidance for creditors' evaluations of whether a restructuring is a troubled debt restructuring (No. 2011-18)
4/20/11 | Assurance services
On April 4, 2011 the FASB issued Accounting Standard Update No. 2011-02, Receivables (Topic 310): A CreditorÆs Determination of Whether a Restructuring Is a Troubled Debt Restructuring (the ASU). The ASU provides additional guidance to creditors for evaluating whether a modification or restructuring of a receivable constitutes a troubled debt restructuring. This PwC Dataline discusses the key provisions of the new guidance and offers our observations. ...
DatalineDataline: Accounting and disclosure implications of the earthquake in Japan and related events (No. 2011-17)
3/28/11 | Assurance services
On March 11, 2011, an earthquake struck off the northeast coast of Japan, triggering a tsunami. The power supply in certain parts of Japan has been cut-off with rolling blackouts scheduled in other areas. Further compounding the situation, nuclear power plants were damaged causing worries about the possible meltdown of nuclear reactors and the release of harmful radioactive materials. While not all-inclusive of the types of issues that may be created by these events, this Dataline discusses several accounting and disclosure-related matters companies may encounter in dealing with the financial reporting implications of these tragic events.
DatalineDataline: FASB redeliberates its financial instruments proposal -- An update on significant changes as of February 24, 2011 (No. 2011-13)
2/24/11 | Assurance services
The accounting for financial instruments is a priority convergence project for the FASB and IASB. The boards are aiming to finalize most of their respective guidance in 2011. The FASB received a significant amount of input from financial statement users, preparers, and accounting firms on its May 2010 proposal. The tentative decisions the FASB has made in its redeliberations point to significant changes from the proposal. This Dataline provides an update on the FASB's redeliberations, with a focus on the significant changes the FASB has tentatively decided to make thus far to its May 2010 proposal.
DatalineDataline: Balance sheet offsetting -- The FASB and IASB proposal (No. 2011-10)
2/22/11 | Assurance services
On January 28, 2011, the FASB and the IASB jointly issued an exposure draft, Offsetting Financial Assets and Financial Liabilities. Entities that historically elected to present derivatives assets and liabilities subject to master netting arrangements on a net basis will be required to report them gross in their statement of financial position. This could significantly impact the balance sheet of many reporting entities that currently apply an accounting policy election to net these amounts. The exposure draft also proposes new disclosure requirements for financial assets and liabilities subject to offset. This Dataline looks at the key aspects of the exposure draft, which is open for public comment through April 28, 2011.
DatalineDataline: Impairment redux -- FASB and IASB are seeking comments on a converged impairment model for financial assets (No. 2011-09)
2/21/11 | Assurance services
On January 31, 2011, the FASB and IASB published a supplementary document to solicit views on a converged model to account for impairments of certain financial assets managed in an open portfolio. Public comments on the supplement are due by April 1, 2011. The boards plan to jointly redeliberate the proposals in the supplement based on the feedback received on it. The IASB expects to issue a final impairment standard by June 2011, and the FASB expects to issue a final Accounting Standards Update that includes the credit impairment model in 2011. This PwC Dataline highlights the key proposals in the supplement.
DatalineDataline: Accounting for hedging activities -- A comparison of the FASB's and IASB's proposed models (No. 2011-06)
2/1/11 | Assurance services
In December 2010, the IASB released for public comment an exposure draft of proposed changes to the accounting for hedging activities under IFRS, resulting from the third phase of the IASB's project to revise financial instruments accounting. In May 2010, the FASB issued an exposure draft that proposed fundamental changes to the accounting for financial instruments under U.S. GAAP, including certain changes to hedge accounting. The two boards have taken different directions with their proposals. The FASB is planning to seek feedback from its constituents on the IASB's December 2010 exposure draft. This Dataline compares the FASB's May 2010 exposure draft and the IASB's December 2010 exposure draft.
DatalineDataline: Highlights of the 2010 AICPA National Conference on Current SEC and PCAOB Developments (No. 2010-44)
12/16/10 | Assurance services
Last week's annual AICPA National Conference on Current SEC and PCAOB Developments focused on restoring public trust and investor confidence in the U.S. capital markets. Presenters called for all members of the financial reporting supply chain, including boards, management and auditors, to play a role in these efforts. This Dataline takes a closer look at the topics discussed at the conference.
DatalineDataline: 2010 year-end accounting and reporting considerations (No. 2010-43)
12/13/10 | Assurance services
This year end, companies continue to face many complex financial reporting issues such as asset impairments, debt modifications, revenue recognition and pensions. Recently issued legislation has created additional reporting considerations. Also, the SEC has put additional emphasis on compliance with certain existing disclosure requirements such as disclosures of loss contingencies, goodwill impairment, segments, and liquidity. Recently issued guidance by the FASB has become effective in 2010, including new guidance on consolidations, updates to fair value disclosures, and disclosures about the credit quality of finance receivables. While not intended to serve as an all-inclusive checklist, this Dataline should be helpful as a timely...
DatalineDataline: FASB proposes guidance to assist creditors in identifying trouble debt restructurings (No. 2010-40)
10/26/10 | Assurance services
The Financial Accounting Standard Board recently exposed for comment a proposed Accounting Standard Update that would provide additional guidance to assist lenders in determining whether a restructuring of a receivable constitutes a troubled debt restructuring (TDR). This Dataline discusses the key provisions and scope of the proposed ASU and shares PwC's insight on it.