Financial instruments
The FASB and IASB have been working on a joint project on financial instruments. The project includes classification and measurement of financial instruments, impairment of financial assets, and hedging. However, the boards have not converged on each element, so there are expected to be differences in the final standards. Most recently, after previously working together on a “three bucket” impairment model, the FASB decided to move to a model they view to be more operational. Meanwhile, the boards are generally in sync on their classification and measurement guidance.
Latest developments - Joint FASB/IASB projects
In the fourth quarter of 2012, the FASB completed its re-deliberations on its proposed impairment model, referred to as the current expected credit loss (CECL) model. The FASB issued its exposure draft at the end of the fourth quarter and comments are due by April 30, 2013. See Dataline 2013-01, FASB Credit losses on financial assets, for further information. The IASB, on the other hand, still intends to move forward with an exposure draft on the “three bucket” model, now known as the "credit deterioration" model.
Meanwhile, the boards have completed their joint project on classification and measurement, reaching a broadly converged approach for debt investments. The IASB issued its exposure draft on limited amendments to IFRS 9 in November, 2012. The FASB issued its exposure draft on classification and measurement of financial assets and financial liabilities in February 2013. See In brief 2013-08, FASB proposes a new model for classification and measurement of financial instruments.
However, there are still key areas where differences remain between the FASB’s and IASB’s models that are currently not being discussed by the boards:
- Accounting for equity investments not under the equity method of accounting
- The scope of application of the equity method of accounting
- Presentation and disclosure requirements
Latest developments - FASB only projects
The comments are in on the FASB's proposal to require new disclosures about liquidity and interest rate risks, and the feedback was overwhelmingly negative. The proposal introduced new quantitative and qualitative liquidity risk disclosures for all entities. For financial institutions, the proposal went further, requiring more extensive liquidity disclosures and interest rate risk disclosures. The negative feedback has convinced the FASB to revisit the objective of the proposal and see how they can revise it. Over the past several months, issuers and other constituents in a variety of industries have raised concerns to the FASB staff and board regarding the scope of the new balance sheet offsetting disclosure requirements. In response to these concerns, at its October 31 meeting the FASB decided to amend and clarify the scope of the balance sheet offsetting disclosures to include only derivatives, repurchase agreements and securities lending transactions. The FASB issued its exposure draft on balance sheet offsetting in November of 2012 with comments due in December of 2012. These disclosures are effective in Q1 2013 for calendar year-end companies.
What's next
The IASB is expected to issue their exposure draft on impairment late in the first quarter of 2013.
The FASB exposure draft has been released for public comment with the comment period ending on May 15, 2013.The IASB issued their exposure draft on limited amendments to IFRS 9 in November of 2012, with the comment period ending on March 28, 2013.
Dataline
How FASB's financial instruments proposals would affect not-for-profit organizations (No. 2013-08)
4/26/13 | Assurance services
In brief
IASB issues exposure draft on impairment of financial instruments (No. 2013-13)
3/8/13 | Assurance services
Accounting guides
Guide to Accounting for Derivative Instruments and Hedging Activities - 2012 edition
9/4/12 | Assurance servicesPwC comment letter (FASB)
PwC Comments on Proposed ASU: Financial Instruments—Overall (Subtopic 825-10)—Recognition and Measurement of Financial Assets and Financial Liabilities and the Proposed Amendments to the FASB Accounting Standards Codification5/15/13 | Assurance services
PwC supports the FASB’s proposed comprehensive framework for classifying financial instruments, which is not dependent on legal form. We agree that the primary drivers for how financial assets are classified and measured should be a company's business model for managing its financial assets, as well as the cash flow characteristics of the instruments. The accounting model should faithfully portray the economic consequences of transactions in the context of a company's business strategies and the nature of those financial instruments.
Dataline
Dataline: 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.
Dataline
Dataline: 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.
Webcast
FASB and IASB proposals on impairment of financial assets webcast – April 25, 2013Assurance services
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 Accounting4/2/13 | 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 Financings3/29/13 | 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 93/28/13 | 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 brief
In 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 standard
Setting the standard -- What you need to know about the FASB's and IASB's standard setting activities -- March 20133/25/13 | 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.
Dataline
Dataline: 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 close
The quarter close — First quarter 2013: Publication and new video perspectives3/18/13 | 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 brief
In 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 brief
In 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.
Webcast
Classification and measurement of financial instruments - An overview of the FASB proposal webcast – March 12, 2013Assurance services
This webcast provides an overview of the revised FASB proposal on financial instruments classification and measurement which is open for public comment until May 15, 2013.
In brief
In 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 brief
In 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 brief
In 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 brief
In 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 brief
In 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.
Dataline
Dataline: 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 brief
In 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 brief
In 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.
Setting the standard
Setting the standard -- What you need to know about the FASB's and IASB's standard setting activities -- December 201212/19/12 | Assurance services
There is no shortage of activity to report this quarter as the boards forged ahead on their major convergence projects. The FASB and IASB made several key decisions as they move closer toward issuing exposure drafts and final standards. In the Q4-2012 edition of Setting the standard, we update you on the latest developments of the joint standard setting projects of the FASB and IASB, as well as the latest on FASB-only projects.
Dataline
Dataline: 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 snapshot
Financial 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 close
The quarter close — Fourth quarter 2012: Publication and new video perspectives12/12/12 | 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.
10Minutes
10Minutes on derivatives reform for non-financial services companies12/7/12 | 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.
Dataline
Dataline: 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.
Dataline
Dataline: 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.
In brief
In brief: IASB proposes limited amendments to its financial instruments guidance under IFRS 9 (No. 2012-55)11/29/12 | Assurance services
This week, the IASB issued its exposure draft proposing limited amendments to IFRS 9 (2010), Financial instruments. The proposed amendments are intended to: (1) Address application issues that have arisen since the original issuance of IFRS 9 with regard to financial assets measured at amortized cost, (2) Consider the interaction with the IASB’s insurance project, and (3) Reduce differences between IFRS 9 and the FASB’s proposed classification and measurement approach. This In brief article provides an overview of the IASB's proposed amendments and what's next.
Dataline
Dataline: 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.
In brief
In brief: FASB plans to propose amendments to repurchase agreement accounting model before year-end (No. 2012-52)11/9/12 | Assurance services
At its November 7 meeting, the FASB (the “board”) discussed the effect on financial reporting complexity of the decisions reached in its project on accounting for repurchase agreements ("repos"). The board confirmed its previous decisions on the project and indicated it will issue an exposure draft for public comment later this quarter. The comment letter period will end on March 29, 2013. The board also made decisions at this meeting about transition, early adoption, and transition disclosures. This In brief article provides an overview of those decisions.
Dataline
Dataline: 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.
In brief
In brief: FASB amends and clarifies scope of balance sheet offsetting disclosures (No. 2012-48)11/1/12 | Assurance services
Over the past several months, issuers and other constituents in a variety of industries have raised concerns to the FASB staff and board regarding the scope of the new balance sheet offsetting disclosure requirements required by Accounting Standards Update 2011-11, Disclosures about Offsetting Assets and Liabilities. In response to these concerns, at its October 31 meeting the FASB decided to amend and clarify the scope of the balance sheet offsetting disclosures. These disclosures are effective in Q1 2013 for calendar year-end companies. This In brief article provides an overview of the FASB's decision and what's next.
Dataline
Dataline: 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.
Accounting guides
Guide to Accounting for Financing Transactions: What You Need to Know about Debt, Equity, and the Instruments in Between - 2012 edition9/19/12 | 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. Before the FASB codified the accounting standards, the accounting guidance applicable to a single transaction was contained in a number of separate FASB Standards, EITF Issues, interpretations, and speeches. 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. This PwC Guide provides a roadmap to the applicable accounting literature to help you determine which steps are necessary for a particular transaction.
Quarter close
The quarter close — Third quarter 2012: Publication and new video perspectives now available9/17/12 | 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.
In brief
In brief: FASB determines additional disclosure requirements for repurchase agreements (No. 2012-42)9/12/12 | Assurance services
The FASB decided at its September 5 meeting to propose additional disclosure requirements for repurchase agreements accounted for as secured borrowings and for repurchase agreements accounted for as sale transactions with a forward repurchase commitment. This In brief article provides an overview of the proposed disclosures.
In brief
In brief: IASB issues draft of forthcoming new hedge accounting requirements (No. 2012-40)9/11/12 | Assurance services
On September 7, 2012, the IASB issued a draft of the general hedge accounting requirements that will be added to IFRS 9, Financial Instruments (the Draft). The current rules on hedge accounting in IAS 39, Financial Instruments: Recognition and Measurement have frustrated many preparers, as the requirements have not been well linked with common risk management practices. The detailed rules have at times made achieving hedge accounting impossible or very costly, even when the hedge was an economically rational risk management strategy. The IASB has addressed several of these concerns in this third phase of its efforts to replace IAS 39 with IFRS 9. This In brief article provides an overview of the key provisions of the Draft.
Accounting guides
Guide to Accounting for Derivative Instruments and Hedging Activities - 2012 edition9/4/12 | Assurance services
This PwC guide offers a comprehensive discussion of the accounting guidance for derivatives and hedging activities contained in ASC 815, Derivatives and Hedging. Domestically and internationally, the volume, variety, and inherent complexity of derivative transactions have steadily increased and the nature of hedging activities continues to evolve. The guide is intended to help preparers and accountants successfully navigate the rules and principles for appropriately accounting for derivative transactions.
Accounting guides
Guide to Accounting for Transfers and Servicing of Financial Assets - 2012 edition9/4/12 | Assurance services
FASB ASC 860, Transfers and Servicing, has proven difficult to apply in practice. Acknowledging this, in 2009 the FASB amended ASC 860 to address practice issues highlighted most recently by events related to the economic downturn. The sweeping impact of this guidance and its amendments on securitizations and financial asset transfer activity is significant for financial companies, but it extends beyond the financial sector and highlights the need for all companies to gain a precise knowledge of its accounting implications. This PwC guide offers a comprehensive exploration of a complex and still evolving area of accounting: the accounting for transfers/securitizations and related transactions.
In brief
In brief: FASB makes key decisions about the revised impairment model for financial assets (No. 2012-37)8/23/12 | Assurance services
Earlier this month, the FASB directed its staff to explore a revised impairment model for financial instruments. At its August 22 meeting, the board made some key decisions about the revised model. The board is considering a model that incorporates the concept of expected losses, but applies that concept to all financial assets and uses a single measurement approach. This In brief article provides an overview of the key decisions made at the board meeting.
In brief
In brief: FASB makes further decisions on repurchase agreement accounting (No. 2012-33)8/2/12 | Assurance services
Read this update on the FASB's August 2012 FASB tentative decision to extend a previously proposed exception to the financial asset sale accounting rules for certain sale and repurchase agreements, from PwC's CFOdirect Network.
In brief
In brief: FASB decides to explore a revised impairment model for financial assets (No. 2012-32)8/1/12 | Assurance services
Over the past several months, the FASB and IASB have jointly deliberated a proposed "three bucket" impairment model for financial assets. After recently announcing its intent to further discuss key aspects of the model, the FASB met on August 1 to discuss the next steps for the project. After considering the results of outreach efforts and constituent feedback, the FASB unanimously agreed with concerns that aspects of the "three bucket" impairment model are complex and difficult to understand. As a result, the FASB will not move forward with an exposure draft on the "three bucket" impairment model and will instead explore a revised approach. This In brief article provides an overview of the key issues and what's next.
In brief
In brief: FASB announces intent to further discuss key aspects of proposed impairment model for financial assets (No. 2012-27)7/19/12 | Assurance services
On July 18, the FASB and IASB (the boards) met to discuss the financial instruments project. At the conclusion of the meeting, the FASB announced its intent to continue discussions about several key aspects of the impairment model, as well as consider the
In brief
In brief: FASB votes to discontinue loss contingencies project (No. 2012-23)7/9/12 | Assurance services
After a long hiatus on its loss contingencies project, the FASB voted today to remove this controversial project from its agenda. This In brief article highlights the project history and some of the reasons cited by board members for discontinuing the pro
In brief
In brief: FASB tentatively agrees on approach for repurchase agreement accounting (No. 2012-19)6/29/12 | Assurance services
The FASB tentatively decided this week to propose specifying the types of repurchase agreements (also known as "repos") that should be accounted for as secured borrowings based on six criteria. These types of transactions would be an exception to the gene
In brief
In brief: FASB proposes new disclosures about liquidity and interest rate risks (No. 2012-18)6/28/12 | Assurance services
Read this discussion of the FASB's June 2012 proposed new disclosures about liquidity and interest rate risks, from PwC's CFOdirect Network.
EITF observer
EITF observer: A meeting synopsis - June 20126/22/12 | 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.
In brief
In brief: FASB and IASB agree on a three-category financial asset classification and measurement approach (No. 2012-10)5/22/12 | Assurance services
This week, the FASB and IASB (the boards) continued their joint discussions on classification and measurement of financial assets and agreed on a three-category approach for eligible debt investments. The three categories are (1) amortized cost, (2) fair
EITF observer
EITF observer: A meeting synopsis - March 20123/18/12 | 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.
Dataline
Dataline: 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...
Dataline
Dataline: 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.
Dataline
Dataline: 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.
Dataline
Dataline: 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 tip
Practical 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.
Dataline
Dataline: 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.
PwC comment letter (FASB)
PwC Comments on Invitation to Comment: Selected Issues about Hedge Accounting (Including IASB Exposure Draft, Hedge Accounting)4/26/11 | Assurance services
In view of the difficulties that practice has experienced in applying hedge accounting, PwC supports the FASB and IASB's overall efforts to simplify accounting for hedging activities and to improve transparency for users of financial statements. The firm is supportive of many of the proposed amendments to hedge accounting in the FASB's proposed ASU, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities, issued in May 2010. PwC expects that several of the FASB's proposed amendments will help reduce the complexity of qualifying for hedge accounting and improve the consistency and comparability of financial reporting.
Dataline
Dataline: 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. ...
PwC comment letter (FASB)
PwC Comments on IASB/FASB Supplementary Document: Accounting for Financial Instruments: Impairment4/4/11 | Global accounting consulting services
Consistent with the Firm's comment letters on the original IASB exposure draft and the FASB proposed ASU, PwC supports an expected loss approach to accounting for the impairment of financial assets carried at amortized cost. PwC believes the impairment model should: (i) measure credit losses consistent with current market expectations regarding collectability, and (ii) recognize the expected losses over the life of the instrument in a manner consistent with its pricing. The Firm believes this better reflects the economics of lending transactions than recognizing lifetime expected losses immediately. While preferring the conceptual merits of such a model, PwC acknowledges the operational and pragmatic concerns that exist and are...
Dataline
Dataline: 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.
Dataline
Dataline: 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.
Dataline
Dataline: 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.
Dataline
Dataline: 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.
Dataline
Dataline: 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.
PwC comment letter (FASB)
PwC Comments on Proposed ASU: Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-2012/23/10 | Assurance services
PwC supports the FASB's proposal to delay the effective date of the additional disclosures about troubled debt restructurings in ASU 2010-20 until it completes deliberations in its separate project to clarify what constitutes a troubled debt restructuring. The firm believes that disclosures about restructurings designed to mitigate or avoid credit losses are important to users of the financial statements. PwC, however, shares the concerns raised by the Board's constituents that implementing the new troubled debt restructuring (TDR) disclosure requirements in ASU 2010-20 in one reporting period, shortly followed by the adoption of a change in the guidance on what constitutes a TDR, would unnecessarily burden preparers and could confuse...
Dataline
Dataline: 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.
Dataline
Dataline: 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...
Dataline
Dataline: 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.
PwC comment letter (FASB)
PwC Comments on Proposed ASU, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities9/2/10 | Assurance services
As the financial instruments area is fundamental to any convergence efforts, and the cost to the capital markets of divergence would be significant on many levels, PwC urges the FASB and IASB to work collaboratively during the redeliberations phase to resolve remaining substantive differences. PwC supports the FASB's objective of developing a model that increases the decision-usefulness of the information reported about financial instruments. However, PwC believes that the Proposal, taken as a whole, does not contain the most appropriate solutions to achieve that objective.
Dataline
Dataline: Changes to Financial Instruments Accounting -- Impacts for Nonfinancial Services Companies (No. 2010-34)8/26/10 | Assurance services
The FASB's proposal to change the accounting for financial instruments and hedge accounting could have broad implications to companies across all industries, including those in commercial and industrial industries. The proposed changes could result in a significant expansion of the use of fair value. This Dataline discusses a few of the more common instruments and transactions that could be affected if proposed ASU, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities, is adopted in its current form.
Dataline
Dataline: Disclosure of Certain Loss Contingencies -- An Analysis of the FASB's Proposed Changes (Revised February 1, 2011*) (No. 2010-32)8/3/10 | Assurance services
On July 20, 2010, the FASB issued an exposure draft of a proposed Accounting Standards Update, Contingencies -- Disclosure of Certain Loss Contingencies. The proposed disclosures in the exposure draft consist of qualitative and quantitative information about loss contingencies aimed at enabling financial statement users to understand their nature, potential magnitude, and potential timing (if known). This Dataline provides a summary of the proposal and includes PwC's insights on selected matters.
Dataline
Dataline: New Disclosure Requirements for Finance Receivables and Allowance for Credit Losses -- A Summary of ASU 2010-20 (No. 2010-31)7/29/10 | Assurance services
The FASB recently issued ASU 2010-20 to address concerns about the sufficiency, transparency, and robustness of credit risk disclosures for finance receivables and the related allowance for credit losses. The ASU requires that entities disclose information at disaggregated levels, specifically defined as "portfolio segments" and "classes." Among other things, the expanded disclosures include roll-forward schedules of the allowance for credit losses and information regarding the credit quality of receivables (including their aging) as of the end of a reporting period. Certain finance receivables that were modified during a reporting period and those that were previously modified and have re-defaulted require enhanced disclosures. The new...
Dataline
Dataline: Impact of ASU 2009-16 and 2009-17 on Transfers of Trade Receivables -- On- vs. Off-Balance Sheet Treatment (No. 2010-27)6/12/10 | Assurance services
Companies often transfer trade receivables to fund working capital and liquidity needs. Examples of such transfers include factoring arrangements and transfers to bank-sponsored commercial paper conduits. The recent amendments to ASC 860, Transfers and Servicing, and ASC 810, Consolidation, have significantly altered the accounting analysis of trade receivable transfers, making it more likely that many structures used to effect such transfers will be accounted for as secured borrowings. The SEC staff recently weighed-in on the relevant cash flow classification issues that result from certain structures that meet sale accounting requirements. Structures continue to evolve in the marketplace and assessing these structures under the new...
Dataline
Dataline: FASB Proposes Changes to Financial Instruments Accounting (No. 2010-25)6/10/10 | Assurance services
The FASB recently issued a proposal to overhaul the accounting requirements for financial instruments. Under the proposal, most financial instruments (including loans held by banks and held-to-maturity securities) would be measured at fair value with changes in fair value recognized in net income, unless an instrument qualifies and an entity elects to recognize the changes in fair value in other comprehensive income. Major changes to impairment and hedge accounting are also being proposed. As part of their convergence efforts, the FASB and IASB are jointly reconsidering the accounting for all financial instruments, however, the two boards so far have reached fundamentally different conclusions. This PwC Dataline provides an overview of...
Dataline
Dataline: Disclosure of Certain Loss Contingencies -- A FASB Project Update (No. 2010-22)5/10/10 | Assurance services
The FASB originally issued an exposure draft of its proposal to require new disclosures about certain loss contingencies in June 2008, and received a high volume of feedback from the marketplace. Based on this feedback, the FASB began redeliberations on the proposal in August 2009 and continued redeliberations at its April 14, 2010 meeting. The approach the FASB is now considering would result in a major shift from the original proposal, and may alleviate concerns of many constituents that certain proposed disclosures in the original proposal would impact their legal strategies and be prejudicial to their cause. The FASB plans to expose a draft of the standard in May 2010 for a 30-day public comment period, and appears committed to...