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.
Debt investments would be accounted for at amortized cost or fair value, with changes in fair value recognized in other comprehensive income or net income, based on a business model assessment and the cash flow characteristics of the instrument. Financial liabilities would generally be accounted for at amortized cost. Fair value, with changes in fair value recognized in net income, would be required if certain conditions are met. Equity investments generally would be measured at fair value, with changes in fair value recognized in net income. The available-for-sale alternative, with changes in fair value recognized in other comprehensive income, would be eliminated.
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.