In February 2013, the FASB issued Accounting Standards Update No. 2013-04, which addresses the diversity in practice related to accounting for joint and several liability arrangements. The standard addresses the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date.
An entity would measure its obligation from a joint and several liability arrangement as the sum of the amount the entity agreed with its co-obligors that it will pay, and any additional amount the entity expects to pay on behalf of its co-obligors.
The standard is effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2013. Non-public companies will adopt the standard in fiscal years ending after December 15, 2014, and in interim and annual periods thereafter. Early adoption is permitted.
This Dataline discusses the key provisions of the new standard.