On April 12, the FASB issued an exposure draft of consequential amendments to the Accounting Standards Codification (ASC) that would result from its financial instruments classification and measurement proposal. The new exposure draft serves as a companion document to the FASB's proposal issued on February 14, 2013 (see In brief 2013-08, FASB proposes a new model for classification and measurement of financial instruments).
Comments on both exposure drafts are due on May 15, 2013 and copies are available on the FASB's website at www.fasb.org. Companies planning to respond to the FASB's proposal should consider the implications of both exposure drafts as they prepare their response letters.
The companion document contains proposed updates to many topics contained in the ASC resulting from the FASB's financial instruments classification and measurement proposal. These changes include eliminating the following existing guidance:
Amendments are also proposed to other financial instruments guidance such as ASC 310, Receivables; ASC 815, Derivatives and Hedging; ASC 825, Financial Instruments (including subtopic 825-30,Fair Value Option); and ASC 860-20, Transfers and Servicing—Sales of Financing Assets.
The consequential amendments are far-reaching and include changes to other topics such as ASC 220, Comprehensive Income; ASC 230, Statement of Cash Flows; ASC 323, Investments—Equity Method and Joint Ventures; and ASC 805, Business Combinations.
The FASB’s and IASB’s respective classification and measurement proposals include a substantially converged approach for debt investments, but other differences will remain, such as the accounting for equity investments. For more information, see Dataline 2013-05, Financial instruments classification and measurement–FASB issues its exposure draft.
While certain financial institutions such as retail and commercial banks and insurance companies are likely to be most affected by this proposal, other companies with large investment portfolios that are not currently measured at fair value through net income may also be significantly impacted.
FASB will decide on an effective date once it has received feedback on the time needed to implement the proposed changes.
Comments on the companion document to the FASB's proposal are due May 15, 2013.
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact the Financial Instruments team in the National Professional Services Group (1-973-236-7803).