Episode 30: FASB Standard setting update, Q3 2017

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Overview

Trying to find an update on FASB standard setting? Stop looking and start listening... Hear about the standards that went final in the third quarter of 2017. PwC's Beth Paul, David Schmid and Jim Gazley discuss activity at the FASB, including the release of two standards - hedging and accounting for certain financial instruments with down round feature. We'll also give you a sneak peek into what's expected for release next quarter.

| Duration 15:30

 

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Show Notes

The FASB amended guidance that will impact financial instruments with down round features. Current accounting guidance creates cost and complexity for companies that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. The amendment requires that when determining whether certain financial instruments should be classified as liabilities or equity instruments, a company would not consider the down round feature when assessing whether the instrument is indexed to its own stock. The amendment also re-characterizes the indefinite deferral of certain provisions of the guidance on Distinguishing Liabilities from Equity to a scope exception

In August, the FASB issued the much anticipated amendments to hedge accounting. The amendment addresses topics such as what qualifies for hedge accounting, hedge documentation, hedge effectiveness, measuring ineffectiveness, and also the related presentation and disclosure. The guidance is effective for calendar year end companies in 2019, with all others getting an additional year. Early adoption is permitted immediately; however, if a company adopts in an interim period, it will need to make adjustments retrospectively to the beginning of the fiscal year.

The FASB issued an exposure draft on accounting for grants and contributions. This proposal would clarify how all entities account for making and receiving grants. However, it does not address the accounting for government grants received by business entities. Under the proposal, all companies would account for grants received as exchange transactions under the new revenue standard if the benefits of the grant flow directly back to the donor. However, if the grant's purpose is to benefit the public, the entity receiving the grant would account for the transaction as a contribution. The proposal would also change the timing of revenue and expense recognition for certain transactions within contribution accounting. The proposal would have the same effective date as the new revenue standard (i.e., 2018 for public calendar-year end companies).

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Beth Paul
US Strategic Thought Leader, National Professional Services Group
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David Schmid
IFRS & US Standard Setting Leader, National Professional Services Group
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