FASB Financial Instruments Standard Issued
After spending the past decade working to simplify the accounting for financial instruments, the Financial Accounting Standards Board (“FASB”) has issued its long-anticipated guidance, Accounting Standards Update (ASU) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. FASB Chairman Russell Golden said the new standard will provide more useful information to financial statement users, and improves the accounting model to better address economic complexities.
When the project initially started, the FASB attempted to overhaul the accounting for financial instruments. Things took a turn after the 2008 financial crisis, and the final standard features targeted changes to accounting for complicated financial products such as certain equity investments. The amendments also retain most of existing U.S. GAAP, and will not be identical to the guidance in IFRS 9, Financial Instruments.
Public companies must adopt ASU No. 2016-01 for annual periods beginning after December 15, 2017, which means the amendments must be applied to their 2018 first-quarter filings. Private companies have an extra year to prepare for the standard, and will not be required to meet the quarterly reporting requirements until fiscal periods beginning after December 15, 2019. The FASB is allowing companies to early adopt the provision that requires the disclosure of any changes to the fair value of their liabilities in other comprehensive income rather than earnings.