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FASB Proposes Codification Improvements

The Proposed Accounting Standards Update, Codification Improvements, has been issued by the Financial Accounting Standards Board (“FASB”) to help improve certain aspects of U.S. GAAP. Covered in the proposal are the following:

  • Comprehensive Income – Overall (Subtopic 220-10): The proposal clarifies that the disclosure of tax benefits concerning deductible temporary differences and carryforwards resulting from a semi-reorganization as defined under Subtopic 852-20, are not considered comprehensive income.
  • Debt—Modifications and Extinguishments (Subtopic 470-50): The proposal clarifies that when the fair value option is selected on extinguished debt, the extinguished debt’s net carrying amount matches its fair value at the reacquisition date. In addition, related gains or losses in other comprehensive income should be included in net income when the debt is extinguished.
  • Compensation—Stock Compensation—Income Taxes (Subtopic 718-740): The proposal clarifies that a business should disclose excess tax benefits or tax deficiencies during the period when the tax deduction for compensation expense is selected on the business’ tax return. This includes deductions selected on the business’ return in a period different from when the event that allows for the tax deduction occurs and the uncertainty regarding whether the business will receive a tax deduction, and the sum of the tax deduction is resolved.
  • Business Combinations—Income Taxes (Subtopic 805-740): The proposal eliminates three methods for distributing the consolidated tax requirement to an acquired entity after acquisition that is not in line with guidance under Topic 740.
  • Fair Value Measurement—Overall (Subtopic 820-10): The proposal updates the existing guidance to permit portfolios of financial instruments and nonfinancial instruments considered as derivatives according to Topic 815, Derivatives and Hedging, to apply the portfolio exception to valuation.
  • Plan Accounting—Defined Contribution Pension Plans—Investments—Other (Subtopic 962-325): The proposal eliminates from the illustrative example in paragraph 962-325-55-17 the stable value common collective trust fund. Removal of the stable value common collective trust fund aims to prevent the interpretation that such an investment is to be assessed using the net asset value per share practical expedient. Instead, a plan would need to measure whether a readily determinable fair value exists.

Comments on the proposal are due Monday, December 4.

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