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FASB Discusses Proposed Callable Debt Securities Standard

After reviewing feedback from its proposed Accounting Standards Update, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, the Financial Accounting Standards Board (“FASB”) has made tentative decisions on the following: Requests to Require a True “Yield-to-Worst” Amortization Method. Premiums on purchased callable debt securities will be amortized to the earliest call date. Requests to Clarify Consequential Amendments to Paragraph 946-320-35-20. The amendment to industry guidance was corrected to affirm that the FASB did not intend to change practice for investment companies holding debt securities. Requests to Clarify “Callable” and the Interaction with Paragraph 310-20-35-26.. Read More.

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Reduced Amortization Period for Callable Debt Securities Proposed

The Financial Accounting Standards Board (“FASB”) wants to reduce the amortization period for premium paid for callable debt securities when purchased above market value. In Proposed Accounting Standards Update (“ASU”) No. 2016-340, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, the FASB proposes the premium amortization to be more aligned with the market’s expectations for the securities. The amortization period would end on the earliest call date, as opposed to the instrument’s maturity date. Due to a tax incentive allowing municipal bond issuers to sell 30-year bonds with above-market coupons and 10-year call provisions,. Read More.

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FASB to Meet This Morning

Per its Notice of Meetings , the Financial Accounting Standards Board (“FASB”) is expected to discuss the following projects today: The proposed Accounting Standards Update, Business Combinations (Topic 805): Clarifying the Definition of a Business. Interest income associated with the purchase of callable debt securities. The proposed Statement of Financial Concepts, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. If necessary, the FASB will conclude with an open discussion on technical projects or other administrative issues. Wednesday’s meeting will begin at 9 a.m., ET. More on the meeting can be found via FASB.org.

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