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FASB Updates Guidance for Assessing Put and Call Options

Impacting companies that invest in or issue debt instruments (or hybrid financial instruments with a debt host) with embedded call (put) options, the Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. The Update clarifies the steps companies are required to take when assessing whether or not the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts. When a call (put) option is contingently exercisable, a company does not have. Read More.

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FASB Clarifies Guidance for Derivative Instrument Accounting

Accounting Standards Update (ASU) No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, has been issued by the Financial Accounting Standards Board (“FASB”). The amendments clarify the guidance in Topic 815. Specifically, ASU No. 2016-05 clarifies that a change in the counterparty to a derivative instrument designated as the hedging instrument does not require dedesignation of the hedging relationship so long as all other hedge accounting criteria. The amendments in ASU No. 2016-05 are effective for public companies’ financial statements issued for fiscal years, and interim periods within those years, starting after December. Read More.

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Private Company Accounting Alternatives Removed

Impacting the use of private company accounting alternatives, the Financial Accounting Standards Board has issued Accounting Standards Update (ASU) No. 2016-03 . The ASU eliminates the effective dates for the following alternatives: ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350). ASU No. 2014-03, Derivatives and Hedging (Topic 815). ASU No. 2014-07, Consolidation (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements. ASU No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination. ASU No. 2016-03 also waives the preferability assessment for the first time a private entity applies a private company accounting alternative. The amendments in ASU No. 2016-03 are effective immediately.

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U.S. GAAP Update to Offer Accounting Alternative for Private Companies

Last month, the Financial Accounting Standard Board (“FASB”) approved a proposal that would offer private companies an easier method to adopt special accounting alternatives from U.S. GAAP. Scheduled to be published in early 2016, the proposal is in response to the Private Company Council’s (“PCC”) calls for accounting changes. In September, the FASB issued Proposed Accounting Standards Update No. PCC-15-01, Intangibles—Goodwill and Other (Topic 350): Business Combinations (Topic 805): Consolidation (Topic 810): Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance — a Proposal of the Private Company Council. The proposal eliminates the effective dates for the following accounting. Read More.

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