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Basel Committee Issues Lease Accounting Guidance

Last week, the Basel Committee on Banking Supervision issued interpretative guidance for the Financial Accounting Standards Board and International Accounting Standards Board’s upcoming lease accounting changes. Presented as frequently asked questions, the guidance relates to Accounting Standards Update No. 2016-02, Leases (Topic 842), and International Financial Reporting Standards 16, Leases. Specifically, the three questions cover how new assets and liabilities are disclosed on bank balance sheets due to the FASB and IASB’s changes to accounting for a company’s rented office space and equipment. The first question says that a leased intangible asset should be exempt from the regulatory capital calculation.. Read More.

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FASB Could Take Up Cloud Computing Project

A cloud computing project could be in the works for the Financial Accounting Standards Board (“FASB”). During the April 4 Private Company Council meeting , most council members said they want implementation accounting for cloud computing software to be similar to the accounting for constructing on-site systems. Lining up the accounting for both would allow companies to potentially capitalize set-up costs, allowing them to postpone disclosing the expense as a long-term asset. David Hirsch, a council member, remarked that the current cloud computing guidance is confusing. In his opinion, cloud- and on-premises software implementation expenses must be recorded similarly.

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Highlights from the Private Company Council’s Tuesday Meeting

The following is a recap of Financial Accounting Standards Board (“FASB”) projects discussed at Tuesday’s Private Company Council (“PCC”) meeting: Disclosure Framework. Numerous PCC members expressed support for the project, particularly the inventory exposure draft. The PCC also provided feedback on various portions of the project. Financial instruments—Hedge Accounting. Many PCC members favor the standard, including guidance to give private companies additional time to disclose hedge effectiveness. Liabilities and Equity—Targeted Improvements. Feedback received on the Exposure Draft was discussed, as well as the FASB’s research on an alternative to help streamline financial instruments accounting with “down round” features. The FASB was encouraged. Read More.

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Proposal for Nonemployee Share-Based Payments Issued

The Financial Accounting Standards Board (“FASB”) issued for public comment the proposed Accounting Standards Update (“ASU”), Compensation— Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The proposal is aimed to lower costs and confusion over financial reporting for non-employee share-based payments. If approved, the scope of Topic 718, Compensation—Stock Compensation, would be expanded to include payments to non-employees. In addition, standard would replace Subtopic 505-50, Equity—Equity Based Payments to Non-Employees. Comments are due Monday, June 5. An effective date for the proposed ASU will be decided after the FASB reviews all submitted feedback. More on the proposal is available at FASB.org.

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FASB Issues Amended Guidance for Amortized Premiums

The Financial Accounting Standards Board (“FASB”) has issued new guidance on the amortization of premiums for purchased callable debt securities. Released as Accounting Standards Update No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities , the standard reduces the amortization period for a premium to the earliest call date to improve when the interest income is recorded on bonds held either at a premium or a discount with the underlying instrument. ASU No. 2017-08 takes effect for public companies for the fiscal years, and interim periods within those years, starting after December 15, 2018. All other companies must apply the amendments to fiscal years starting after December 15, 2019, and interim periods. Read More.

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FASB Makes Decisions on Targeted Improvements to Liabilities and Equity

During its March 22 meeting, the Financial Accounting Standards Board (“FASB”) reviewed comment letters received on its proposed Accounting Standards Update—Distinguishing Liabilities from Equity (Topic 480): I. Accounting for Certain Financial Instruments with Down Round Features, and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. As a result of the discussions held and feedback received, the FASB asked staff members to conduct research on a possible alternative that would impact the measurement of down round features, but not the classification. Further, the FASB. Read More.

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