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FASB Issues Update on Certain Financial Instruments with Liabilities and Equity Characteristics

Following recommendations from the Private Company Council, the Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update No. 2017-11, Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part 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. Part I simplifies accounting for select financial instruments with down round features, a rule in an equity-linked financial instrument or embedded feature that offers a downward adjustment. Read More.

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IASB Proposes Change to Financial Instrument Standard

A slight change could be coming to the International Accounting Standards Board’s (“IASB”) financial instruments standard. On Wednesday, the IASB announced a proposed amendment to International Financial Reporting Standards (“IFRS”) 9, Financial Instruments, which would require assets to be calculated either at amortized cost or at fair value with changes disclosed under other comprehensive income. The proposed amendment is intended to determine interest in permitting a measurement change for certain financial assets with prepayment options. IASB research staff members plan to move quickly to issue the proposal for public comment by the end of April. If approved, a final amendment. Read More.

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Comment Letters Ask FASB to Limit Future Projects

Some trade groups want the Financial Accounting Standards Board (“FASB”) to provide more leeway for implementing current accounting standards before taking on new projects. In feedback to the FASB’s Invitation to Comment, Agenda Consultation, groups like the American Bankers Association (“ABA”) asked the board to consider the time and costs needed when new standards are implemented. The ABA also noted that standards involving revenue, leases, credit losses and financial instrument measurement and classification require significant undertaking that could last over several years. Other comment letters to the agenda consultation document came from the Institute of Management Accountants (“IMA”), which advised. Read More.

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FASB Credit Loss Standard to be Issued Thursday

The Financial Accounting Standards Board’s (“FASB”) long-anticipated guidance in response to the 2008 financial crisis is scheduled for a Thursday release. The accounting board’s final standard for writing down bad loans and securities will be issued as Accounting Standards Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326), and listed under U.S. GAAP as Topic 326, Financial Instruments — Credit Losses. Barring any changes, public companies must implement the new amendments beginning in 2020.

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SEC Deputy Chief Accountant Speaks at Financial Reporting Conference

As guest speaker at the 15th Annual Baruch College Financial Reporting Conference, Securities and Exchange Commission (“SEC”) Deputy Chief Accountant Wesley Bricker expressed his views on the current transition period undertakings for the upcoming revenue recognition and leases standards, and the Financial Accounting Standards Board’s proposal for financial instruments’ credit impairment. He also cautioned companies that presenting non-generally accepted accounting principles in public filings, especially adjustments to revenue, will increase the likelihood of receiving an SEC comment letter. He also spoke about the Public Company Accounting Oversight Board’s efforts to encourage auditor attention on financial reporting risks. A transcript of Bricker’s speech is available on. Read More.

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FASB Approves Credit Loss Standard

After reviewing the costs and benefits of its new guidance for writing down bad loans and securities , the Financial Accounting Standards Board (“FASB”) voted last week to proceed with a final standard based on the proposed Accounting Standards Update, Financial Instruments—Credit Losses (Subtopic 825-15). The standard will help companies with the financial reporting of credit losses on loans and other financial instruments, and is expected to be released in June. Relative to its decision, the FASB has deferred the new standard’s effective date by one year for public companies that fall under the Securities and Exchange Commission filer requirements. Such public companies must apply the forthcoming guidance to fiscal years, and interim periods. Read More.

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