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Write-Down Guidance to Stay in ASC 323-10-35-31

The Financial Accounting Standards Board (“FASB”) has opted to keep the guidance related to write-downs of equity method investments in Accounting Standards Codification (ASC) 323-10-35-31, Investments — Equity Method and Joint Ventures – Overall – Subsequent Measurement in lieu of making the previously proposed amendments to its upcoming Financial Instrument standard. In regard to the guidance, ASC 323-10-35-31 applies the concept of a decrease in value that is deemed “other than temporary” for writing down equity investments believed at their historical rate.

Although the write-down guidance remains intact, the issue has been met with disapproval by FASB members. Thomas Linsmeier remarked that using the “other than temporary” phrase would be inconsistent with decisions related to Proposed Accounting Standards Update (ASU) No. 2012-260, Financial Instruments—Credit Losses (Subtopic 825-15). Despite their opposition, board members left the existing guidance as is for the short term due to the “other than temporary” principle being infrequently used.

Meanwhile, FASB will move forward without the write-down guidance in its final standard for recognizing and measuring financial instruments. Set for Wednesday, November 12th, board members plan to discuss finalizing the standard, its effective date and the transition to the new accounting. FASB is aiming for an early 2015 release of the standard.

Cherry Bekaert’s Financial Services Group can assist with the write-down guidance and other matters that may concern your company. Learn more at our Financial Services section.