FASB Makes Decisions on Targeted Improvements to Liabilities and Equity

March 31, 2017

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 affirmed its decision to replace the indefinite deferral under Topic 480, Distinguishing Liabilities from Equity, with an exemption to improve the FASB Accounting Standards Codification. The FASB also moved the next project stage, improvements to the navigation of the guidance in the FASB Codification, to the Distinguishing Liabilities from Equity project.