FASB Removes Outdated SEC Interpretive Guidance for Financial Instruments Standard

April 9, 2018

The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2018-04, Investments — Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273, which eliminates out-of-date interpretive guidance from the Securities and Exchange Commission (“SEC”) on financial instruments. The change to U.S. GAAP was made in response to ASU No. 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

The U.S. GAAP update is highlighted in Staff Accounting Bulletin (“SAB”) No. 117, in which the SEC revised its interpretive guidance for assessing certain equity securities to comply with ASU No. 2016-01. When SAB No. 117 was issued in November, the SEC stated that the FASB’s financial instruments standard makes obsolete its guidance concerning other-than-temporary-impairment of particular investments in equity securities.

ASU No. 2018-04 also erases separate guidance that was succeeded by Release No. 33-9273, Rescission of Outdated Rules and Forms, and Amendments to Correct References, associated with a public utility holding company’s consolidated balance sheets.