FASB considers simplification of accounting methods April 09, 2015 Share Subscribe RFP The FASB has begun deliberations on two new projects related to simplification of accounting methods: Reducing the cost and complexity of the equity method of accounting by removing some existing GAAP requirements Removing an existing requirement to retrospectively account for measurement period adjustments for business combinations In each case, the board asked staff to draft a proposed Accounting Standards Update (ASU). Equity method The board tentatively decided to do the following: Eliminate existing guidance requiring entities to account for basis differences as though the investee were a consolidated subsidiary along with the related disclosures. Entities would cease amortizing all remaining differences once the amended guidance took effect. Require entities to disclose the amount of amortization of basis differences recognized in the comparable prior period. Eliminate existing guidance requiring an entity to retroactively apply the equity method of accounting to an investment that did not qualify for equity method accounting in previous periods but subsequently qualifies because of an increase in the ownership interest. This change would apply prospectively to ownership level increases after the effective date. Measurement period adjustments in a business combination The board tentatively decided the following During the measurement period of a business combination, an acquirer would recognize adjustments of provisional amounts in the reporting period in which the adjustment was determined. The acquirer would record the cumulative effect on earnings of changes in depreciation amortization, or other income statement effects resulting from the change in the provisional amount. The amended guidance would apply prospectively to adjustments of provisional amounts occurring after the effective date, with FASB Accounting Standards Codification® ASC 250 disclosures required in the period of adoption.