First ASU of 2015 eliminates concept of extraordinary items

Contents FASB Guidance issued eliminating the concept of extraordinary items
Board discusses disclosure framework

FASB Guidance issued eliminating the concept of extraordinary items
Under its simplification initiative, the Board recently released ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which eliminates the concept of extraordinary items altogether from U.S. GAAP.

Currently, an event or transaction that is unusual and occurs infrequently must be separately classified and presented as an extraordinary item net of tax after income from continuing operations. Entities are also required to disclose income taxes and earnings-per-share data for each extraordinary item if the amounts are not already presented on the face of the income statement. By removing the concept of extraordinary items from U.S. GAAP, this ASU removes the uncertainty and disparity in practice involved in identifying, presenting, and disclosing extraordinary items, as well as more closely aligns U.S. GAAP with IFRS. As with all of the FASB’s simplification initiatives, the new guidance is also expected to reduce the costs and complexity of financial statement preparation.

The amendments resulting from ASU 2015-01 are effective for all entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with earlier adoption permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. Entities may elect to apply the guidance prospectively (including subsequent adjustments to extraordinary items recognized before the date of adoption) or retrospectively. An entity that applies the guidance prospectively must disclose the nature and amount, if applicable, of any item included in continuing operations that adjusts a previously reported extraordinary item. An entity that applies the guidance retrospectively must provide the change in accounting principle disclosures required under ASC 250, Accounting Changes and Error Corrections.

Board discusses disclosure framework All decisions reached at Board meetings are tentative and may be changed at future meetings. Decisions are included in an Exposure Draft only after a formal written ballot. Decisions reflected in Exposure Drafts are often changed in redeliberations by the Board based on information received in comment letters, at public roundtable discussions, and from other sources. Board decisions become final after a formal written ballot to issue a final Accounting Standards Update.

The FASB met on January 7 to discuss disclosure requirements pertaining to income taxes, inventory, and interim reporting in connection with its disclosure framework project.

The Board discussed the income tax disclosure requirements for undistributed foreign earnings and tentatively decided that any proposed amendments to those requirements would be exposed for public comment through the Board’s disclosure review – income taxes project.

The Board also tentatively decided to exclude ASC 705, Cost of Sales and Services, from the scope of its inventory disclosure review. Instead, the Board requested the staff to perform pre-agenda research on a potential disclosure project for cost of sales or services.

Lastly, the Board focused its discussion on interim reporting, specifically redeliberating the proposed Concepts Statement, Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements. The Board requested the staff to research how the guidance in the proposed Concepts Statement would impact the existing fair value measurement and revenue disclosure requirements contained within ASC 270, Interim Reporting.

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