On the Horizon -- FASB reviews projects for future agenda

Contents FASB      Highlights of February 3 FASB meeting published
GASB proposes leasing guidance for state and local governments International Federation of Accountants      IPSASB proposes amendments to reporting under cash basis accounting
Comment letter issued

FASB 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.

Highlights of February 3 FASB meeting published The FASB met on February 3 and considered whether to include several potential financial reporting topics in a Discussion Paper on its future technical agenda that will be issued in the first half of 2016. The Board recommended including potential topics on financial performance reporting, distinguishing liabilities from equity, intangible assets, and pensions and other postretirement employee benefit plans.

The Board also discussed targeted improvements to its liabilities and equity project. As a result, it decided to remove from this project’s agenda the simplification of accounting for derivative and financial instruments indexed to a company’s own stock and to retain accounting for instruments with down-round features.

In addition, the Board continued redeliberations on proposals related to the following four topics under Phase 1 of its project on the financial statements of not-for-profit entities:

  • Netting of external and direct internal investment expenses against investment return
  • Disclosure of netted investment expenses
  • Expenses by nature and analysis of expenses by function and nature
  • Enhanced disclosures about cost allocations and improved guidance on management and general activities

GASB proposes leasing guidance for state and local governments The GASB issued a proposal to establish a single approach for state and local government lessees and lessors to recognize assets and liabilities related to leases. The proposed approach is based on the principle that leases are financings of the right to use an underlying asset; however, limited exceptions are provided in the draft guidance, including short-term leases (12 months or less) and financed purchases.

The proposal also provides guidance for lease contracts for nonfinancial assets—including vehicles, heavy equipment, and buildings—but excludes grants, donated assets, and leases of intangible assets, such as patents and software licenses.

Under the proposed GASB standard, Leases, a lessee government would recognize a lease liability and an intangible asset representing its right to use the leased asset, and a lessor government would recognize a lease receivable and a deferred inflow of resources.

The proposed standard also addresses accounting for lease terminations and modifications, sale-leaseback transactions, nonlease components embedded in lease contracts (such as service agreements), and related-party leases.

Comments are due by May 31.

International Federation of Accountants IPSASB proposes amendments to reporting under cash basis accounting The International Public Sector Accounting Standards Board (IPSASB) issued Proposed International Public Sector Accounting Standard (IPSAS), Amendments to Financial Reporting under the Cash Basis of Accounting (the Cash Basis IPSAS), which proposes amendments to the existing 2007 guidance, Financial Reporting under the Cash Basis of Accounting, in the areas of consolidation, disclosure of external assistance and payments made by third parties, and other matters, including some “housekeeping” type amendments.

The objective of the proposed standard is to overcome obstacles that currently exist related to the adoption of the existing guidance. IPSASB has indicated that few jurisdictions prepare financial statements that fully comply with all requirements of the existing guidance.

Stakeholders have until July 31 to comment on the proposal.

Comment letter issued On January 29, the firm issued a comment letter in response to the AICPA Peer Review Program’s Proposed Changes to the AICPA Standards for Performing and Reporting on Peer Reviews, Improving Transparency and Effectiveness of Peer Reviews.

© 2016 Grant Thornton LLP, U.S. member firm of Grant Thornton International Ltd. All rights reserved. This Grant Thornton LLP On the Horizon provides information and comments on current accounting and SEC reporting issues and developments. It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting or other advice or guidance with respect to the matters addressed in this publication. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this publication. For additional information on topics covered in this publication, contact a Grant Thornton client-service partner.