On the Horizon -- Board discusses comments on proposed fair value measurement disclosures

Contents FASB posts tentative decisions from June 1 meeting SEC adopts interim final rule to implement FAST Act provision GASB issues Q2-2016 newsletter

FASB posts tentative decisions from June 1 meeting 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 June 1 to discuss comments received on the proposed ASU related to changes in fair value measurement disclosures, to continue deliberations on its Conceptual Framework – presentation project, and to discuss various issues identified while drafting and reviewing a forthcoming ASU on the financial statements of not-for-profit entities (NFPs). The Board took the actions summarized below.

Disclosure requirements for fair value measurement The Board discussed a summary of comments received, but made no technical decisions, on the proposed ASU, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The staff will conduct outreach with investors and other financial statement users on the proposed ASU.

Conceptual Framework – presentation The Board continued its deliberations on the proposed new presentation chapter in FASB Concepts Statement 8, Conceptual Framework for Financial Reporting, and tentatively decided to

  • Focus on presenting information about assets, liabilities, equity, revenues, expenses, gains, and losses in the financial statements rather than requiring specific financial statements that present this information
  • Consider the form of settlement of a liability or realization of an asset in grouping recognized items into line items
  • Incorporate into the proposed chapter some of the discussion of central, peripheral, operating, and nonoperating from FASB Concepts Statement 5, Recognition and Measurement in Financial Statements of Business Enterprises
  • Emphasize that the Conceptual Framework is a nonauthoritative tool for the Board’s use in its standard-setting activities

The Board also tentatively decided to issue the proposed chapter on presentation separately from the proposed chapter on measurement. It directed the staff to draft a proposed Concepts Statement for vote by written ballot, with a 90-day comment period.
Financial statements of not-for-profit entities The Board discussed issues identified during the drafting and external review of the forthcoming final ASU, Presentation of Financial Statements for Not-for-Profit Entities, and made the tentative decisions summarized below:

  • To permit NFPs to present net investment return that is either managed differently or derived from different sources in multiple, appropriately labeled line items within the statement of activities. The Board also affirmed a previous tentative decision that higher education institutions would no longer be required to display an investment return of the “other investment portfolio” separately from other components of net investment return.
  • To preclude NFPs from including investment expenses that have been netted against investment returns in the analysis of expenses by nature and function
  • To eliminate the requirement for NFPs to disclose the portion of unrealized gains and losses for the period that relates to equity securities still held at the reporting date

The Board plans to issue a final ASU in the summer of 2016.

SEC adopts interim final rule to implement FAST Act provision On June 1, the SEC adopted Interim Final Rule, Form 10-K Summary, to implement a provision of the FAST Act. The Interim Final Rule adds Item 16 to Part IV of Form 10-K, giving a registrant the option to include a summary of business and financial information contained in its Form 10-K. Current rules do not prohibit a registrant from including a summary in Form 10-K; however, Item 16 now expressly allows it. Each summary topic should include a cross-referenced hyperlink referring the reader to the related detailed disclosure item elsewhere in Form 10-K.

The Interim Final Rule will become effective when published in the Federal Register.

The SEC has also requested public comment on the Interim Final Rule, including comments on whether the summary is useful, should be mandated, or should be allowed in other annual reporting forms, and whether the rule should include further guidance or requirements regarding the content and form of the summary. The SEC will accept comments until 30 days after the rule is published in the Federal Register.

GASB issues Q2-2016 newsletter The GASB issued the Q2-2016 edition of its GASB Outlook e-newsletter, which includes summaries of the Board’s projects and key activities.

© 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.