On the Horizon: FASB finalizes lease accounting guidance

Contents FASB      Board issues new standard on lease accounting
     Tentative decisions from February 24 meeting posted
     FASB responds to PIR report on EPS guidance
     New Board member appointed
GASB Outlook e-newsletter issued for Q1-2016

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.

Board issues new standard on lease accounting The Board recently issued ASU 2016-02, Leases (Topic 842), which requires most lessees to record a lease liability and a right-of-use asset on their balance sheets.

Read more about the new standard in NDS 2016-02, “FASB issues new lease accounting standard: Long-awaited guidance brings most leases on balance sheet for lessees.”

The FASB is providing the following resources to help entities learn more about the new leasing guidance:

Tentative decisions from February 24 meeting posted The FASB met on February 24 and continued to discuss its project on targeted improvements to the accounting for long-duration insurance contracts. The Board made the tentative decisions summarized below.

The Board tentatively decided that the carrying amount of the liability for market risk benefits in contracts offered through separate accounts should be presented as a separate line item in the statement of financial position. In addition, the change in fair value of this liability, excluding the portion relating to changes in an entity’s own credit risk, should be presented as a separate line item in the statement of operations.

The Board tentatively decided to require new disclosures for long-duration contracts subject to the guidance in ASC 944, Financial Services – Insurance. The disclosures would be required for both annual and interim financial statements and would include disaggregated tabular rollforwards of the liabilities for future policy benefits; policyholders’ account balances; market risk benefits and separate accounts, with reconciliations of the disaggregated rollforwards to the aggregate period-ending carrying amounts; and a disaggregated tabular rollforward of deferred acquisition costs. The disclosures would also include qualitative and quantitative information about how the liabilities were measured.

FASB responds to PIR report on EPS guidance The FASB responded to the Financial Accounting Foundation’s (FAF) post-implementation review (PIR) report on Statement 128, Earnings per Share, and stated that it does not plan to undertake a comprehensive review of this guidance.

In its report, the FAF concluded that the earnings per share guidance achieved its expected benefits because the standard resolved the issues that led to its issuance and generally provided investors with useful information.

New Board member appointed Christine Ann Botosan, professor of accounting at the David Eccles School of Business at the University of Utah, has been appointed to a five-year term on the FASB starting July 1, 2016. She will replace Thomas J. Linsmeier, whose second and final term on the Board concludes on June 30, 2016.

"GASB Outlook" e-newsletter issued for Q1-2016 The GASB issued the Q1-2016 edition of its GASB Outlook e-newsletter, which includes summaries of the Board’s projects and key activities.

Correction to effective date for DOE uniform guidance update Last week, we incorrectly stated that the provisions of the Department of Energy’s Regulation 2 Code of Federal Regulations 910, “Audit Requirements for For-Profit Entities,” are effective for years beginning after December 31, 2015. However, the guidance is effective for years ending on or after December 31, 2015.

© 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.