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On the Horizon -- FASB one step closer to issuing final credit losses standard

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Contents
FASB
     Proposed ASU addresses presentation of restricted cash in cash flows statement
     Tentative decisions from April 27 meeting posted
     Q2 2016 FASB Outlook e-newsletter issued
AICPA releases employee benefit plan alert
Comment letters issued



FASB

Proposed ASU addresses presentation of restricted cash in cash flows statement

The Board issued proposed ASU, Restricted Cash – a consensus of the FASB Emerging Issues Task Force, which addresses the presentation of restricted cash and changes in restricted cash on the statement of cash flows. The proposal aims to reduce the existing diversity in practice in how restricted cash and related changes are presented on the statement of cash flows.

The proposed ASU specifies that restricted cash and restricted cash equivalents should be included with cash and cash equivalents on the statement of cash flows, and that transfers between cash, cash equivalents, and restricted cash or restricted cash equivalents are not part of an entity’s operating, investing, and financing activities, and should not be reported on the statement of cash flows.

Consequently, restricted cash and restricted cash equivalents would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. If the total amount of cash, cash equivalents, and restricted cash or restricted cash equivalents on the statement of cash flows cannot be reconciled to a similarly titled line item or subtotal on the balance sheet, the entity would disclose the amounts of restricted cash or restricted cash equivalents either on the statement of cash flows or in the notes to the financial statements, including a description of the location of those amounts on the balance sheet.

An entity would also be required to provide a description of the provisions of the restrictions on cash and cash equivalents in the notes to the financial statements.

Entities would adopt the proposed ASU on a retrospective basis. The effective date will be determined after the EITF considers stakeholder feedback on the proposal.

The proposed ASU does not define “restricted cash” and “restricted cash equivalents.” As a result, public entities should continue to consider the guidance in SEC Regulation S-X.

Stakeholders have until June 27 to comment on the proposal.

Tentative decisions from April 27 meeting posted

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 April 27 to redeliberate its proposed ASU, Financial Instruments – Credit Losses, and took the actions summarized below.

Under the proposed ASU, an entity would be required to disclose “credit quality indicators” of certain financial assets and to present the amortized cost basis of these assets within each credit quality indicator by year of origination, or vintage year, for not more than the most recent five origination years. A “credit quality indicator” is a statistic about the credit quality of a financial asset.

The Board tentatively decided not to amend the vintage-year disclosure requirements for public business entities that are SEC filers; however, public business entities that are not SEC filers would be permitted to provide vintage-year disclosures using a phased-in transition approach until five separate fiscal years are disclosed. All other entities, including not-for-profit (NFPs) organizations and employee benefit plans (EBPs), would not be required to disaggregate credit quality indicators by year of origination.

The Board also tentatively decided to defer the planned effective dates by one year from the dates that were tentatively decided during previous redeliberations on the proposed ASU. Therefore, public business entities that are SEC filers would adopt any new guidance for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The effective date for other public business entities would be one year later.

All other entities, including NFPs and EBPs, would adopt the new guidance for fiscal years beginning after December 15, 2020 and for interim periods within fiscal years beginning after December 15, 2021.

Early adoption would be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Board has directed the staff to draft a final ASU for vote by written ballot and expects to release a final ASU in June 2016.

Q2 2016 FASB Outlook e-newsletter issued

The FASB issued the Q2 2016 edition of its FASB Outlook E-newsletter, which includes, among other articles, an update on implementation of the new revenue standard, the Board’s hedge accounting project, and information on using and improving the cash flows statement.



AICPA releases employee benefit plan alert

The AICPA issued Audit Risk Alert, Employee Benefit Plans Industry Developments – 2016. This alert provides information on recent industry, technical, regulatory, or professional developments, as well as guidance, practice aids, and illustrative examples addressing common audit and accounting issues.



Comment letters issued

On April 25, the firm issued two comment letters to the FASB in response to the following proposed ASUs:





© 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.