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On The Horizon: FASB issues proposal to reorganize the consolidation guidance

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Contents FASB       Proposal to reorganize and clarify the existing consolidation guidance
      Highlights from September 20 meeting posted
      PCC posts highlights of September 19 meeting

SEC       Commission and staff issue interpretive guidance on pay ratio rule
      CorpFin updates Securities Act Rules S&DIs

IASB announces composition of TRG for IFRS 17

FASB Proposal to reorganize and clarify the existing consolidation guidance The FASB has issued a proposed ASU, Consolidation (Topic 812)—Reorganization, to reorganize and clarify certain items within the existing consolidation guidance in ASC 810, Consolidation. The FASB has issued the proposal in response to stakeholders’ concerns that the existing consolidation guidance is difficult to understand and navigate.

The proposed amendments would:

  • Reorganize the existing consolidation guidance in ASC 810 into a new topic, ASC 812, Consolidation
  • Create separate subtopics for variable interest entities in ASC 812-20, Variable Interest Entities, and for voting interest entities in ASC 812-30, Voting Interest Entities
  • Move the existing guidance in ASC 810 for consolidation of entities controlled by contract to ASC 958, Not-for-Profit Entities because this guidance only applies to not-for-profit entities
  • Supersede the existing guidance in ASC 810-30, Research and Development Arrangements
  • Clarify certain areas of the existing consolidation guidance to make it easier to understand, but not change any of the analyses performed under the existing guidance

The Board will determine the effective dates for the amendments for public business entities and all other entities after it considers feedback on the proposal.

Although the Board does not anticipate changes in accounting practices or outcomes from the proposed amendments, it has provided the following transition guidance:

  • Entities that have not adopted the amendments in ASU 2015-02, Amendments to the Consolidation Analysis, would be required to adopt the amendments in the proposal at the same time that they adopt the amendments in ASU 2015-02, and should apply the same transition method (a modified retrospective approach by recording a cumulative effect adjustment to beginning retained in the year of adoption, or a retrospective approach) that it elects for ASU 2015-02.
  • Entities that have adopted the amendments in ASU 2015-02 would be required to apply the proposed amendments retrospectively to all prior periods presented, beginning with the period that the amendments in ASU 2015-02 were initially adopted.

The comment period on the proposed ASU ends on December 4.

Highlights from September 20 meeting posted All decisions reached at Board meetings are tentative and may be changed at future meetings.

The FASB met on September 20 to discuss (1) the results of staff research and analysis on the projects included in the Invitation to Comment, Agenda Consultation, and (2) the status of the Board’s research agenda. The Board took the actions summarized below.

The Board tentatively decided to add the following projects to its technical agenda:

  • Distinguishing liabilities from equity (including convertible debt) with a focus on indexation and settlement (in the context of the derivative scope exception), convertible debt, disclosures, and earnings-per-share
  • Disaggregation of performance information either through income statement presentation or disclosure (as part of the financial performance reporting project)
  • Improvement of the aggregation criteria and disclosures related to segment reporting

It also tentatively decided to remove the following projects from its research agenda:

  • Accounting for financial instruments: interest rate risk disclosures
  • Pensions and other postretirement benefit plans
  • A holistic project on accounting for intangibles (see below)
  • Segment reporting for not-for-profit (NFP) healthcare entities (part of the NFP phase 2 research project)

Although the Board tentatively decided to remove its holistic project on intangibles from its research agenda, it also tentatively decided to:

  • Maintain a component of the intangibles project related to developing qualitative disclosures about intangibles (as part of the disclosure framework project)
  • Combine on its research agenda the projects on (1) accounting for identifiable intangible assets in a business combination for public business entities (PBEs) and NFP entities and (2) subsequent accounting for goodwill for PBEs and NFPs

Tentative decisions were also made to continue the Board’s research on the following projects:

  • Accounting for income taxes: presentation of tax expense/benefit (also added other suggested potential simplifications to the project’s scope)
  • Accounting for inventory and cost of sales
  • Improving the statement of cash flows
  • Improving the structure of the performance statement and developing an operating performance measure

The Board also tentatively decided to combine its research projects on structuring the performance statement (or the statement of activities) of for-profit entities and NFP entities.

PCC posts highlights of September 19 meeting The Private Company Council (PCC) met on September 19 with FASB members and shared stakeholder input from the August private company Town Hall meeting. The FASB staff delivered project updates and PCC members provided input on the following FASB projects:

  • Cloud computing (EITF Issue 17-A): PCC members provided input on the accounting alternatives presented for costs of implementation activities incurred in a cloud computing arrangement that is considered a service contract.
  • Balance-sheet classification of debt: The staff discussed the Board’s recent tentative decisions. PCC members provided suggestions to improve clarity and expressed a commitment to work with the Board on stakeholder education.
  • Readily determinable fair value: The PCC discussed the FASB staff research on the topic, and one PCC member observed that educational activities would also benefit the topic.

The next PCC meeting will be held on December 8. The FASB and PCC also will hold the next private company Town Hall meeting in November, with more details to follow.



SEC Commission and staff issue interpretive guidance on pay ratio rule Commission adopts interpretive release

On September 21, the SEC approved interpretive guidance to assist registrants in their compliance with the Final Rule, Pay Ratio Disclosure. Registrants must comply with the final rule for the first fiscal year beginning on or after January 1, 2017, which means registrants will begin making pay ratio disclosures in early 2018.

The interpretive guidance includes the Commission’s views on

  • The use of reasonable estimates, assumptions and methodologies, and statistical sampling in determining the median employee and calculating the median employee’s annual total compensation
  • The use of appropriate existing internal records, such as tax or payroll records, to determine inclusion of certain non-U.S. employees and to identify the median employee when calculating the median annual total compensation
  • The application of widely recognized tests to determine whether its workers are employees for purposes of the rule

CorpFin staff updates


Regulation S-K C&DIs


The staff of the SEC’s Division of Corporation Finance (CorpFin) also updated its Regulation S-K Compliance and Disclosure Interpretations (C&DIs) Questions 128C.01 and 128C.06 to reflect the views of the Commission as discussed in the interpretive release. Additionally, Question 128C.05 was withdrawn.

Statistical sampling guidance

CorpFin staff also published guidance to assist registrants in determining how to use statistical sampling methodologies and other reasonable methods when identifying the median employee and in calculating the annual total compensation or any elements of total compensation for employees other than the principal executive officer. The staff’s guidance also provides hypothetical examples that a registrant may consider when using reasonable estimates, statistical sampling, and other reasonable methods to identify its median employee.

CorpFin updates Securities Act Rules C&DIs The Compliance and Disclosure Interpretations described below reflect the views of the SEC staff. They are not rules, regulations, or statements of the Commission and have not been approved by the Commission. The interpretations are intended as general guidance and should not be relied on as definitive.

CorpFin recently updated its Securities Act Rules C&DIs to correct certain outdated rule and statutory references stemming from its Final Rule, Exemptions to Facilitate Intrastate and Regional Securities Offerings. Among the revisions, the staff updated for amendments to Rule 147 and clarified certain qualification requirements for exempt offerings under Rules 504 and 506. Additionally, the staff withdrew certain sections related to the repeal of Rule 505.



IASB announces composition of TRG for IFRS 17 The International Accounting Standards Board announced the membership of its IFRS 17 Transition Resource Group (TRG), which was formed to support implementation of the new guidance on insurance contracts.

The objective of the TRG is to provide a public forum for any stakeholder to share implementation questions with the Board and to follow the discussion of those questions. The TRG will not issue any authoritative guidance; but the IFRS Foundation will publish summaries and recordings from the meetings on its website.

Vasilka L. Bangeova, a Director from Grant Thornton UK LLP, will represent Grant Thornton on the TRG.

The first meeting of the TRG will be held on November 13. A link to the TRG’s webpage is included on the IFRS Foundation’s website.



© 2017 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.