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October 03, 2017

FASB published an Exposure Draft that proposed an Accounting Standards Update on codification improvements, which include codification updates for technical corrections, clarifications, and other minor improvements. Comments are due by December 04, 2017. The “Amendments to the FASB Accounting Standards Codification” section explains the reason for each proposed amendment in this Update and contains a chart identifying the Topics, paragraphs, and the nature of amendments being proposed. The amendments in this proposed Update would affect a wide variety of Topics in the Codification, including Amendments to Subtopic 815-10 on Derivatives and Hedging and Amendments to Subtopic 820-10 on Fair Value Measurement.

Amendments to Subtopic 815-10, Derivatives and Hedging. The amendments in this proposed update would clarify the circumstances in which derivatives may be offset. Under certain conditions, derivatives may be offset if three of the four criteria in paragraph 210-20-45-1 are met. One of the criteria—the intent to set off—may not be required to offset derivative assets and liabilities for certain amounts arising from derivative instruments recognized at fair value and executed with the same counterparty under a master netting agreement. The guidance in paragraph 815- 10-45-4 is potentially misleading because it specifically references the criteria in paragraph 210-20-45-1, which states that derivatives may only be offset when all four of the conditions in paragraph 210-20-45-1 are met. The proposed amendments would (1) modify the reference in paragraph 815-10-45-4 so that the reader is directed to the full guidance of Subtopic 210-20, Balance Sheet— Offsetting, and (2) clarify the guidance in paragraph 815-10-45-5 for the exception of the intent to set off criteria for derivatives.

Amendments to Subtopic 820-10 on Fair Value Measurement. The amendments in this proposed update would clarify the Board’s decisions about the measurement of the fair value of a liability or instrument classified in a reporting entity’s shareholder’s equity from the perspective of a market participant that holds an item identical to an asset at the measurement date. The amendments in this proposed update would also revise the current guidance to allow portfolios of financial instruments and nonfinancial instruments accounted for as derivatives in accordance with Topic 815 to use the portfolio exception to valuation. Additionally, the amendment to paragraph 820-10-50-2(bbb)(2) in this proposed update would replace indefinite deferral guidance that is currently in paragraph 820-10-65-9 with a disclosure exemption in paragraph 820-10-50-2(bbb)(2) and paragraphs that explicitly cite that paragraph. The proposed amendments are not intended to substantively change the application of generally accepted accounting principles or GAAP. However, it is possible that the proposed amendments may result in a change to the existing practice for some entities.

The provisions of this Exposure Draft, if finalized as proposed, would require changes to the U.S. GAAP Financial Reporting Taxonomy (Taxonomy). After the FASB has completed its deliberations and issued a final Accounting Standards Update, the proposed amendments to the Taxonomy will be made available for public comment and finalized as part of the annual release process.


Related Link: Exposure Draft on Codification Improvements (PDF)

Comment Due Date: December 04, 2017

Keywords: Americas, US, Banking, Securities, Insurance, Accounting, Derivatives and Hedging, Codification Improvements, Fair Value Measurement, Taxonomy, FASB

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