FASB Issues Update on Interactions Among Topics 321, 323, and 815

The amendments in this Update affect all entities that apply the guidance in Topics 321, 323, and 815 and elect to apply the measurement alternative or enter into a forward contract or purchase an option to purchase securities that, on settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting. The key amendments include the following:

• Accounting for Certain Equity Securities on the Application or Discontinuation of the Equity Method of Accounting. The amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or on discontinuing the equity method.
• Scope Considerations for Forward Contracts and Purchased Options on Certain Securities. The amendments clarify that, when determining the accounting for certain forward contracts and purchased options an entity should not consider, whether on settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option.

For public business entities, the amendments in the Update become effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. For all other entities, the amendments become effective for fiscal years beginning after December 15, 2021 and for interim periods within those fiscal years.

Related Links

• Press Release
• Accounting Standards Update (PDF)

Keywords: Americas, US, Banking, Securities, Accounting, Derivatives and Hedging, Financial Instruments, Topic 321, Topic 815, Topic 323, Accounting Standards Update, FASB