What is the Financial Accounting Standards Board (FASB) up to this year? To help your business stay in the know, here is more about standards likely to be issued this year. Your business may be permitted or even required to immediately adopt these standards, so thinking about these standards now can help you as you plan for the year ahead.
Are you in compliance with new effective dates?
Investments in Equity Securities
When: The final standard is expected in the first quarter of 2020.
What: The accounting for investments in equity securities depends on the extent of the investor’s holdings. If the investor owns less than a majority interest but can exert significant influence over the investee, the equity method should be used. Under Accounting Standards Update (ASU) 2016-01 Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities at lower levels of ownership, equity securities are accounted for at fair value, with an alternative measurement approach permitted in certain circumstances when fair value is not readily determinable.
This standard will address questions that have arisen regarding the interaction between the equity method and the fair value/alternative measurement method for equity securities in two fact patterns:
Debt vs. Equity
When: The final standard is on fast track and is expected in 2020.
What: This proposal would simplify the existing accounting for convertible instruments and contracts in a company’s own equity by essentially ignoring many of the instruments’ features.
A new standard was issued in 2017 targeted to improve hedge accounting. The FASB is working on two projects related to questions that arose from the targeted improvement. The proposed changes would clarify existing guidance to reduce inconsistent application. The first project resulted in an exposure draft for which the comment period ended January 20, 2020. The second project is expected to result in an exposure draft shortly.
Other Accounting Standards Items to Consider
The FASB is also working on number of projects that have a high potential to be finalized during 2020. These include:
It’s important to keep on top of these accounting standards as they could have an impact on your organization. Knowing what’s coming will help you plan for compliance.
We’re continuing to keep an eye on how these standards will impact you.