FASB decided Monday to expose for public comment three proposed Accounting Standards Updates (ASUs) based on consensuses reached at the March 15 meeting of the Emerging Issues Task Force (EITF), according to its summary of board decisions.
The proposed ASUs deal with sales of donated securities by not-for-profits; accounting for government-assisted acquisition of financial institutions; and a rebuttable presumption in Topic 926, Entertainment—Films.
Board decisions are tentative and may be changed at future board meetings, and decisions are included in an exposure draft for formal comment only after a formal, written ballot.
FASB approved the EITF consensuses on Issue 12-A, Issue 12-C, and Issue 12-E and decided to expose them for 90-day public comment periods. None of the proposals would require additional recurring disclosures.
Not-for-profits’ sales of donated securities
The issue discussed by the EITF deals with securities that are directed for sale by not-for-profits upon receipt.
When the not-for-profit is able to avoid significant investment risks and rewards through nearly immediate conversion into cash, cash receipts from such donations and sales should be classified as operating cash flows, according to the proposal.
But cash receipts meeting that description should be classified as financing cash flows if the donor restricts the use of those contributed resources to the acquisition, construction, or improvement of long-lived assets to establish or increase a permanent or term endowment.
The proposed amendments would be applied prospectively to cash receipts on or after the date of adoption from the sale of donated securities. Retrospective application to all prior periods presented upon the date of adoption would be permitted but not required. The EITF decided that earlier adoption should be allowed.
Government-assisted purchase of a financial institution
The proposed amendment would require that indemnification assets recognized in accordance with Subtopic 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Noncontrolling Interest, as a result of a government-assisted acquisition of a financial institution involving an indemnification agreement should be subsequently measured on the same basis as the asset subject to indemnification.
Amortization of changes in value would be limited to contractual limitations on the amount and term of the indemnification agreement. Entities would consider the lesser of the term of the indemnification agreement and the term of the indemnified assets when considering the contractual term of the indemnification agreement.
The proposed amendments would be applied prospectively to new indemnification assets acquired and to changes in expected cash flows of existing indemnification assets occurring on or after the date of adoption. Prior periods would not be adjusted, and earlier adoption would be permitted.
The final proposal would eliminate the rebuttable presumption in Topic 926, Entertainment—Films, that the conditions leading to the write-down of unamortized film costs after the balance sheet date existed as of the balance sheet date.
In addition, the proposal would eliminate the requirement that an entity incorporate into fair value measurements used in the impairment tests the effects of any changes in estimates resulting from the consideration of subsequent evidence if the information would not have been considered by market participants at the measurement date.
Entities would need to comply with the disclosure requirements in Topic 855, Subsequent Events, and other relevant codification topics. The proposed amendments would be applied prospectively for impairment tests performed after the date of adoption, with earlier application permitted. Also, earlier application will be allowed for entities that haven’t yet issued their financial statements for the most recent period and for nonpublic entities whose financial statements have not yet been made available for issuance.
—Ken Tysiac (firstname.lastname@example.org) is a JofA senior editor.
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