Changes to GAAP that FASB issued affect recognition and measurement of financial instruments for public and private companies, not-for-profits, and employee benefit plans that hold financial assets or owe financial liabilities. The guidance is contained in Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
- Requires fair-value measurement for equity investments (except those that are accounted for under the equity method of accounting or result in consolidation of the investee). Changes in fair value will be recognized in net income.
- Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
- Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on balance sheets or notes accompanying financial statements.
- Eliminates mandatory disclosure of fair value of financial instruments measured at amortized cost for organizations that are not public business entities. Early adoption is permitted for this provision.
- Eliminates mandatory disclosure of methods and significant assumptions used by public business entities to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
- Requires a reporting organization to present separately—in other comprehensive income—the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (or "own credit") when the organization has elected to measure the liability at fair value under the relevant option for financial instruments. Early adoption is permitted for this provision.
The recognition and measurement standard applies to public companies in fiscal years beginning after Dec. 15, 2017, including interim periods within those fiscal years. It applies to other affected organizations in fiscal years beginning after Dec. 15, 2018, and in interim periods within fiscal years beginning after Dec. 15, 2019.