FASB issues technical corrections

FASB issued numerous technical corrections and clarifications to GAAP on Wednesday that are designed to remove inconsistencies in the board’s accounting guidance.

The changes were issued in Accounting Standards Update No. 2016-19, Technical Corrections and Improvements. The amendments apply to all reporting organizations that are within the scope of the affected accounting guidance.

Most of the amendments take effect immediately, while others take effect for interim and annual reporting periods beginning after Dec. 15, 2016.

“While narrow in scope, the technical changes in the ASU are intended to make it easier to understand and implement guidance across important areas of GAAP,” FASB Chairman Russell Golden said in a news release. “We encourage stakeholders to review the new provisions.”

Amendments in the standard that affect all organizations include:

• An amendment that promotes consistent use of the term “participating insurance” in FASB Accounting Standards Codification (ASC) Subtopics 715-30 and 715-60, as well as Topic 944, Financial Services—Insurance.
• An amendment to Topic 825, Financial Instruments, and Topic 944 promoting consistent use of the term “reinsurance recoverable.”
• An amendment removing the term “debt” from the Master Glossary.
• An amendment removing the phrase “that contain no purpose restrictions” from Topic 958, Not-for-Profit Entities.
• An amendment to Subtopic 350-40 that adds a reference to use when accounting for internal-use software licensed from third parties.
• An amendment to Subtopic 360-20 that clarifies that loans issued under the Federal Housing Administration and the Veterans Administration do not have to be fully insured by those programs to recognize profit using the full-accrual method.
• An amendment to Topic 820, Fair Value Measurement, that clarifies the difference between a “valuation approach” and a “valuation technique” when applying the guidance. The amendment also requires an organization to disclose when there has been a change in either a valuation approach, a valuation technique, or both.
• An amendment to Subtopic 405-40 that clarifies that for an amount of an obligation under an arrangement to be considered fixed at the reporting date, the amount that must be fixed is not the amount that is the organization’s portion of the obligation, but, rather, is the obligation in its entirety.
• An amendment to Subtopic 860-20 aligning its implementation guidance to its corresponding guidance.
• An amendment to Subtopic 860-50 that adds guidance from an AICPA position statement on the accounting for the sale of servicing rights when the transferor retains loans. The AICPA guidance had been omitted from the ASC.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.