FASB proposes scope-related changes to two ASC topics

FASB published a proposed Accounting Standards Update (ASU) aimed at easing some of the challenges related to the scope of financial reporting on a couple fronts.

The ASU, according to a FASB news release, addresses stakeholder feedback by proposing:

• Scope refinements to FASB ASC Topic 815, Derivatives and Hedging, specifically related to the application of derivative accounting to contracts with features based on the operations or activities of one of the parties to the contract; and

• Scope clarification to Topic 606, Revenue From Contracts With Customers, specifically related to the diversity in accounting for a share-based payment from a customer that is consideration for the transfer of goods or services. 

In relation to Topic 815, the news release said that the proposed ASU “is expected to (1) reduce the cost and complexity of evaluating whether these contracts are derivatives, (2) better portray the economics of those contracts in the financial statements, and (3) reduce diversity in practice resulting from changing interpretations of the existing guidance.”

In relation to Topic 606 and its interaction with other topics, the proposed ASU “would provide investors with more comparable information and would reduce accounting complexity and related reporting costs for preparers and auditors.”

FASB is seeking feedback on the ASU through Oct. 21. In addition to an electronic feedback form, the PDF of the proposed ASU includes instructions on other ways to provide feedback.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.