Rounding Up Recent Accounting Developments Update


Earlier this year, an article was posted on two Accounting Standards that affect public companies. Below is quick update.

Keeping up with changing accounting standards is critical to every public company’s well-being. That’s why it’s important to consider these recent developments.


The Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2015-02 — Consolidation (Topic 810): Amendments to the Consolidation Analysis — is intended to improve consolidation guidance. Although it targets asset management firms, it will affect all companies involved with limited partnerships or similar legal entities. Among other things, the amendments:

  • Modify the evaluation of whether a limited partnership or similar entity is a variable interest entity (VIE), placing greater emphasis on the risk of loss rather than majority voting rights,
  • Eliminate the presumption that a general partner should consolidate a limited partnership,
  • Provide that certain legal entities are no longer required to be consolidated on the basis of fee arrangements,
  • Reduce the application of related-party guidance for VIEs,
  • Eliminate indefinite deferral for certain investment funds, and
  • Exclude certain money market funds from the consolidation guidance.

For public companies, the ASU is effective for annual and interim periods beginning after Dec. 15, 2015. Early adoption is permitted, including adoption in an interim period.

Pushdown Accounting

The FASB’s ASU No. 2015-08, Business Combinations (Topic 805): Pushdown Accounting — Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115, brings existing guidance into conformity with ASU No. 2014-17, Business Combinations (Topic 805), which made pushdown accounting for acquired entities optional in their stand-alone financial statements when there’s a change-in-control event. Pushdown accounting refers to the practice of adjusting an acquired company’s standalone financial statements to reflect the acquirer’s accounting basis rather than the target’s historical costs.

Hedge Accounting

The FASB has tentatively decided to make targeted improvements to its hedge accounting model, rather than attempt a complete overhaul, in an effort to make hedge accounting easier to apply and easier for financial statement users to understand. One significant change that’s being contemplated is whether to defer recognition of ineffectiveness for cash flow hedges (of financial as well as nonfinancial items) until a hedged item affects earnings. The FASB expects to issue a proposed ASU by the fourth quarter of 2015.

Lease Accounting

The FASB continues to work on a major overhaul of its lease accounting guidance. At a recent meeting, it decided to add a requirement that lessors evaluate the collectability of lease payments for purposes of lease classification, recognition and measurement. The change is intended to align the FASB’s lease proposal more closely with its new revenue recognition standard.

Debt Issuance Costs

The FASB’s ASU No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, provides for debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Amortization of these costs is reported as interest expense. According to the FASB, companies should report debt issuance costs incurred before the associated funding is received as deferred charges until the debt liability is recorded.

For public companies, the ASU is effective for financial statements issued for fiscal years beginning after Dec. 15, 2015, and interim periods within those fiscal years. The amendments should be applied on a retrospective basis.

A Potpourri of New Developments

Work with your advisors to help you understand how all of these new developments might affect you.

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