Resources

Thomson Reuters Tax & Accounting News

Featuring content from Checkpoint

Back to Thomson Reuters Tax & Accounting News

Subscribe below to the Checkpoint Daily Newsstand Email Newsletter

EITF Agrees to Issue Two Proposals

The FASB’s Emerging Issues Task Force (EITF) is sending two issues to the accounting board for consideration as proposed amendments to U.S. GAAP. One of the changes deals with the calculation of per-unit earnings by limited partnerships. The second concerns a method for calculating the fair values for some investments measured with the net asset value (NAV) method commonly used for mutual fund shares.

The FASB’s Emerging Issues Task Force (EITF) agreed on September 18, 2014, to send two issues to the FASB as proposed amendments to U.S. GAAP.

The accounting board, which must approve all task force decisions, is scheduled to discuss them on October 8. The board will decide how long the comment periods should be if it decides to publish the proposals.

The task force approved EITF Issue No. 14-A “Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions,” which deals with the calculation of the earnings per unit of a master limited partnership after the partnership’s formation.

EITF Issue No. 14-A is an attempt by the task force to fill a void in U.S. GAAP.

Topic 0260¬†Earnings Per Share,¬†draws on guidance that originated with EITF Issue No. 07-4, “Application of the Two-Class Method under FASB Statement No. 128 to Master Limited Partnerships.” The standard says master limited partnerships have to apply the two-class method of calculating per-unit earnings because the general partner, limited partners, and holders of distribution rights have varying claims on the distribution of earnings.

But U.S. GAAP doesn’t expressly cover the calculation of per-unit earnings prior to the drop-down transaction, and the task force decided that earnings or losses from the periods prior to the drop-down should be allocated to the general partner, limited partners, and distribution rights holders, largely because this approach aligns with the transaction’s economics.

The task force also agreed that there should be a footnote disclosure about the per-unit earnings calculation.

“We’re really talking about clarifying that there was a change in how the earnings were allocated before the drop-down transaction and after the drop-down transaction,” said Mark Pollock of the FASB’s research staff in explaining the need for the disclosure.

The task force also agreed that EITF Issue No. 14-B “Fair Value Hierarchy Levels for Certain Investments Measured at Net Asset Value,” should be issued as a proposal. The task force is trying to develop a method for calculating the fair values for some investments measured with the net asset value (NAV) method commonly used for mutual fund shares.

The task force decided to hold its next meeting in January 2015.

Tagged with →