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Task Force Scheduled to Review Derivatives, Pushdown Accounting Proposals

The FASB said its Emerging Issues Task Force (EITF) will consider finalizing two proposed amendments to U.S. GAAP at its next meeting. The task force is also scheduled to take up two issues for the first time. One deals with the calculation of the earnings per unit of a master limited partnership, and the second concerns the method for calculating the fair values for some investments.

The FASB said its Emerging Issues Task Force (EITF) will consider finalizing two proposed amendments to U.S. GAAP when it meets on September 18, 2014.

Proposed Accounting Standards Update (ASU) No. EITF-13G, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force), was issued in October 2013 to clear up the application of hedge accounting for stock and bond offerings that include embedded features, such as options. The comment period ended last December.

The FASB published Proposed ASU No. EITF-12F, Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force), in April to give businesses and other organizations wider use of an option to apply pushdown accounting after they’ve been acquired. The comment period ended in July.

Before voting on finalizing the amendments, the task force plans to consider the comment letters for both proposals, and whether the letters raised enough issues to warrant publication of a second proposal for public comment.

The task force is also scheduled to take up two issues for the first time — EITF Issue No. 14-A “Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions” and EITF Issue No. 14-B “Fair Value Hierarchy Levels for Certain Investments Measured at Net Asset Value.”

EITF Issue No. 14-A deals with the calculation of the earnings per unit of a master limited partnership after the partnership’s formation. In EITF Issue No. 14-B, the task force wants to settle on a method for calculating the fair values for some investments measured with the net asset value (NAV) method commonly used for mutual fund shares.

For more analysis of Proposed ASU No. EITF-13G, please see the Accounting and Auditing Update Service [AAUS No. 2013-44] and the SEC Accounting and Reporting Update Service [SARU No. 2013-52] (October 2013): Evaluating the Host Contract in a Hybrid Instrument Issued in the Form of a Share.

For more analysis of Proposed ASU No. EITF-13F please see the AAUS No. 2014-17 and the SARU No. 2014-18 (May 2014): Application of Pushdown Accounting by an Acquired Entity.