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Vote Scheduled for One-Year Delay of Revenue Standard

The FASB at its next meeting plans to vote on delaying until 2018 its revenue recognition standard. A proposal to give companies an extra year received wide support. Separately, the FASB also is scheduled to discuss disclosures related to fair value measurement, its project to clarify the definition of a business, and its effort to write new disclosure requirements for businesses about the types of government assistance they receive, such as tax credits and abatements.

The FASB on July 9, 2015, plans to vote on giving businesses an extra year to implement the board’s wide-reaching revenue recognition standard.

The FASB in April floated the possibility of a delay with Proposed Accounting Standards Update (ASU) No. 2015-240, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date . The proposal was issued in response to the outcry from businesses, auditors, and professional groups that a 2017 effective date for the revenue standard was unrealistic, given the significant changes the standard will bring to financial reporting and the prospect that the standard will be revised somewhat prior to the effective date.

The FASB’s ASU No. 2014-09, Revenue From Contracts With Customers (Topic 606) , is largely converged with the IASB’s IFRS 15, Revenue from Contracts with Customers . The May 2014 standards offer a single, principles-based approach for almost all companies to calculate their revenues. The standards represent more than a decade of work by the two boards and have been referred to as the “crown jewel” of convergence. The IASB also is considering a one-year delay to its version of the standard.

In addition to deciding whether to delay the revenue standard’s effective date, the FASB on July 9 plans to discuss several other topics.

The board is scheduled to discuss disclosures related to fair value measurement, its project to clarify the definition of a business, and its effort to write new disclosure requirements for businesses about the types of government assistance they receive, such as tax credits and abatements.

The FASB also plans to review two proposals from its Emerging Issues Task Force (EITF) and decide whether to finalize them as updates to U.S. GAAP.

The task force in June voted to forward to the FASB an amendment from Proposed ASU No. EITF-15C, Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Fully Benefit-Responsive Investment Contracts, Plan Investment Disclosures, Measurement Date Practical Expedient — a Consensus of the FASB Emerging Issues Task Force , which is intended to simplify the measurement of employee benefit plans and scale back some disclosure requirements.

The EITF also in June agreed to send to the FASB a proposal to let some futures contracts for delivering electricity qualify for an exception to hedge accounting. The plan is outlined in Proposed ASU No. EITF-15A, Derivatives and Hedging (Topic 815): Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts Within Nodal Energy Markets — a Consensus of the FASB Emerging Issues Task Force .

Finally, the FASB plans to consider whether to release for public comment two narrow clarifications to hedge accounting the EITF agreed to in June.

The first issue, EITF Issue No. 15-D, “Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships,” deals with whether changing a trading partner in certain types of derivatives would eliminate the ability to apply hedge accounting to a derivative instrument. The task force proposed that a change in trading partner — called “novation ” — would not automatically result in the loss of the ability to apply hedge accounting.

The second, EITF Issue No. 15-E, “Contingent Put and Call Options in Debt Instruments,” attempts to address conflicting views about the economic characteristics and risks of embedded put or call options. Users of the options have to evaluate the relationship between the options’ characteristics and the debt instrument they are based on. The relationship determines whether the host contracts and the derivatives have to be accounted for separately, or “bifurcated.” The task force agreed that a business assessing whether a certain type of put or call option embedded in a debt instrument must be separated from its host and recorded at fair value through earnings should follow a four-step test in Topic 815, Derivatives and Hedging .

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