Codification of FAS 166 and FAS 167 (ASU 2009-16 and ASU 2009-17)
The FASB issued ASU No. 2009-16, Transfer and Servicing (Topic 860) – Accounting for Transfers of Financial Assets, and ASU No. 2009-17, Consolidation (Topic 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, on December 23, 2009. As a result, FASB Statement No. 166, Accounting for Transfers of Financial Assets, and FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R), have now been incorporated into the standard-setter’s Accounting Standards Codification for U.S. GAAP.
Both ASUs are effective for annual periods beginning after November 15, 2009 (i.e., January 1, 2010 for calendar year-end companies). The FASB also issued a proposed update to the application of FAS 167 (ASU 2009-17) for certain investment funds until the joint consolidation project is completed by IASB and FASB in late 2010. Examples of entities that may meet the Board’s deferral criteria include, but are not limited to, mutual funds, hedge funds, private equity funds and venture capital funds. Examples of entities that do not meet these criteria include, but are not limited to, securitization entities, asset-backed financing entities, or entities formerly classified as qualifying special purpose entities. The comment period ended on January 6, 2010, and the Board has begun its redeliberations on this topic.
Proposed Exposure Draft on Subsequent Event Procedures
During the last week of 2009, the FASB exposed a proposed ASU that addresses certain implementation issues related to the requirement to perform and disclose subsequent events in accordance with FASB Statement No. 165 (codified as ASC Topic 855, Subsequent Events). The proposal would amend the guidance as follows: (1) An entity that files financial statements with, or furnishes them to, the SEC would not be required to disclose the date through which subsequent-events procedures have been performed and (2) clarify the disclosure required for reissued financial statements. In addition, the proposed ASU would clarify that non-SEC filers or furnishers must disclose the date through which these updated procedures have been performed.
Comments on the proposed ASU are due by January 28, 2010. The final ASU would be effective immediately upon issuance.
New ASUs in the New Year
The FASB issued the following Accounting Standards Updates (ASUs) in January 2010.
ASU 2010-01, Equity (ASC 505) – Accounting for Distributions to Shareholders with Components of Stock and Cash (a consensus of the FASB Emerging Issues Task Force) — This ASU incorporates the final consensus reached on EITF Issue 09-E, Accounting for Distributions to Shareholders with Components of Stock and Cash, into the Codification. The guidance is effective for interim and annual periods ending on or after December 15, 2009.
ASU 2010-02, Consolidation (ASC 810) – Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification — This ASU addresses implementation issues related to the changes-in-ownership provisions in the ASC 810-10. It updates the scope of the decrease-in-ownership guidance to specifically include nonprofit activities and specifically exclude in-substance real estate and conveyances of oil and gas mineral rights. It also clarifies that the guidance applies to a decrease in ownership of a subsidiary or a group of assets that is a business. In addition, expanded disclosures are required related to valuation techniques used and the extent of any continuing involvement or related party interaction.
An entity is required to follow the amended guidance beginning in the period that it first adopts FAS 160, Noncontrolling Interests in Consolidated Financial Statements (now included in ASC 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009, and the amendments should be applied retrospectively to the first period that an entity adopted FAS 160.
ASU 2010-03, Extractive Activities – Oil and Gas (ASC 932) – Oil and Gas Reserve Estimation and Disclosures — This ASU amends the Codification to align the oil and gas reserve estimation and disclosure requirements in ASC 932 with the SEC's final rule, Modernization of the Oil and Gas Reporting Requirements. The amendments are effective for annual reporting periods ending on or after December 31, 2009.
On the Horizon:
Disclosures of Fair Value Measures
We’ve previously discussed that the FASB has proposed certain disclosures about fair value measurements in an exposure draft of an ASU. The previous proposal includes three new disclosure requirements:
- a sensitivity disclosure for fair value measurements using significant unobservable inputs (level 3), if changing one or more of those inputs to reasonably possible alternative inputs would increase or decrease the fair value measurement significantly;
- the amounts of significant transfers in and/or out of Level 1 and Level 2 fair value measurements and the reasons for the transfers; and
- a reconciliation of the activities in Level 3 fair value measurements on a gross basis.
The comment period for the proposal ended on October 12, 2009. The FASB decided to defer the consideration of the Level 3 sensitivity disclosures but proceed with all of the remaining requirements substantially as described in the proposed ASU. The final update will amend Topic 820-10 and will be effective for annual or interim reporting periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activity for purchases, sales, issuances, and settlements on a gross basis. The Board expects to issue a final update shortly.*
*Just before the publication date of this Alert, the FASB issued ASU 2010-06 that finalizes the new disclosure requirements for fair value measures. The final disclosures are similar to those in the proposed ASU described above and do not require entities to provide sensitivity disclosures.