Current reporting issue
SEC allows grace period for registrants affected by Hurricane Sandy
The Securities and Exchange Commission is offering a grace period for any public registrants that might not be able to submit corporate filings due this week due to the effects of Hurricane Sandy. In a statement posted October 30, the SEC said that registrants should file when they are able, but that the EDGAR system is online for those ready to file. The Divisions of Corporation Finance and Investment Management will handle requests for filing date adjustments on a case by case basis.
FASB
Final ASUs issued related to recent EITF decisions
The FASB recently issued the following Accounting Standards Updates (ASUs) related to EITF consensuses that the Board ratified at its September 27 meeting:
- ASU 2012-05, Not-for Profit Entities: Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows – a consensus of the FASB Emerging Issues Task Force
- ASU 2012-06, Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution – a consensus of the FASB Emerging Issues Task Force
- ASU 2012-07, Accounting for Fair Value Information That Arises after the Measurement Date and Its Inclusion in the Impairment Analysis of Unamortized Film Costs – a consensus of the FASB Emerging Issues Task Force
A summary of these ASUs can be found in the September 18 edition of On the Horizon.
Meeting held October 19
All decisions reached at Board meetings are tentative and may be changed at future meetings. Decisions are included in an Exposure Draft only after a formal written ballot. Decisions reflected in Exposure Drafts are often changed in redeliberations by the Board based on information received in comment letters, at public roundtable discussions, and from other sources. Board decisions become final after a formal written ballot to issue a final Accounting Standards Update.
In addition to specifying which types of transactions would be within the scope of the proposed financial instruments guidance at its October 19 meeting, the Board also made the following tentative decisions regarding a lender's recognition and measurement of loan commitments.
If the likelihood that a loan commitment will be exercised is greater than remote and the underlying loan is measured at fair value, then the issuer would measure the loan commitment at fair value. However, if the underlying loan is measured at amortized cost, then commitment fees received would be deferred and recognized as an adjustment of yield over the life of the funded loan, in accordance with existing U.S. GAAP.
If the likelihood that a loan commitment will be exercised is remote, any commitment fees received by the issuer would be recognized as fee income over the commitment period, in accordance with existing U.S. GAAP.
The Board also tentatively decided that hybrid financial liabilities should be analyzed for bifurcation of derivative components before applying the proposed classification and measurement model. Therefore, both a financial liability host, as well as a debt-equity hybrid instrument that is recognized as a financial liability in its entirety or as having a separately reportable financial liability component, would be subject to the proposed model.
The Board tentatively decided to eliminate the option to measure at fair value a host financial instrument resulting from the separation of an embedded nonfinancial derivative from a nonfinancial hybrid instrument, pursuant to FASB Accounting Standards Codification® (ASC) 815-15, Derivatives and Hedging: Embedded Derivatives. Instead, the proposed guidance would require a hybrid nonfinancial asset that contains an embedded derivative requiring bifurcation to be measured in its entirety at fair value, with changes in fair value recognized in earnings.
The financial host that results from separating a nonfinancial embedded derivative from a hybrid nonfinancial liability would be subject to the proposed model. At initial recognition, an entity would have the option to initially and subsequently measure the hybrid nonfinancial liability at fair value, with changes in fair value recognized in net income, if it determines that an embedded derivative requiring bifurcation and separate accounting exists.
Private Company Council sets inaugural meeting for December 6
The Financial Accounting Foundation's newly formed Private Company Council (PCC) will hold its inaugural meeting on December 6 from 9 a.m. to 3 p.m. EST. The topics to be discussed will include
- Transition from the Private Company Financial Reporting Committee to the PCC
- Feedback received on the FASB's Invitation to Comment, Private Company Decision-Making Framework: A Framework for Evaluating Financial Accounting and Reporting Guidance for Private Companies
- Briefing from the FASB staff on private company issues and projects
- Private company issues related to current FASB projects and previously issued standards
This meeting will be webcast live.
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