Accounting & Auditing | Corporate Finance & Governance | Legislative / Regulatory

More details, resources emerge about FASB’s new rules for financial instruments

Big news from the Financial Accounting Standards Board, which has issued an accounting standards update that’s meant to improve the recognition and measurement of financial instruments.

The update is more than a decade in the making and impacts public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities — just about everyone, in other words.

Accounting Today has a terrific summary of the update, which will improve on existing GAAP by doing the following:

  • It will require “equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.”
  • It will require “public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.”
  • It will require “separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.”
  • It will eliminate “the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities.”
  • It will eliminate “the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.”
  • It will require “a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.”

Here are a few more summaries of the FASB’s update:

Want to learn more?
The MACPA will be examining the FASB’s accounting standards update during a pair of upcoming seminars:

  • Not-For-Profit Accounting and Auditing Update, scheduled for June 2 at the MACPA’s Columbia Center. This program will focus on the latest developments affecting not-for-profits, such as recent FASB requirements and information on the latest OMB and Yellow Book developments.
  • New FASB Developments for Business and Industry, scheduled for July 7 as part of the MACPA’s annual Beach Retreat in Ocean City. Attendees will gain expertise from a high-level approach to financial reporting issues backed by detailed descriptions and examples of the implementation of new standards.

Bill Sheridan