Defining Issues | January 2016
FASB changes accounting for equity investments and financial liabilities
KPMG reports on ASU 2016-01, which changes accounting under ASC 825. The FASB’s ASU significantly impacts the recognition of equity investment measurement changes and changes in the fair value of financial liabilities under the fair value option.
Applicability
- Company that holds equity investments
- Company with financial liabilities
Relevant dates
Mandatory effective dates and early adoption provisions:
Effective date: |
Public business entities |
All other entities |
Annual periods – Fiscal years beginning after |
Dec. 15, 2017 |
Dec. 15, 2018 |
Interim periods – In fiscal years beginning after |
Dec. 15, 2017 |
Dec. 15, 2019 |
Early adoption allowed? |
Immediately, but only for fair value changes in financial liabilities for financial statements not yet been issued |
Dec. 15, 2017 Immediate adoption for elimination of previously required disclosures of fair values in Subtopic 825-10-50 for financial statements not yet issued |
Key impacts
- Amendments to ASC Topic 825
- Income statement volatility will increase because entities must recognize changes in the measurement of equity investments in net income
- Changes in an entity’s credit risk will not affect earnings when the fair value option is elected
Report contents
- Equity investments
- Financial liabilities
- Deferred tax assets
- Disclosures
- Effective date