Defining Issues | March 2016
FASB eliminates retroactive application of equity method
KPMG reports on ASU 2016-07, which amends ASC 323. The FASB issued the ASU to eliminate the requirement to retroactively apply the equity method when an investment becomes an equity method investee.
Applicability
- Company with an investment that qualifies for the equity method of accounting following an increase in the level of ownership
Effective dates:
Mandatory effective dates and early adoption provisions:
Effective date: |
All entities |
Annual periods – Fiscal years beginning after |
Dec. 15, 2016 |
Interim periods – In fiscal years beginning after |
Dec. 15, 2016 |
Early adoption allowed? |
Immediately |
Key impacts
- Amendments to ASC Topic 323.
- ASU simplifies transition to the equity method for companies, but creates challenges in comparability
- New guidance more closely aligns with other US GAAP (e.g. consolidation guidance) and reduces the burden on preparers
Report contents
- Effective date
- Available-for-sale equity securities
- FASB drops proposal to eliminate basis differences