Q&A | October 2018

Financial instruments: Recognition and measurement

KPMG addresses frequently asked questions on ASC 321 and changes to ASC 825. This latest edition includes new and updated interpretations on a variety of topics.


ASU 2016-01

ASU 2018-03

  • Company that holds equity investments
  • Company that has elected the fair value option for financial liabilities

Relevant dates

Mandatory effective dates and early adoption provisions:

Effective date:

Annual periods – Fiscal years beginning after





Interim periods – In fiscal years beginning after







Early adoption allowed?

Public business entities

ASU 2016-01: Dec. 15, 2017

ASU 2018-03: Dec. 15, 2017


ASU 2016-01: Dec. 15, 2017

ASU 2018-03:

Interim periods within those fiscal years beginning after June 15, 2018.

Interim periods beginning after June 15, 2018 for entities with fiscal years beginning between Dec. 15, 2017 and Jun. 15, 2018


ASU 2016-01: Immediately, but only for fair value changes in financial liabilities for financial statements not yet been issued

ASU 2018-03: Immediately, including in an interim period

All other entities

ASU 2016-01: Dec. 15, 2018

ASU 2018-03: Dec. 15, 2018


ASU 2016-01: Dec. 15, 2019

ASU 2018-03: Dec 15, 2019







2016-01: Dec. 15, 2017

Immediate adoption permitted for elimination of previously required disclosures of fair values in Subtopic 825-10-50 for financial statements not yet issued

2018-03: Not permitted for entities that have not adopted ASU 2016-01.  Immediately, including in an interim period, for entities that have adopted ASU 2016-01

Key impacts

  • New ASC 321 and amendments to ASC 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 securities
  • Financial liabilities for which the fair value option is elected
  • Establishing a valuation allowance for deferred tax assets
  • Effective dates and transition
  • Cash flow presentation
  • Considerations for entities that adopt ASU 2016-01 and 2018-03 on different dates

Related content

Spotlight on contributors

Danielle Imperiale

Danielle Imperiale

Executive Director, DPP, KPMG US

+1 212-954-3866
Mark Northan

Mark Northan

Partner, DPP, KPMG US

+1 212-954-6927
Mahesh Narayanasami

Mahesh Narayanasami

Partner, Audit, KPMG (US)

+1 212-954-7355