Q&A |   March 2018

Financial instruments: Recognition and measurement

KPMG addresses frequently asked questions on ASC 321 and changes to ASC 825. This latest edition has been updated to include recent developments and discussions with the FASB staff, and the issuance of technical corrections ASU 2018-03. 


  • 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:

   Public business entities

   All other entities

Annual periods – Fiscal years beginning after

   ASU 2016-01: Dec. 15, 2017

   ASU 2018-03: Dec. 15, 2017

   ASU 2016-01: Dec. 15, 2018

   ASU 2018-03: Dec. 15, 2018

Interim periods – In fiscal years beginning after

   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: Dec. 15, 2019

   ASU 2018-03: Dec 15, 2019

Early adoption allowed?

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

   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

Spotlight on contributors

Lindsey Freeman

Lindsey Freeman

Senior Manager, DPP, KPMG (US)

+1 212-954-3519
Danielle Imperiale

Danielle Imperiale

Executive Director, Department of Professional Practice, KPMG

Mark Northan

Mark Northan

Partner, DPP, KPMG (US)

+1 212-954-6927



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