Defining Issues   |   September 2017

 

FASB proposes targeted clarifications to recognition and measurement guidance for financial assets and liabilities

KPMG reports on the latest proposed technical corrections. The FASB’s proposal makes targeted clarifications to recognition and measurement guidance for financial assets and liabilities.

Applicability

Proposed ASU to clarify ASU 2016-01

  • A reporting entity that holds financial assets or owes financial liabilities.

Relevant dates

  • September 27, 2017 – FASB issued proposed ASU
  • November 13, 2017 – Comments due on the proposed ASU

Key impacts

The more significant changes in the proposed ASU would:

  • Clarify the transition requirements for equity securities without a readily determinable fair value. Under the Proposed ASU, if an entity elects to apply the measurement alternative then transition would be prospective. In contrast, if an entity chooses to apply fair value measurement then transition would be applied by means of a cumulative-effect adjustment.
  • Permit entities that initially elected the measurement alternative for equity securities without a readily determinable fair value to subsequently elect to measurement them at fair value.
  • Clarify that when the measurement alternative is applied to forward contracts and purchased options, the entire fair value is remeasured whenever transactions in the underlying equity securities are observed.

Transition:

  • The proposed amendments described above would be effective upon the adoption of ASU 2016-01.


 

 

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