AccountingLink

    Financial instruments

    18 September 2018

    Comment Letter - FASB’s proposed amendments to the new credit losses standard
    In our comment letter, we supported the FASB’s proposal to reduce transition complexity by providing entities that are not public business entities with additional time to implement the new credit losses standard. We also supported the FASB’s proposal to clarify that operating lease receivables are not in the scope of the credit losses standard and that lessors should follow the impairment guidance in ASC 842 for these receivables.

    22 August 2018

    NAIC Bulletin - Summer 2018 edition
    Our NAIC Bulletin contains the highlights of the Summer 2018 meeting of the National Association of Insurance Commissioners.

    14 June 2018

    Financial Reporting Developments - Certain investments in debt and equity securities (after the adoption of ASU 2016-01)
    Our new FRD publication on certain investments in debt and equity securities (after adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities) is now available. This publication also reflects recent technical corrections and improvements to the new guidance. It includes answers to questions that entities have raised about how to apply the new guidance and provides examples. The guidance is already effective for calendar-year public business entities.

    14 June 2018

    To the Point - FASB TRG for Credit Losses discusses five topics and reaches general agreement on most implementation issues
    Members of the FASB Transition Resource Group (TRG) for Credit Losses discussed implementation topics related to recoveries, accrued interest, capitalized interest, prepayments and transfers of certain assets between categories and reached general agreement on most issues. The FASB staff plans to recommend amendments to ASC 326 to reflect some of the TRG members’ views.

    7 June 2018

    To the Point - FASB to issue final guidance on long-duration contracts for insurers
    The FASB voted to move ahead with a final standard that will change how insurers account for long-duration contracts, including how they measure, recognize and make disclosures about insurance liabilities and deferred acquisition costs. The new guidance will be effective for PBEs for fiscal years beginning after 15 December 2020 and a year later for all other entities. The FASB plans to issue an Accounting Standards Update in August 2018.

    3 May 2018

    Financial Reporting Developments - Foreign currency matters
    Our Financial reporting developments publication on foreign currency matters has been updated to clarify and enhance our interpretative guidance.

    26 April 2018

    Technical Line - A closer look at the FASB’s new hedge accounting standard
    We have updated our Technical Line on ASU 2017-12 to reflect the FASB staff’s responses to technical inquiries regarding partial-term hedges, the last-of-layer method, component hedging, changes to the hedged risk when hedging forecasted transactions and one-time transition elections.

    12 April 2018

    NAIC Bulletin - Spring 2018 edition
    Our NAIC Bulletin contains the highlights of the Spring 2018 meeting of the National Association of Insurance Commissioners.

    30 March 2018

    Comment Letter - FASB proposal to add new benchmark interest rate for hedge accounting
    In our comment letter, we supported the FASB’s proposal to add the overnight index swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) to the list of US benchmark interest rates in ASC 815 that are eligible to be hedged. However, instead of limiting final guidance to the SOFR OIS rate, we suggested the Board add a broader swap rate based on SOFR that would also include tenors greater than overnight. We also recommended that the Board provide relief to help entities address the accounting implications associated with the transition from LIBOR to SOFR, noting that without this relief many existing hedging relationships would likely need to be discontinued.

    15 March 2018

    Technical Line - A closer look at the new guidance on recognizing and measuring financial instruments
    We have updated our Technical Line, A closer look at the new guidance on recognizing and measuring financial instruments, to address amendments that the FASB recently issued to clarify the new guidance on transition, the application of the measurement alternative and the presentation of financial liabilities measured using the fair value option. We also have added interpretive guidance on the accounting and disclosure requirements for equity investments measured using the measurement alternative. The most significant update is a clarification that when an entity holds an equity investment that is measured using the measurement alternative and observes an orderly transaction for the same or a similar investment of the same issuer, it must adjust the carrying amount of its investment to fair value as determined in accordance with the principles of ASC 820. In addition, we have updated the questions and answers about how to apply the new guidance. The guidance is already effective for calendar-year public business entities.

    28 February 2018

    To the Point - FASB amends new guidance on recognizing and measuring financial instruments
    The FASB amended the new guidance on recognizing and measuring financial instruments to clarify that entities have to use a prospective transition approach only for equity securities they elect to measure using the new measurement alternative. The amendments also clarify other aspects of the guidance on how to apply the measurement alternative and the presentation requirements for financial liabilities measured under the fair value option. The amendments are effective for calendar-year public business entities for annual periods beginning in 2018 and interim periods beginning in the third quarter of 2018. Early adoption is permitted.

    22 February 2018

    To the Point - Proposal would add a new benchmark interest rate for hedge accounting
    The FASB proposed adding the overnight index swap rate based on the Secured Overnight Financing Rate to the list of US benchmark interest rates in ASC 815 that are eligible to be hedged. The proposal would allow entities to designate changes in this rate as the hedged risk in hedges of interest rate risk for fixed-rate financial instruments. Comments are due by 30 March 2018.

    23 January 2018

    To the Point - FASB revises proposal to amend new guidance on recognizing and measuring financial instruments
    The FASB tentatively decided to revise its proposal to amend the new guidance on recognizing and measuring financial instruments to require an entity that voluntarily discontinues using the new measurement alternative for an equity security without a readily determinable fair value to measure that security and “all identical or similar investments of the same issuer” at fair value. Entities that make this change would not be permitted to measure subsequent purchases of identical or similar investments of the same issuer under the measurement alternative. The FASB directed the staff to draft a final ASU.

    20 December 2017

    Financial Reporting Developments - Certain investments in debt and equity securities (prior to the adoption of ASU 2016-01)
    We have updated our FRD publication on certain investments in debt and equity securities to include recent standard-setting activity related to premium amortization on callable debt securities. We have also enhanced and clarified our interpretive guidance. Refer to Appendix F of the publication for a summary of the changes.

    20 December 2017

    NAIC Bulletin - Fall 2017 edition
    Our NAIC Bulletin contains the highlights of the Fall 2017 meeting of the National Association of Insurance Commissioners.

    13 November 2017

    Comment Letter - FASB’s proposed amendments to the new recognition and measurement guidance
    In our comment letter, we support the FASB’s efforts to clarify certain aspects of the new guidance on recognizing and measuring financial instruments. However, we believe the Board should define “same type” of equity securities to help entities apply the guidance on changing from the measurement alternative to a fair value method. In addition, we recommend that the Board clarify the acceptability of the cost method with amortization to account for investments in qualified affordable housing projects and provide guidance on the transition approach for certain insurers that measure their equity securities without readily determinable fair values at fair value with changes in fair value recognized in other comprehensive income.

    19 October 2017

    Financial Reporting Developments - Derivatives and hedging
    We have updated our Financial reporting developments publication on derivatives and hedging to further clarify and enhance our interpretative guidance. Our updates also address the accounting implications of rulebook changes made by certain central clearinghouses to legally characterize variation margin payments for over-the-counter derivatives they clear as settlements rather than collateral. Refer to Appendix F of the publication for a summary of the updates.

    5 October 2017

    Financial Reporting Developments - Issuer’s accounting for debt and equity financings
    We have updated our Financial reporting developments (FRD) publication on an issuer’s accounting for debt and equity financings to reflect the issuance of ASU 2017 11 on accounting for certain financial instruments with down round features. We have also enhanced and clarified our interpretive guidance. Refer to Appendix F of the publication for a summary of the updates.

    30 August 2017

    NAIC Bulletin - Summer 2017 edition
    Our NAIC Bulletin contains the highlights of the Summer 2016 meeting of the National Association of Insurance Commissioners.

    28 August 2017

    To the Point - FASB amends hedge accounting guidance to better reflect entities' risk management activities
    The FASB issued final guidance amending its hedge accounting model to enable entities to better portray the economics of their risk management activities in the financial statements and enhance the transparency and understandability of hedge results. The amendments also simplify the application of hedge accounting in certain situations. The guidance is effective in 2019 for calendar-year public business entities and 2020 for all other calendar-year companies, with early adoption permitted in any interim or annual period.

    26 July 2017

    Financial Reporting Developments - Transfers and servicing of financial assets
    We have updated our FRD publication on transfers and servicing of financial assets primarily for recent standard-setting activity.

    18 July 2017

    To the Point - FASB simplifies the accounting for financial instruments with ‘down round’ features
    The FASB issued final guidance that eliminates today’s requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock. Entities that present earnings per share pursuant to ASC 260 will recognize the effect of a down round feature in a freestanding equity-classified financial instrument only when it is triggered. The effect of triggering such a feature will be recognized as a dividend and a reduction to income available to common shareholders in basic EPS.

    16 June 2017

    Technical Line - How principle-based reserving will affect life insurers
    Our Technical Line takes a closer look at the new principle-based reserving (PBR) framework established by the National Association of Insurance Commissioners that will require life insurers to significantly change how they estimate reserves for most types of life insurance contracts under the statutory basis of accounting. Life insurers also will need to prepare a comprehensive PBR actuarial report documenting the judgments made in the PBR valuation process to submit to state insurance regulators.

    16 June 2017

    To the Point - FASB TRG for credit losses discusses implementation issues
    Members of the FASB TRG for credit losses reached general agreement on three implementation issues and may revisit two others. They generally agreed that entities can elect to use a discount rate adjusted for expected prepayments to determine the allowance for credit losses and can elect to maintain existing pools of purchased credit impaired assets at adoption or on an ongoing basis. They also generally agreed that entities should consider the cash flows of the assets underlying a beneficial interest, including expected prepayments, to determine whether the guidance on purchased financial assets with credit deterioration applies. The TRG may revisit questions about how to determine the life of a credit card receivable and how to forecast troubled debt restructurings.

    5 May 2017

    Comment Letter - FASB proposal to simplify the balance sheet classification of debt
    In our comment letter, we support the FASB’s efforts to reduce the cost and complexity of determining whether debt should be classified as current or noncurrent on a classified balance sheet by replacing today’s rules-based guidance with a principles-based approach. While we also support the FASB’s proposed exception for certain waivers of covenant violations received after the balance sheet date but before the financial statements are issued, we recommend that the FASB clarify the proposed principle by requiring classification to be based on whether current assets are needed to settle the liability.

    3 May 2017

    NAIC Bulletin - Spring 2017 edition
    Our NAIC Bulletin contains the highlights of the Spring 2016 meeting of the National Association of Insurance Commissioners.

    4 April 2017

    To the Point - FASB shortens the amortization period for certain purchased callable debt securities held at a premium
    The FASB issued guidance to shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Today, entities generally amortize the premium as a yield adjustment over the contractual life of the security. The guidance does not change the accounting for callable debt securities held at a discount. For public business entities, the guidance is effective for fiscal years beginning after 15 December 2018, and interim periods therein. For all other entities, it is effective for fiscal years beginning after 15 December 2019, and interim periods within fiscal years beginning after 15 December 2020. Early adoption is permitted, including in an interim period.

    16 March 2017

    Technical Line - How the new credit impairment standard will affect entities outside the financial services industry
    The FASB issued new guidance that will change how entities account for credit impairment for many financial assets. For receivables and certain other instruments that aren’t measured at fair value, entities will be required to estimate expected credit losses, which generally will result in the earlier recognition of credit losses. For available-for-sale debt securities, they will recognize an allowance for credit losses rather than a reduction to the asset’s carrying value.

    9 February 2017

    Technical Line - Insurers will have to make additional disclosures about short-duration contracts
    We have updated our Technical Line to include the SEC staff’s views on the presentation of acquisitions, disposals and foreign currency exchange translation adjustments in the incurred and paid claims development tables required by the guidance. All insurers, not just SEC registrants, should consider those views.

    7 February 2017

    Comment Letter - FASB proposal on accounting for instruments with down round features
    In our comment letter, we support the FASB’s objective to reduce the cost and complexity of accounting for certain financial instruments with down round features, and we believe the proposal would meet that objective by requiring fewer equity-linked financial instruments (or embedded features) with down round features that have to be accounted for at fair value. However, we believe the proposed guidance could cause confusion about whether a convertible instrument with an adjustment provision that could result in the recognition of a contingent beneficial conversion feature (BCF) would be in the scope of the proposed recognition and measurement guidance for down round features (i.e., ASC 480-20). Therefore, we recommend that the FASB clarify the proposed guidance on convertible instruments with down round features that are also subject to the contingent BCF guidance in ASC 470-20. We do not believe these instruments should be in the scope of ASC 480-20, because applying both the guidance in ASC 480-20 and the contingent BCF guidance in ASC 470-20 would be too complex.

    18 January 2017

    NAIC Bulletin - Fall 2016 edition
    Our NAIC Bulletin contains the highlights of the Fall 2016 meeting of the National Association of Insurance Commissioners.

    12 January 2017

    To the Point - Proposal would simplify how entities determine the balance sheet classification of debt
    The FASB proposed replacing today’s rules-based guidance for determining whether to classify debt as current or noncurrent on the balance sheet with a principles-based approach that would require debt to be classified as noncurrent only when it is contractually due to be settled more than one year (or operating cycle, if longer) after the balance sheet date or when the entity has a contractual right to defer settlement for at least one year (or operating cycle, if longer) after the balance sheet date. An exception would be provided for waivers of debt covenant violations received after the balance sheet date but before the financial statements are issued. Comments are due by 5 May 2017.

    14 December 2016

    Comment Letter - FASB’s long-duration contracts proposal for insurers
    In our comment letter, we support the Board’s objective to simplify and enhance the financial reporting requirements for long-duration contracts issued by insurers and believe many of the proposed amendments would meet that objective. However, we believe the FASB should reconsider certain aspects of the proposal and provide additional guidance or clarification in some places.

    17 November 2016

    Comment Letter - FASB proposal on premium amortization on purchased callable debt securities
    In our comment letter, we supported the FASB’s proposal to shorten the amortization period for callable debt securities purchased at a premium. However, we recommended that the FASB clarify whether the proposed guidance would apply to callable instruments that do not have definitive call dates.

    3 November 2016

    Comment Letter - FASB’s hedge accounting proposal
    In our comment letter, we applaud the FASB for addressing many of the concerns raised by preparers, users and other stakeholders about the complexity of today’s hedge accounting model and the restrictions it imposes. Overall, we agree that the proposed amendments would better portray the economics of an entity’s risk management activities in its financial statements and simplify the application of hedge accounting in certain situations. However, we believe the FASB should reconsider certain aspects of the proposal and provide additional guidance or clarification in some places.

    1 November 2016

    Technical Line - A closer look at proposed changes in insurers’ accounting and disclosures for long-duration contracts
    The FASB proposed changing how insurers account for and make disclosures about long-duration contracts to provide users of the financial statements with more meaningful information about the amount, timing and uncertainty of cash flows related to these contracts. The proposal would change how insurers recognize and measure insurance liabilities and deferred acquisitions costs and require them to make new disclosures. The proposal would significantly change practice and could have a material effect on insurers’ financial statements. Comments are due by 15 December 2016.

    20 October 2016

    To the Point - Rules on fund liquidity risk management and swing pricing
    The SEC adopted a rule that requires registered open-end funds, including mutual funds and exchange-traded funds but not money market funds, to establish a liquidity risk management program and expand their disclosures about their liquidity and redemption practices The SEC also gave open-end funds (except for money market funds and exchange-traded funds) the option to use swing pricing to adjust their net asset value for costs associated with satisfying requests for shareholder purchases or redemptions (e.g., trading costs) in certain circumstances.

    12 October 2016

    Technical Line - A closer look at the new credit impairment standard
    The FASB issued credit impairment guidance that modifies or replaces existing credit impairment models for many financial assets. For receivables, loans, held-to-maturity debt securities and certain other financial assets, entities will be required to estimate expected credit losses, which generally will result in the earlier recognition of credit losses. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. Our publication takes an in-depth look at the new standard and is intended to help companies consider the effects of adopting it. We expect to update this publication as we develop additional insights and views related to this standard. In the coming weeks, we will issue a publication that highlights significant changes for entities outside the financial services industry.

    29 September 2016

    To the Point - Proposal would change accounting and disclosures for long-duration contracts for insurers
    The FASB proposed changing how insurers account for long-duration contracts, including how they measure, recognize and make disclosures about insurance liabilities and deferred acquisition costs. Comments are due by 15 December 2016.

    14 September 2016

    NAIC Bulletin - Summer 2016 edition
    Our NAIC Bulletin contains the highlights of the Summer 2016 meeting of the National Association of Insurance Commissioners.

    10 March 2016

    To the Point - FASB says hedge accounting relationships may continue after a novation
    The FASB issued final guidance clarifying that the novation of a derivative contract in a hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship.

    29 September 2015

    To the Point - SEC proposes liquidity risk rules for mutual funds and ETFs
    The SEC proposed requiring that all open-end mutual funds (excluding money market funds) and exchange-traded funds implement a liquidity risk management program and giving mutual funds the option to use swing pricing to adjust their net asset value for costs associated with satisfying requests for shareholder purchases or redemptions in certain circumstances.

    6 August 2015

    To the Point - Simplifying the presentation of debt issuance costs
    We have updated our publication to reflect an SEC staff member’s announcement at the June 2015 meeting of the Emerging Issues Task Force that the staff will not object to an entity presenting the cost of securing a revolving line of credit as an asset, regardless of whether a balance is outstanding. The question arose after the FASB issued ASU 2015-03 on the presentation of debt issuance costs in April 2015. The ASU doesn’t address the presentation of the costs of obtaining a revolving line of credit.