FASB issued a new standard in the beginning of January designed to improve the recognition and measurement of financial instruments through targeted changes to existing GAAP. Public and private companies, not-for-profits and employee benefit plans that hold financial assets or owe financial liabilities are affected by the standard. The new guidance is contained in Accounting Standards Update No.2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
Requires equity investments, except those that are accounted for under the equity method of accounting or result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income.
Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
Requires separate presentation of financial assets and liabilities by measurement category and of financial assets on the balance sheet or the accompanying notes.
Eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public entities.
Eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
Requires a reporting organization to present separately in other comprehensive income, the portion of the total change in fair value of a liability resulting from a change in instrument-specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
VACo Contact: Vicky Steinruck