ThinkTWENTY20

Accounting by a joint venture for nonmonetary assets contributed by investors. The Board began its initial deliberations on the project. The Board directed the staff to continue research on various alternatives for recognizing and measuring nonmonetary assets contributed to a joint venture in a joint venture’s financial statements.

Conceptual framework—elements. The Board discussed the definitions of several elements to be included in a proposed Concepts Statement chapter on elements of financial statements.  The Board decided that:

1. The elements revenues, expenses, gains, and losses should be defined as follows:
   1. Revenues are inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities.
   2. Expenses are outflows or other using up of assets of an entity or incurrences of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities.
   3. Gains are increases in equity (net assets) from transactions and other events and circumstances affecting the entity except those that result from revenues or investments by owners.
   4. Losses are decreases in equity (net assets) from transactions and other events and circumstances affecting the entity except those that result from expenses or distributions to owners.
2. Subject to drafting improvements, the elements investments by owners and distributions to owners should be defined as follows:
   1. Investments by owners are increases in equity of a particular business enterprise resulting from transfers to it from other entities of something valuable to obtain or increase ownership interests (or equity) in it.
   2. Distributions to owners are decreases in equity of a particular business enterprise resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners. Distributions to owners decrease ownership interest (or equity) in an enterprise. 

Next Steps
 
The Board directed the staff to draft a proposed Concepts Statement chapter on elements of financial statements for vote by written ballot. The Board decided on a comment period of 120 days.

Hedging—last-of-layer method. The Board discussed the following topics related to the last-of-layer hedging proposed amendments.

Disclosures

The Board decided not to add or amend the last-of-layer disclosure requirements in Topic 815, Derivatives and Hedging, related to the addition of the proposed multiple-hedge model.
 
Transition

Regarding transition, the Board decided that:

1. The proposed amendments, except for those related to disclosures required by Topics other than Topic 815, would be applied on a prospective basis.
   1. An entity would be permitted to modify documentation without dedesignating a last-of-layer hedging relationship existing as of the date of adoption to add one or more hedges to the closed portfolio if the requirements for the amended last-of-layer method are met. In those cases, an entity also would be permitted to modify documentation without dedesignating the existing hedging relationship to add the new elective documentation specifying the order in which multiple hedging relationships associated with the closed portfolio would be discontinued in the event of a breach.
   2. Fair value hedge basis adjustments allocated to an asset that exists on an entity’s balance sheet on the date of adoption would remain allocated to that asset over the remaining life of the asset. The fair value hedge basis adjustments allocated to those assets existing on the balance sheet on the date of adoption would be amortized over the remaining lives of the assets to which they were allocated in the same manner as any premium or discount associated with those assets. Any new last-of-layer fair value hedge basis adjustments recorded after the date of adoption would be maintained at the closed portfolio level.
2. An entity would have the option to apply the proposed amendments related to disclosures required by Topics other than Topic 815 on a prospective basis as of the date of adoption or on a full retrospective basis.
3. An entity would be required to disclose the nature of and reason for the change in accounting principle related to accounting for last-of-layer fair value hedge basis adjustments in transition.
4. For an entity that has not yet adopted Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as of the issuance date of a final Update of the proposed last-of-layer amendments, the proposed last-of-layer amendments related to Update 2016-13 would be effective upon the adoption of Update 2016-13. For an entity that has not yet adopted the amendments in Update 2016-13 as of the issuance date of a final Update of the proposed last-of-layer amendments and chooses to early adopt the amendments in Update 2016-13 before the effective date of the proposed last-of-layer Update, adoption of all amendments in the last-of-layer Update would be required upon the adoption of Update 2016-13. This decision does not affect when an entity is required to adopt the amendments in Update 2016-13.

Next Steps
 
Following external review, the staff will present to the Board any additional issues and an analysis of costs and benefits..