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On January 5, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-01
Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU seeks to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.
In July 2014, the International Accounting Standards Board (IASB) issued the final version of International Financial Reporting Standard (IFRS) 9
Financial Instruments in response to a joint project with FASB. Despite the objective of convergence on a single recognition and measurement model for financial instruments, FASB decided to make targeted improvements to US Generally Accepted Accounting Principles (US GAAP) and to consider opportunities for convergence with IFRS, rather than complete convergence with IFRS 9. FASB concluded, following a cost/benefit analysis, that there are limited changes to the overall accounting outcomes in the classification and measurement model between US GAAP and IFRS 9.
The main changes to US GAAP are as follows:
For public business entities, the amendments are effective for fiscal years beginning after December 15, 2017, including interim periods therein. For all other entities (including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting) the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods beginning after December 15, 2019. All entities that are not public business entities may early adopt the amendments as of the fiscal years beginning after December 15, 2017, including interim periods therein.
Early application of the following amendments is permitted for a fiscal year or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (all other entities) as of the beginning of the fiscal year of adoption:
Except for the early application guidance discussed above, early adoption of the amendments is not permitted.
The amendments, with one exception, should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption.
To access the full script of ASU No. 2016-01, click
For more information on the financial reporting library, contact a local MNP Assurance Professional, or Jody MacKenzie, Director, Assurance Professional Standards.
This communication contains a general overview of the topic and is current as of January 5, 2016. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made n consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2016. All rights reserved.
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