Question

In: Accounting

What was the process by which ASU 2016-1 proposed changes were shared with the business, accounting,...

What was the process by which ASU 2016-1 proposed changes were shared with the business, accounting, and investment communities?

Solutions

Expert Solution

ASU 2016-1 (Accounting Standards Update No. 2016-1), it addresses or labels the measurement and recognition of the financial liabilities and assets.

It maintains the present GAAP for the instruments of the debt, comprising the debt securities and the loans. The standard modifies the present GAAP for the equity investments, usually require the issers to carry investments at the fair value.

Limited equity securities mostly held through banks like stock in Federal Home Loan which are excluded from the ASU 2016 - 1 scope. So, no change in the accounting for the investments will happen.

Exit and Entry Pricing

The ASU 2016-1 maintains the present accounting for the debt instruments, it require various revisions to the fair value disclosures stated in the footnotes of the financial statements. This standard made various changes to the disclosures in form of quantitative as well as qualitative. The most significant revisions are:

1. Public Business Entities - The record of fair value of the financial instruments by using the concept of exit price instead of entry price.

2. Non-Public Business Entities - These entities does not require to present the fair value of the financial instruments evaluated at the amortized cost, which is disclosed in footnote.


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