The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-09 Codification Improvements, on July 16, 2018, in the board’s latest installment of its recurring project to periodically make limited corrections and improvements to the Accounting Standards Codification (ASC).
“The amendments in this update represent changes to clarify, correct errors in or make minor improvements to the codification,” the FASB said. “The amendments make the codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications.”
The effective date varies based on the details of the individual amendments in ASU No. 2018-09, the FASB said.
The changes address a number of topics, and the FASB said most of the amendments are relatively minor. The board added that some of the amendments, such as the reporting requirements for comprehensive income, the guidance for debt modifications and the accounting requirements for distinguishing liabilities from equity, could affect a significant number of businesses and organizations.
The phrase “taxes not payable in cash” was removed from FASB ASC 220-10-45-10B, Income Statement—Reporting Comprehensive Income, formerly Statements of Financial Accounting Standards (SFAS) No. 130, and replaced with guidance that the FASB said specifically addressed some types arrangements that are comparable to bankruptcy reorganizations. The change was made to eliminate a conflict between FASB ASC 220-10-45-10B and guidance that says income taxes and the adjustments to the accounts that qualify for fresh start reporting during a business combination or reorganization must be recognized in income. The guidance can be found in FASB ASC 740, Income Taxes, FASB ASC 805-740, Business Combinations — Income Taxes, and FASB ASC 852-740, Reorganizations — Income Taxes. The FASB said that without the proper context, the phrase “taxes not payable in cash” could be interpreted to include any tax that is not payable in cash, including a deferred tax asset.
FASB ASC 470-50-40-2, Liabilities — Debt — Modifications and Extinguishments — Derecognition — Extinguishments of Debt, formerly Accounting Principles Board Opinion (APB) No. 26, was amended to clarify the use of fair value accounting for debt that is extinguished and the reporting of gains or losses on the extinguished debt in other comprehensive income.
The FASB also amended FASB ASC 480-10-55-55, Liabilities — Distinguishing Liabilities from Equity — Overall — Implementation Guidance and Illustrations — Majority Owner's Accounting for a Transaction in the Shares of a Consolidated Subsidiary and a Derivative Instrument Indexed to the Noncontrolling Interest in that Subsidiary, formerly Emerging Issues Task Force (EITF) Issue No. 00-04, and FASB ASC 480-10-55-59, Liabilities — Distinguishing Liabilities from Equity — Overall — Implementation Guidance and Illustrations — Written Put Option and Purchased Call Option Embedded in Noncontrolling Interest, to match the requirements of SFAS No. 150, Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity.
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