Financial Accounting Standards Updates: Reporting Implications

This discussion board post provides a comprehensive overview of recent accounting standards updates issued by the Financial Accounting Standards Board (FASB). The post begins by addressing changes related to fair value measurement, clarifying how observable price changes in similar investments impact fair value calculations. It then examines the implications of these changes on the equity method of accounting and forward contracts. The post also covers updates on income taxes, including the treatment of franchise taxes and the business combination transactions related to goodwill. Further, the post discusses the accounting standard update 2019-15, which provides entities with an irrevocable option to select fair value methodologies for certain financial assets, aiming to reduce valuation costs and increase transparency. References to the relevant FASB updates are provided. The assignment is designed to help students understand and apply the changes to their financial reporting knowledge. The post highlights the importance of staying informed about these updates to ensure accurate and compliant financial reporting.

Reply to post 1:
In update 2016-01, it was stated that if there is are any observable price changes in the
transactions of similar investment of the same issuer, then the entity should measure that
transactions/ securities at fair value on the date of observable event. Due to this amendment,
mainly two issues were arising: whether the entity should consider observable transaction that
require it to discontinue or apply equity method of accounting; Whether certain forward
contracts or purchased securities will be accounted under equity method of accounting
(FASB 2020, update 2020-01). The amendment clarified for first issue that the entities should
consider measurement alternatives immediately before applying or discontinuing the equity
method (FASB 2019, Update 2019-12). For second issue, the amendment clarified that the
entities should not consider measurement alternatives for forward contracts and purchased
options and should evaluate the balance features of paragraph 815-10-15-141.
As per update 2019-12, an entity should recognize a franchise tax and similar tax will be
treated as non- income- based tax. Further an entity should evaluate the business combination
transactions when there is step up in the tax basis for goodwill.
Reply to post 2:
Yes, we are agreed with the student post. The Accounting standard update 2019-15 has
provided the entities an irrevocable option to select fair value methodologies on instrument-
by- instrument basis for certain kind of financial assets. This option is available on such
financial assets which were previously recognized and measured at amortized costs (FASB
2020, recently completed projects). This option is not available for held- to maturity debt
securities. It will help to reduce the fair valuation costs and will help to increase transparency

and comparability of each financial instrument. The amendment date will the date mentioned
in update 2016-13 for those entities who have not adopted the amendments in update 2016-13
and for others it will be for the fiscal years beginning after December 15, 2019 including
interim period for those fiscal years (FASB 2019, Update 2019-05).

References:
Financial Accounting Standard Board. 2019. Accounting Standards Update 2019-05—
Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief. Retrieved
from https://www.fasb.org/cs/ContentServer?
c=FASBContent_C&cid=1176173147553&d=&pagename=FASB%2FFASBContent_C
%2FCompletedProjectPage
Financial Accounting Standard Board. 2020. Accounting Standard update 2020-01- Financial
Instruments—Clarifying the Interactions Between Topic 321, Topic 323, And Topic 815 (Eitf
19-A). Retrieved from https://www.fasb.org/cs/ContentServer?
c=FASBContent_C&cid=1176174089366&d=&pagename=FASB%2FFASBContent_C
%2FCompletedProjectPage
Financial Accounting Standard Board. 2019. Accounting Standards Update 2019-12—
Income Taxes (Topic 740): Simplifying The Accounting For Income Taxes. Retrieved from
https://www.fasb.org/cs/ContentServer?
c=FASBContent_C&cid=1176174066395&d=&pagename=FASB%2FFASBContent_C
%2FCompletedProjectPage
Financial Accounting Standard Board. 2020. Recently completed projects. Retrieved from
https://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156240004