FASB changes accounting for equity investments and financial liabilities
Defining Issues | January 2016
The proposals on equity-linked instruments with down-round features aim to make the accounting guidance easier to use.
KPMG reports on ASU 2016-01, which changes accounting under ASC 825. The FASB’s ASU significantly impacts the recognition of equity investment measurement changes and changes in the fair value of financial liabilities under the fair value option.
Applicability
ASU 2016-01
- Company that holds equity investments
- Company with financial liabilities
Relevant dates
Key impacts
- Amendments to ASC Topic 825
- Income statement volatility will increase because entities must recognize changes in the measurement of equity investments in net income
- Changes in an entity’s credit risk will not affect earnings when the fair value option is elected
Report contents
- Equity investments
- Financial liabilities
- Deferred tax assets
- Disclosures
- Effective date
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FASB changes equity investment and financial liabilities accounting
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