Summary of Board Decisions

Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.

October 23, 2013 FASB Board Meeting

Not-for-profit financial reporting: financial statements. The Board continued deliberations on the project and tentatively decided to improve the statement of cash flows by:

  1. Requiring the direct method of reporting cash flows provided [used] by operating activities and removing the requirement to reconcile the change in net assets to net cash flow from operating activities (often referred to as the indirect method).
  2. Revising how the following items are classified in the statement of cash flows:
    1. Cash gifts with donor-imposed restrictions that they be used to purchase, construct, or otherwise acquire long-lived assets for operating purposes would be classified as inflows from operating activities rather than as inflows from financing activities.
    2. Cash payments to purchase, construct, or otherwise acquire long-lived assets for operating purposes would be classified as outflows from operating activities rather than as outflows from investing activities.
    3. Cash dividends and interest income would be classified as inflows from investing activities rather than as inflows from operating activities.
    4. Cash payments of interest expense would be classified as outflows from financing activities rather than as outflows from operating activities.

Investment Companies: Disclosures about Investments in Another Investment Company. The Board discussed the components of, and the threshold for, disclosures about investments in another investment company. The Board also discussed whether to proceed to an Exposure Draft.

The Board decided the following:

Scope

The disclosures would be required for:
  1. Investments in unconsolidated investment companies.
  2. The first level of investments in another investment company, not to the second or third level of investments. However, the Board decided that the guidance would include language to discourage a reporting investment company from creating additional levels of investments to circumvent the proposed disclosures.
Proposed Disclosures

A reporting investment company would disclose the following about each investment in another investment company (that is, an investee fund) that has a carrying value that equals or exceeds 5 percent of reporting company’s net assets as of the date of its statement of financial position:
  1. The reporting investment company’s share of the dollar amounts of management fees and incentive fees associated with the investee fund. If the reporting investment company cannot obtain information about the dollar amount of its share of the fees, it would disclose instead the percentage amounts and computational basis for each such fee.
  2. The reporting investment company’s fair value of, and its share of income/loss from, its investment in an investee fund.
  3. For investments in which the reporting investment company owns more than 20 percent of an investee fund, the reporting investment company would disclose whether its ownership percentage is between 20 to 50 percent of the net assets of the investee fund or whether its ownership percentage is greater than 50 percent of the net assets of the investee fund.
The Board decided that a reporting investment company would not be required to disclose information about leverage within an investee fund. This decision would remove the Board’s previous decision that would have required disclosure of the total assets, total debt outstanding and net assets of an investee fund.

Applicability to Interim Periods

An investment company would provide the disclosures for any financial statements that include a schedule of investments (regardless of whether those financial statements are for an annual or interim period).

Transition

The disclosures would be applied prospectively and early adoption would be permitted.
The comment period end date would be the later of 90 days from the date of issuance of the Exposure Draft or May 15, 2014.

The Board directed the staff to draft a proposed Accounting Standards Update incorporating the above-described decisions for vote by written ballot.