Monday, October 24, 2011

FASB Proposes Deferring OCI Reclass Adjustments

The Financial Accounting Standards Board voted on Friday to propose a deferral of certain requirements in ASU 2011-5, Comprehensive Income, issued earlier this year. Important: the only requirements in that standard which will be deferred - while FASB further deliberates those matters - are the requirements for presentation of ‘reclassification adjustments’ from Other Comprehensive Income (OCI); the remaining provisions of ASU 2011-5 will become effective as originally set forth in that standard (beginning with public companies, for fiscal years, and interim periods within those years, ending after Dec. 15, 2011; private companies are subject to a later effective date in the standard). The action was expected, as noted here.

Proposal Expected Soon; At Least 15-Day Comment Period
An AccountingLink Financial Reporting Alert, published by Ernst & Young on Friday was one of the first reports published in the board’s vote. According to E&Y,

“[FASB’s] tentative decision came in response to concerns raised by issuers and other stakeholders that the requirement would significantly increase the number of line items that would have to be displayed in arriving at net income. Issuers also cited challenges in identifying and summarizing certain reclassification adjustments that have been capitalized on the balance sheet before recognition in net income (e.g. pension-related items that are capitalized in inventory).The FASB plans to issue an exposure draft on the decision in the near term and will provide no less than a 15-day period for comment. The Board decided to include in the exposure draft a proposed requirement to disclose in the notes to the financial statements amounts reclassified out of OCI, consistent with the existing disclosure requirement in ASC 220, Comprehensive Income.The deferral, if finalized, would not change the requirement to present items of net income, items of other comprehensive income and total comprehensive income in either one continuous statement or two separate consecutive statements. This requirement is effective for fiscal years and interim periods beginning after 15 December 2011 for public companies and for fiscal years ending after 15 December 2012 and interim periods thereafter for non-public companies.”

Reclassification Adjustments aka ‘Recycling’
BNA’s Steven Burkholder, in an article entitled FASB to Defer Part of Rules On Presenting ‘Recycling’ Adjustments, in today’s BNA Daily Report for Executives, notes that the proposed deferral of “reclassification adjustments,” or “what accountants call recycling” is expected to be released for public comment “in early November.” Like E&Y, he notes the comment period will be “at least 15 days.”

The jist of the new standard (ASU 2011-5), as explained by Burkholder was, “elimination of the option in U.S. GAAP to present those OCI components in the statement of change in stockholders' equity.: He adds, “Accountants and rulemakers frequently refer to such items of OCI being “buried” in that statement of stockholders' equity. The improvements that FASB states the new standards introduce “will help financial statement users better understand the causes of an entity's change in financial position and results of operations.”

Current Disclosure Requirements In Force During Deferral Period
Burkholder added that, “board members noted that the footnote reporting requirements of current, pre-ASC 2011-5 GAAP relating to presentation of comprehensive income would be effective,” during the deferral period. He adds, “Those disclosure rules call for details on reclassification adjustments and amounts coming out of OCI, as Seidman noted. A staff accountant told FASB that she did not know how well companies were complying with those current disclosure requirements pertaining to recycling adjustments. [FASB Board Member Tom] Linsmeier suggested that the board should convey a message, to accompany the proposed deferral, that it expects that companies would comply with current disclosure requirements. Those requirements are in provisions of ASC 220 that were formerly part of FAS 130.

Burkholder also cites FASB Project Manager Patricia Donoghue as explaining at the board meeting that ASU 2011-05 makes U.S. GAAP “more convergent’ with IFRS, “but not completely convergent.”

Watch for FASB’s proposal (and potentially a related press release) on their website,

Print this post


shane knight said...

Bookmark this wonderful resource i am happy to find it here....good job keep posting the updates

new york city accountant said...

The best financial accounting values are so important for the deliberate of the income propose. The high standard originally comprehensive data are so effective for the financial services.

hassan shah said...

"Have you ever considered about adding a little bit more than just your articles? I mean, what you say is fundamental and everything. But just imagine if you added some great visuals or video clips to give your posts more, "pop"! Your content is excellent but with images and videos, this website could definitely be one of the greatest in its niche. Great blog!"
adjustable bed reviews

Alexander Shekaroff said...

Glad to read about OCI Reclass

Bookkeeper Sunshine Coast said...

This is a short but fact-filled post.A very helpful source on the topic.You need to bookmark this site.

medical equipment companies said...

Thanks so much to both of you.

andrewaidan said...

principal investments provides loans for building their own houses.

Vintage Fashion said...

A terrific read! I was finding these important facts and figures throughout on the internet. Certainly a great contribution!Vintage Fashion

Inez Shutts said...

Pleasant short article, thanks to the details. It is very comprehensive data

pest control palm beach gardens said...

I wish to say that this post is amazing, nice written and include approximately all important infos. I would like to see more posts like this.pest control palm beach gardens

Junaid said...

Way cool.Some extremely valid points! I appreciate you penning this write-up and the rest of the site is really good.