The Financial Accounting Standards Board (FASB) has been working to simplify US Generally Accepted Accounting Principles (GAAP) through the Simplification Initiative. The goal of this initiative is to identify areas of US GAAP where cost and complexity can be reduced while maintaining or improving the usefulness of information provided in the financial statements. The FASB recently expanded the number of improvements that are being considered and added additional related projects to its technical agenda.

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The Financial Accounting Standards Board
(FASB) has been working to simplify US Generally
Accepted Accounting Principles (GAAP) through the
Simplification Initiative. The goal of this initiative is to
identify areas of US GAAP where cost and complexity
can be reduced while maintaining or improving the
usefulness of information provided in the financial
statements. The FASB recently expanded the number
of improvements that are being considered and added
additional related projects to its technical agenda.
Targeted Improvements
TheSimplificationInitiativehadtwoprojectsassociated
with it that had been previously discussed by the FASB
and have had exposure drafts issued. These projects
were Simplifying Income Statement Presentation by
Eliminating the Concept of Extraordinary Item and
Simplifying the Subsequent Measurement of Inventory
(MHM Messenger 2014-21). As part of the exposure
draft process, the FASB is accepting comment letters
through September 30, 2014.
Additional projects that the FASB has added to its
agenda include:
• Simplifying the Presentation of Debt Issuance
Cost: The aim of this project is to harmonize the
accounting for certain fees and costs associated
August 2014
FASB Expands Simplification Initiative
with the issuance of a debt instrument with the
accounting for a debt discount or premium. The
FASB discussed this project and we expect an
exposure draft to be issued that will propose
treating debt issuance costs as a contra-liability
account netted against the face amount of the
debt on the balance sheet, instead of presenting
the costs as a deferred asset.
• Simplifying the Measurement Date for Plan
Assets: The board decided to allow employers
to measure the projected benefit obligation and
benefit plan assets as of the closest calendar
month-end to the employers’ fiscal year-end. The
change would make it easier for companies that
have fiscal periods that do not end on a calendar
month-end. Companies would make an accounting
election to use the calendar month-end and be
required to disclose the alternative measurement
date. The board also deliberated the inclusion of
additional rollforward information for plan assets
and contributions for assets measured using a
Level 3 fair value measurement. An exposure
draft is expected on this project in the near future.
• Simplifying the Balance Sheet Classification
of Debt: The classification of debt in US GAAP
is based on rules that when being applied can
result in significant costs. As part of this project,
the FASB has proposed to modify the guidance on
the classification of debt. The FASB is expected to
deliberate creating a principle that the classification
of debt will be based on the contract terms and
covenant compliance as of the reporting date.

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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM auditor to further discuss the impact on your audit or audit report.
Other New Projects
The FASB added an additional project to its agenda
to consider the accounting for income taxes for
intra-entity asset transfers and the balance sheet
classification of deferred taxes. This project includes
the possibility of simplifying the accounting for income
taxes by eliminating intercompany tax effects of the
sale or transfer of assets among a consolidated
group; making the classification of all deferred
taxes noncurrent; and changes to the allocation of
income tax expense between continuing operations,
discontinued operations and charges to equity.
Additional deliberation and research is expected on
this project.
In addition, the FASB added projects to the Emerging
Issues Task Force (EITF) agenda to consider the fair
value leveling for investments measured at net asset
value (NAV) and to clarify the accounting for historical
earnings per unit for master limited partnerships that
have had a dropdown transaction occur.
For More Information
The improvements under the Simplification Initiative
have the potential to make applying and following US
GAAP easier for many companies. We will continue
to follow the projects and the initiative as they evolve
and are deliberated by the FASB. If you have any
specific questions, comments or concerns, please
share them with Ernie Baugh or James Comito
of MHM’s Professional Standards Group or your
MHM service professional. You can reach Ernie at
ebaugh@mhm-pc.com or 423.870.0511 and James at
jcomito@cbiz.com or 858.795.2029.