FASB Drops Debt Balance Sheet Classification Project

Thoughtware Alert Published: Apr 20, 2021
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FASB met on April 14, 2021, and officially dropped a long-running simplification project to refresh the rules on classifying debt on the balance sheet. The project’s initial deliberations began in 2014 and FASB issued its first proposal in 2017. Feedback was mixed and a second proposal was issued in September 2019; again, feedback was mixed. After careful consideration, FASB concluded that any potential benefit of updates would not outweigh the implementation costs.

In January 2020, the International Accounting Standards Board (IASB) issued Classification of Liabilities as Current or Non-current, which updated existing guidance and clarified how to classify debt and other financial liabilities in particular circumstances. FASB is currently soliciting feedback about the financial reporting issues to be considered for addition to the technical agenda and the priority of those issues. FASB will then determine if a more comprehensive project is warranted on current versus noncurrent classification for all liabilities, not just debt. If approved, this could lead to more consistent balance sheet classification between FASB and IASB.

Conclusion

BKD will continue to follow development on this topic. If you have questions about these changes, contact your BKD Trusted Advisor today.

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