Wiley GAAP 2019

18ASC 320 INVESTMENTS—DEBT SECURITIES¹

PERSPECTIVE AND ISSUES

Technical Alert

The FASB has an ongoing financial instruments project. As part of this project, in January 2016, the FASB issued ASU 2016-01 and in June 2016, issued ASU 2016-13. Both of these are discussed below. As explained in Footnote 1, this chapter reflects guidance after implementation of ASU 2016-01, but before ASU 20016-13. The ASU 2016-13 guidance is not reflected in this chapter because it is not yet effective.

ASU 2016-01

NOTE: ASU 2016-01 has a significant effect on ASC 320. The major changes are summarized below and reflected throughout this chapter.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

Guidance

The ASU affects guidance on:

• Equity investments that are not consolidated or accounted for under the equity method,
• Financial liabilities under the fair value option, and
• Presentation and disclosure requirements for financial instruments.

There is now a split in the accounting for debt and equity securities. This resulted in the addition of ASC 321 and changes in terminology in the other investment topics.

Equity Investments without Readily Determinable Fair Value

For equity investments without readily determinable fair value, the ASU generally eliminates the cost method—cost less impairment, adjusted for subsequent observable price changes. However, some investments ...