FASB Statements 165, 166, 167, and 168

FASB Statements 165,166,167 & 168

FASB Statement 165

This statement is meant to dictate how to handle activities and events that occur after the official balance sheet had been completed but before the actual financial statement is available to be issued. Issued in 2009, the statement aims to cover some events and transactions that were before in a gray area according to the GAAP. These events and activities occur after the period for recording management and financial activities has closed. Thus, the evaluation of those activities typically would not be considered in that period. However, the financial statements from that period have not yet been released. This ultimately creates a situation where there is the potential to recognize such events with special circumstances.

There are circumstances where events and transactions that happen after the date of the balance statement should still be included within its financial statements. The general name of this statement happens to be "Subsequent Events." For events that occur before the financial statements are released, they can be included into the balance statement with the added notation. This notation is a disclosure for the exact date the event or transaction occurred and the exact meaning of the date, suggesting when such financial data would be available.

Additionally, this ultimately warns with the disclosure that there are transactions and events that may not be properly evaluated because of their late duration. For certain entries that record middle ground transactions, it is important to note whether or not they were properly evaluated within the current balance sheet. If events are not appropriately evaluated, there needs to be a disclosure which states the exact date of the publication of the financial statement that will have that specific transaction accounted for. This helps keep better track of transactions and events that occur during middle periods, so that they are not repeated on two separate financial statements or left out entirely in a state of confusion.

Also enacted in 2009, the "Accounting for Transfers of Financial Assets" statement aims to better account for the transfer of financial assets. Previous statements did leave open some loopholes in regards as to how to handle the recording of financial asset transfers. Ultimately, Statement 140 did leave open some grey area, where there could be potential confusion regarding how to handle certain financial asset transfers, especially in regards to their tangible or intangible nature. Under 140, there were clearly defined guidelines for more obvious asset transfers, but not so much for more abstract notions. Thus, Statement 166 better clarifies the nature of transfers of financial assets by describing the purpose behind such transfers and using how it would impact the parties involved as a definitive element of what qualifies as a financial asset under the GAAP. These financial assets which are included in the statement dictations are anything that impact an organization's financial position, cash flow, or financial performance. Thus, these could include working capitol, physical assets, or even stock and bond issues of any sort. Anything that will either benefit or decrease financial status and health would then relate to something that could be considered a transfer of a financial asset to another organization.

Both parties are responsible for reporting the financial transfer, both as a loss and as a gain. This also dictates that companies need to once again include intangible assets that were previously unrecognized if their intent was to increase the financial health of an organization upon receiving a transfer of a defined asset. Additionally, this statement eliminated the concept which helped a transfer qualify as a special purpose-entity. That meant that organizations which had used such exemptions prior to 2009 need to reevaluate how they report such transfers from here on out.

Just like the previous statement, FASB 167 is also related to the redefinition of specially considered entities, such as variable interest entities. Known as the "Consolidation of Variable Interest Entities," the statement aimed to improve on how these entities dealt with financial reporting. Originally described in Statement 46 in 2003, the new statement released in 2009 collaborated with Statement 166. This augmented how organizations need to handle variable interest entities. It is also related to a special purpose entity. Essentially, the variable interest entity refers to an investee that does hold a majority interest, but one that is not based on the rights associated with voting activities. In this definition, the equity which is at risk is not enough to support the entire entity's activities and where the risk holders cannot control the activities of the entity at hand.

FASB Statement 167 aims to better clarify how to deal with such variable interest entities. It improves on the earlier statement to better define their construction and how companies need to consolidate them if that company is the primary beneficiary. Essentially, the organization or risk holder that is the biggest beneficiary of groupings of variable interest entities must consolidate them in regards to financial statements and activities. The traditional definition of special purpose entities was eliminated in Statement 166. Therefore, Statement 167 reconstitutes a new definition to be used for general accounting purposes. This then forces the most benefiting share holder within such entity groupings needs to receive all benefits, but also all risks. These benefits and risks are then absorbed into the larger entity grouping for accounting purposes.

FASB Statement 168