The FASB has issued an updated (FASB update 2013-4) accounting standard on “obligations resulting from joint and several liabilities arrangements for which the total amount of the obligation is fixed at the reporting date.” In the past, FASB remained silent on the accounting and the disclosures needed for this type of obligation. This resulted in inconsistencies on how companies were accounting and disclosing such obligations. This new FASB update will bring consistency between companies on the accounting and disclosures of obligations resulting from joint and several liabilities.

The result of this update: The FASB will now require companies to measure and disclose obligations resulting from joint and several liability arrangements that are fixed at the reporting date. Companies will be required to account and disclosure their portion of the obligation and any additional amount the company expects to pay on behave of its co-obligators. Additionally, the update will require certain disclosures such as the nature and other information about those obligations.

Effective date: The amendments will be effective for nonpublic entities for fiscal years ending after December 15, 2014, and interim periods and annual periods thereafter.