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Q4 – Technical Review Jan 30, 2017 | Company news
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Currently Effective Standards Technical Corrections and Improvements: In December 2016, the FASB issued ASU No. 2016-19, Technical Corrections and Improvements. The amendments apply to all reporting organizations within the scope of the guidance. Consequently, reporting organizations are advised to review the ASU to ensure compliance with the applicable parts of the guidance. Most of the amendments are effective immediately, while others take effect in interim and annual reporting periods beginning after December 15, 2016. Among other amendments, the ASU promotes consistent use of the terms “participating insurance” and “reinsurance recoverable.” It also clarifies the distinction between a “valuation approach” and a “valuation technique.” Additionally, the ASU clarifies that for an amount of an obligation under an arrangement to be considered fixed at the reporting date, the amount that must be fixed is not the amount that is the organization’s portion of the obligation but, rather, is the obligation in its entirety. (For a comprehensive list of amendments not mentioned here, refer to the text of the ASU on the FASB website.)
Soon-to-be Effective Standards Revenue Recognition – Technical Improvements: In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. Among other amendments, the ASU clarifies that guarantees within the scope of Topic 460 are not within the scope of Topic 606. The ASU also clarifies that, when performing impairment testing an entity should (a) consider expected contract renewals and extensions and (b) include both the amount of consideration it already has received but has not recognized as revenue and the amount it expects to receive in the future. Additionally, the ASU specifies that the provision for losses be determined at least at the contract level. However, the amendments allow an entity to determine the provision for losses at the performance obligation level as an accounting policy election. (For a comprehensive list of the amendments not mentioned here, refer to the text of the ASU on the FASB website.) The ASU’s effective date coincides with the effective date of Topic 606, specifically annual reporting periods beginning after December 15, 2017 for public companies and annual reporting periods beginning after December 15, 2018 for other entities. Restricted Cash: In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU becomes effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The ASU should be applied using a retrospective transition method to each period presented. Interests Held Through Related Parties Under Common Control: In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interests Held Through Related Parties That Are Under Common Control. Under current GAAP accounting, a primary beneficiary of a VIE has both of the following characteristics: (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. If a reporting entity satisfies the first characteristic of a primary beneficiary (making it the single decision maker of a VIE), the ASU requires that reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, include all of its direct variable interests in a VIE and, on a proportionate basis, its indirect variable interests in a VIE held through related parties, including related parties that are under common control with the reporting entity. Stated differently, under the ASU, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. If, after performing that assessment, a reporting entity that is the single decision maker of a VIE concludes that it does not have the characteristics of a primary beneficiary, the ASU requires the reporting entity to evaluate whether it and one or more of its related parties under common control, as a group, have the characteristics of a primary beneficiary. If the single decision maker and its related parties that are under common control, as a group, have the characteristics of a primary beneficiary, then the party within the related party group that is most closely associated with the VIE is the primary beneficiary. The guidance is effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the ASU in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Income Taxes for Intra-Entity Transfers of Assets Other Than Inventory: In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): IntraEntity Transfers of Assets Other Than Inventory. The FASB decided that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the ASU eliminates the exception for an intra-entity transfer of an asset other than inventory. Two common examples of assets included in the scope of the ASU are intellectual property and property, plant, and equipment. However, on the basis of stakeholders’ feedback about the anticipated benefits and costs, the FASB decided not to change GAAP for an intra-entity transfer of inventory. The guidance does not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. For public business entities, the ASU is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. That is, earlier adoption should be in the first interim period if an entity issues interim financial statements. The amendments in the ASU should be applied on a modified retrospective basis through a cumulativeeffect adjustment directly to retained earnings as of the beginning of the period of adoption. Cash Receipts and Cash Payments: In August 2016, the FASB issued ASU No. 201615, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (A Consensus of the Emerging Issues Task Force). The ASU provides guidance on the following eight cash flow issues: 1) debt prepayment or issuance costs; 2) settlement of zero-coupon debt instruments or other debt instruments with insignificant interest rates; 3) contingent consideration payments made after a business combination; 4) proceeds from settlement of insurance claims; 5) proceeds from settlement of corporate-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interest in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle. The ASU becomes effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The ASU should be applied using a retrospective transition method to each period presented. Not-for-Profit Financial Reporting: In August 2016, the FASB issued ASU No. 201614, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-forProfit Entities. This guidance requires Not-For-Profit (“NFP”) entities to present two classes of net assets (net assets with donor restrictions and net assets without donor restrictions) on the statement of financial position, rather than the currently required three classes. (These two classes of net assets also would be used on the statement of current activities.) Additionally, the guidance eliminates the required presentation of the indirect method of the statement of cash flows when the direct method was used. Finally, the guidance introduces several new disclosure requirements. The ASU is effective for annual financial statements issued beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. Application to interim financial statements is permitted but not required in the initial year of application. Early application is permitted. The amendments should be applied on a retrospective basis in the year the ASU is first applied. Accounting for Credit Losses: In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), to improve financial reporting by requiring the timelier reporting of credit losses on loans and other financial instruments. The guidance requires organizations to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The guidance also requires enhanced qualitative and quantitative disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. For SEC filers, the guidance becomes effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For public companies that are not SEC filers, the guidance becomes effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other organizations, the guidance becomes effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Leases: In February 2016, the FASB issued ASU No. 2016 – 02, Leases (Topic 842). The ASU will require organizations that lease assets to recognize the assets and liabilities created by those leases. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The ASU consists of three sections: Section A – Leases: Amendments to the FASB Accounting Standards Codification, Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification, and Section C – Background Information and Basis for Conclusions. The ASU becomes effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the guidance will take effect for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early application will be permitted for all organizations. Classification of Deferred Taxes: In November 2015, the FASB issued ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The guidance eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. For public companies, the ASU becomes effective for annual periods beginning after December 15, 2016 and for interim periods within those annual periods. For all other entities, the ASU becomes effective for annual periods beginning after December 15, 2017 and for interim periods within annual periods beginning after December 15, 2018. Early application in permitted. Inventory Measurement: In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The guidance applies to all inventory not measured using the LIFO or retail inventory methods. Under the new guidance, an entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. For public business entities, the ASU becomes effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this ASU should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period.
Standards Under Discussion Goodwill Impairment: In May 2016, the FASB issued an Exposure Draft of the proposed Accounting Standards Update, Intangibles-Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. At its November meeting, the Board clarified that an entity will be able to adopt the guidance regardless of whether it evaluates goodwill for impairment using the quantitative assessment in the period of adoption. The Board also decided to incorporate the guidance on impairment charges when goodwill is tax deductible into the private company accounting alternative. Additionally, the FASB decided that private companies that switch from the private company accounting alternative should apply the forthcoming guidance prospectively on or before the effective date. Finally, the Board decided that private companies that switch from the private company accounting alternative to the forthcoming guidance on or before the effective date would not need to justify preferability for the accounting change. Entities other than public business entities should apply the new guidance for annual and any interim impairment tests for periods beginning after December 15, 2021, with early adoption allowed. The final ASU is anticipated in Q1 2017. Nonemployee Share-Based Payment Accounting Improvements: The FASB has added a project to its agenda to reduce the complexity of accounting for nonemployee share-based payment awards. At the November 2016 meeting, the Board concluded that it has received sufficient information and analysis on the forthcoming proposed amendments on nonemployee share-based payments to make an informed decision on the issues presented and that the expected benefits of the amendments justify the related costs. Consequently, the Board directed the staff to draft a proposed ASU for vote by written ballot. Balance Sheet Classification of Debt: The FASB has added a project to its agenda provide guidance that will reduce the cost and complexity of determining the current versus noncurrent balance sheet classification of debt. During its October 2016 meeting, the Board affirmed its plan to move forward to a proposed ASU that includes a debt classification principle based on legal terms. The proposed guidance would include an exception for the classification of debt with waivers of debt covenant violations received after the reporting date but before financial statement issuance. The Board also affirmed its prior decision to require separate line-item presentation for debt that is classified as a noncurrent liability as a result of an exception for waivers of debt covenant violations received after the reporting date but before financial statement issuance. The Board directed the staff to draft a proposed ASU for vote by written ballot. The Board extended the comment period from 60 days to end no earlier than Friday, May 5, 2017.
Q3 – Technical Review Nov 16, 2016 | Company news
Soon-to-be Effective Standards Cash Receipts and Cash Payments: In August 2016, the FASB issued ASU No. 201615, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (A Consensus of the Emerging Issues Task Force). The ASU provides guidance on the following eight cash flow issues: 1) debt prepayment or issuance costs; 2) settlement of zero-coupon debt instruments or other debt instruments with insignificant interest rates; 3) contingent consideration payments made after a business combination; 4) proceeds from settlement of insurance claims; 5) proceeds from settlement of corporate-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interest in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle. The ASU becomes effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The ASU should be applied using a retrospective transition method to each period presented. Not-for-Profit Financial Reporting: In August 2016, the FASB issued ASU No. 201614, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-forProfit Entities. This guidance requires Not-For-Profit (“NFP”) entities to present two classes of net assets (net assets with donor restrictions and net assets without donor restrictions) on the statement of financial position, rather than the currently required three classes. (These two classes of net assets also would be used on the statement of current activities.) Additionally, the guidance eliminates the required presentation of the indirect method of the statement of cash flows when the direct method was used. Finally, the guidance introduces several new disclosure requirements. The ASU is effective for annual financial statements issued beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. Application to interim financial statements is permitted but not required in the initial year of application. Early application is permitted. The amendments should be applied on a retrospective basis in the year the ASU is first applied. Accounting for Credit Losses: In June 2016, the FASB issued ASU No. 2016–13, Financial Instruments – Credit Losses (Topic 326), to improve financial reporting by requiring the timelier reporting of credit losses on loans and other financial instruments. The guidance requires organizations to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The guidance also requires enhanced qualitative and quantitative disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. For SEC filers, the guidance becomes effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For public companies that are not SEC filers, the guidance becomes effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other organizations, the guidance becomes effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Revenue Recognition – Rescission of SEC Guidance: In May 2016, the FASB issued ASU No. 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update). The ASU rescinds the following SEC Staff Observer guidance: revenue and expense recognition for freight services in progress, accounting for shipping & handling fees and costs, accounting for consideration given to a vendor, and accounting for gasbalancing arrangements. The ASU’s effective date coincides with the effective date of Topic 606, specifically annual reporting periods beginning after December 15, 2017 for public companies and annual reporting periods beginning after December 15, 2018 for other entities. Revenue Recognition – Narrow Scope Improvements: In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients. First, the ASU clarifies the collectability criterion by specifying that the objective of this assessment is to determine whether the contract is valid and represents a substantive transaction on the basis of whether a customer has the ability and intention to pay the promised consideration in exchange for the goods or services that will be transferred to the customer. Second, the ASU addresses the topic of the presentation of state taxes collected from customers by indicating that an entity is permitted, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price. Third, the ASU addresses noncash consideration by specifying that that measurement date for noncash consideration is contract inception. Fourth, the ASU covers contract modifications at transition by providing a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented in accordance with Topic 606 when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations. Finally, the ASU addresses completed contracts at transition by specifying that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy generally accepted accounting principles (GAAP) before the date of initial application. Accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. The ASU’s effective date coincides with the effective date of Topic 606, specifically annual reporting periods beginning after December 15, 2017 for public companies and annual reporting periods beginning after December 15, 2018 for other entities. Revenue Recognition – Performance Obligations and Licensing: In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The guidance improves Topic 606 by reducing the cost and complexity of application and the potential for diversity in practice. First, the ASU clarifies Topic 606’s guidance on identifying promised goods or services through the following additions: 1) an entity is not required to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer; and 2) an entity is permitted to account for shipping and handling activities that occur after the customer has obtained control of the good as an additional activity to fulfill the promise to transfer the good rather than an additional promised service. The ASU also provides clarity on the Topic 606 criteria that promises to transfer goods or services should be considered distinct. Specifically, the ASU indicates that, in order to be considered distinct, the promise to transfer goods or services should be separately identifiable. (The ASU also provides guidance to assess that criterion.) Finally, the ASU provides clarification for the licensing implementation guidance of Topic 606. The ASU’s effective date coincides with the effective date of Topic 606, specifically annual reporting periods beginning after December 15, 2017 for public companies and annual reporting periods beginning after December 15, 2018 for other entities. Leases: In February 2016, the FASB issued ASU No. 2016 – 02, Leases (Topic 842). The ASU will require organizations that lease assets to recognize the assets and liabilities created by those leases. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The ASU consists of three sections: Section A – Leases: Amendments to the FASB Accounting Standards Codification, Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification, and Section C – Background Information and Basis for Conclusions. The ASU becomes effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the guidance will take effect for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early application will be permitted for all organizations. Classification of Deferred Taxes: In November 2015, the FASB issued ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The guidance eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. For public companies, the ASU becomes effective for annual periods beginning after December 15, 2016 and for interim periods within those annual periods. For all other entities, the ASU becomes effective for annual periods beginning after December 15, 2017 and for interim periods within annual periods beginning after December 15, 2018. Early application in permitted. Inventory Measurement: In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The guidance applies to all inventory not measured using the LIFO or retail inventory methods. Under the new guidance, an entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. For public business entities, the ASU becomes effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period.
Standards Under Discussion Hedge Accounting: In September 2016, the FASB issued a proposed ASU to improve the accounting guidance for hedging activities. Among other changes, the new guidance would expand the use of component hedging for nonfinancial and financial risks, refine the measurement techniques for hedged items in fair value hedges of benchmark interest rate risk, eliminate the separate measurement and reporting of hedge ineffectiveness, require that, for cash flow and net investment hedges, all changes in fair value of the hedging instrument included in the hedging relationship be deferred in other comprehensive income and released to the income statement in the period when the hedged item affects earnings, and requires that changes in the fair value of hedging instruments be recorded in the same income statement line item as the earnings effect of the hedged item. The comment period ends November 22, 2016. Insurance Contracts: In September 2016, the FASB issued a proposed ASU, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for LongDuration Contracts. The proposed ASU improves the accounting for long-duration insurance contracts in the following areas: 1) assumptions used to measure the liability for future policy benefits; 2) measurement of market risk benefits; and 3) amortization of deferred acquisition costs. Additionally, the proposed ASU would require additional disclosures to enable financial statement users to better understand the amount, timing, and uncertainty of cash flows arising from the contracts. The comment period ends December 15, 2016. Conceptual Framework – Presentation: In August 2016, the FASB issued a proposed statement of financial accounting concepts, Concepts Statement 8 – Conceptual Framework for Financial Reporting – Chapter 7: Presentation. The conceptual framework is a system of coherent concepts that flow from the objective of financial reporting. The concepts address the selection of transactions, events, and circumstances that meet the definitions of elements of financial statements, the determination of which items should be recognized in an entity’s financial statements, how those items should be measured, and how they should be summarized and presented in financial statements. Chapter 8 describes the information to be included in general purpose financial statements and how appropriate presentation can contribute to achieving the objective of financial reporting. The comment period ends November 9, 2016.
Q2 – Technical Review Jun 15, 2016 | Company news
Soon-to-be Effective Standards Accounting for Credit Losses: In June 2016, the FASB issued ASU No. 2016–13, Financial Instruments – Credit Losses (Topic 326), to improve financial reporting by requiring the timelier reporting of credit losses on loans and other financial instruments. The guidance requires organizations to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The guidance also requires enhanced qualitative and quantitative disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. For SEC filers, the guidance becomes effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For public companies that are not SEC filers, the guidance becomes effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other organizations, the guidance becomes effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Revenue Recognition – Performance Obligations and Licensing: In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The guidance improves Topic 606 by reducing the cost and complexity of application and the potential for diversity in practice. First, the ASU clarifies Topic 606’s guidance on identifying promised goods or services through the following additions: 1) an entity is not required to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer; and 2) an entity is permitted to account for shipping and handling activities that occur after the customer has obtained control of the good as an additional activity to fulfill the promise to transfer the good rather than an additional promised service. The ASU also provides clarity on the Topic 606 criteria that promises to transfer goods or services should be considered distinct. Specifically, the ASU indicates that, in order to be considered distinct, the promise to transfer goods or services should be separately identifiable. (The ASU also provides guidance to assess that criterion.) Finally, the ASU provides clarification for the licensing implementation guidance of Topic 606. The ASU’s effective date coincides with the effective date of Topic 606, specifically annual reporting periods beginning after December 15, 2017 for public companies and annual reporting periods beginning after December 15, 2018 for other entities. Revenue Recognition – Rescission of SEC Guidance: In May 2016, the FASB issued ASU No. 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update). The ASU rescinds the following SEC Staff Observer guidance: revenue and expense recognition for freight services in progress, accounting for shipping & handling fees and costs, accounting for consideration given to a vendor, and accounting for gasbalancing arrangements. The ASU’s effective date coincides with the effective date of Topic 606, specifically annual reporting periods beginning after December 15, 2017 for public companies and annual reporting periods beginning after December 15, 2018 for other entities. Revenue Recognition – Narrow Scope Improvements: In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients. First, the ASU clarifies the collectability criterion by specifying that the objective of this assessment is to determine whether the contract is valid and represents a substantive transaction on the basis of whether a customer has the ability and intention to pay the promised consideration in exchange for the goods or services that will be transferred to the customer. Second, the ASU addresses the topic of the presentation of state taxes collected from customers by indicating that an entity is permitted, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price. Third, the ASU addresses noncash consideration by specifying that that measurement date for noncash consideration is contract inception. Fourth, the ASU covers contract modifications at transition by providing a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented in accordance with Topic 606 when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations. Finally, the ASU addresses completed contracts at transition by specifying that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy generally accepted accounting principles (GAAP) before the date of initial application. Accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. The ASU’s effective date coincides with the effective date of Topic 606, specifically annual reporting periods beginning after December 15, 2017 for public companies and annual reporting periods beginning after December 15, 2018 for other entities. Leases: In February 2016, the FASB issued ASU No. 2016 – 02, Leases (Topic 842). The ASU will require organizations that lease assets to recognize the assets and liabilities created by those leases. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The ASU consists of three sections: Section A – Leases: Amendments to the FASB Accounting Standards Codification, Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification, and Section C – Background Information and Basis for Conclusions. The ASU becomes effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the guidance will take effect for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early application will be permitted for all organizations. Classification of Deferred Taxes: In November 2015, the FASB issued ASU No. 201517, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The guidance eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. For public companies, the ASU becomes effective for annual periods beginning after December 15, 2016 and for interim periods within those annual periods. For all other entities, the ASU becomes effective for annual periods beginning after December 15, 2017 and for interim periods within annual periods beginning after December 15, 2018. Early application in permitted. Inventory Measurement: In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The guidance applies to all inventory not measured using the LIFO or retail inventory methods. Under the new guidance, an entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. For public business entities, the ASU becomes effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period.
Standards Under Discussion Insurance Contracts: In June 2013, the FASB issued an Exposure Draft on insurance contracts. The guidance contains significant changes to the way insurance contracts are measured and reported by entities issuing those contracts. Because the feedback to the FASB was largely unsupportive, the FASB began deliberations apart from the IASB. At its March 2016 meeting, the board discussed transition methods and disclosures, along with deferred acquisition costs. A revised Exposure Draft is anticipated in the third quarter of 2016. Disclosure Framework – Fair Value Measurement: In December 2015, the FASB issued a proposed ASU, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The guidance in the proposed ASU modifies the disclosure requirements for fair value measurements. Under the new guidance, certain disclosure requirements would be eliminated because they are no longer deemed to provide useful information, and certain disclosure requirements would be modified to provide more useful information. Additionally, for public companies, additional disclosure requirements would be added. Specifically, public companies would be required to disclose changes in unrealized gains and losses for the period included in other comprehensive income and earnings for recurring Level 1, Level 2, and Level 3 fair value measurements held at the end of the reporting period, disaggregated by level of the fair value hierarchy, and, for Level 3 fair value measurements, the range, weighted average, and time period used to develop significant unobservable inputs. The comment period ended in the first quarter of 2016, and the Board has not yet set a date to discuss the feedback received and incorporate any possible changes into a final standard. Goodwill Impairment: The FASB has undertaken a project to reduce the cost and complexity of the subsequent accounting for goodwill by simplifying the impairment test. Additionally, FASB is considering whether to make additional changes to the subsequent accounting for goodwill in a related project, Subsequent Accounting for Goodwill for Public Business Entities and Not-for-Profit Entities. On May 12, 2016, the Board issued an Exposure Draft of the proposed ASU, Intangibles—Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. The comment deadline is July 11, 2016.
LSG Launches New Website Feb 12, 2016 | Company news
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