FASB Update December 2013
What is going on?
• Interesting last few years– 2010 29 ASUs issued– 2011-2013 30 ASUs issued
• Changes have gotten bottled up– Big three projects
• Getting closer to the jam being removed
2013 ASUs
• 01 – Offsetting Assets & Liabilities• 02 – Reclassifications out of Other
Comprehensive Income• 03 – Nonpublic disclosures for financial
instruments• 04 – Joint and several liability arrangements
(EITF)• 05 – Foreign currency issue (EITF)
2013 ASUs
• 06 – NFP services received issue (EITF)• 07 – Liquidation basis• 08 – Financial services – investment company
issues• 09 – Deferral of certain disclosure
requirements of ASU 2011-04• 10 – Derivative and Hedging issue (EITF)• 11 – Unrecognized tax benefit reporting (EITF)
Revenue Recognition
• Final Draft expected for Board consideration this month
• Expected to pass• Effective years beginning after 12/15/16• Five step process– Identify contracts with customers– Identify separate performance obligations– Determine transaction price– Allocate price to obligations– Recognize revenue as obligations satisfied
Costs of Implementation
• FASB staff identified specific anticipated cost increases associated with:– Construction & production type contracts– Time value adjustments to transaction prices– Bundled telecommunication contracts– The revenue constraint– Licenses of intellectual property– Transition requirements
Areas Requiring Judgment
• Who is a customer• Collectibility issues• Separating performance obligations• Significant revenue reversal• Time value of money• Recognition over time vs. point in time
Leases
• Who knows?• Type A vs. Type B dilemma• Seemingly no support• Is doing nothing an option
Financial Instruments
• Three stage project– Classification & Measurement– Impairment– Hedging
• Classification & Measurement ASU and Impairment ASU expected in first half of 2014
Classification & Measurement
• Classification of financial asset will be based on its cash flow characteristics and the entity’s business model for managing the asset
• Three possible classifications– Amortized cost– Fair value – net income– Fair value – other comprehensive income
• Changes to fair value option
Impairment
• Proposes a current expected credit loss model that would apply to all impairments of financial instruments
• Model would reflect management’s current estimate of the contractual cash flows the entity does not expect to collect
Discontinued Operations
• Big change is to the definition of “component of the entity”
• Expanded disclosures for discontinued operations
• Balance sheet effects• Expected to be completed in early 2014 and
implemented for public companies in 2015 and non-public companies in 2016
Going Concern Disclosures
• Provides guidance on when and how entities should disclose going concern uncertainties in financial statements
• Must assess ability to meet obligations due within 24 months to determine if disclosures are necessary
• Plan calls for review of comments in first quarter and proceed from there
PCC Proposals
• Accounting for identifiable intangible assets acquired in a business combination
• Accounting for goodwill• Accounting for receive-variable, pay-fixed
interest rate swaps
Other Projects
• Definition of NonPublic entity• Disclosure Framework• Development Stage Enterprises• NFP Financial Statements