Quarterly Accounting Roundup by Magnus Orrell and Joseph Renouf, Deloitte & Touche LLP To our clients, colleagues, and other friends: Welcome to Quarterly Accounting Roundup: Third Quarter — 2018. The third quarter of 2018 was a busy one for the FASB. Guidance issued by the Board includes: • Accounting Standards Updates (ASUs) on (1) cloud computing, (2) Codification improvements, (3) improving disclosure effectiveness, (4) long-duration insurance contracts, and (5) targeted amendments to the leasing guidance in ASC 842. 1 • Proposed ASUs on (1) credit losses and (2) targeted improvements to the lessor accounting model in ASC 842. On the regulatory front, the SEC continued to advance its disclosure effectiveness initiative by releasing several final and proposed rules, including the following: • A final rule that amends certain of its disclosure requirements “that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, [U.S. GAAP], or changes in the information environment.” • A proposed rule that would amend certain disclosure requirements related to registered debt securities. 1 For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.” In This Issue • Accounting — Newly Issued Standards • Accounting — Exposure Drafts • Accounting — Other Key Developments • Auditing Developments • Regulatory and Compliance Developments • Appendix A: Significant Adoption Dates • Appendix B: Current Status of FASB Projects • Appendix C: New Deloitte U.S. Accounting Publications Third Quarter — 2018
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Quarterly Accounting Roundupby Magnus Orrell and Joseph Renouf, Deloitte & Touche LLP
To our clients, colleagues, and other friends:
Welcome to Quarterly Accounting Roundup: Third Quarter — 2018. The third quarter of 2018 was a busy one for the FASB. Guidance issued by the Board includes:
• Accounting Standards Updates (ASUs) on (1) cloud computing, (2) Codification improvements, (3) improving disclosure effectiveness, (4) long-duration insurance contracts, and (5) targeted amendments to the leasing guidance in ASC 842.1
• Proposed ASUs on (1) credit losses and (2) targeted improvements to the lessor accounting model in ASC 842.
On the regulatory front, the SEC continued to advance its disclosure effectiveness initiative by releasing several final and proposed rules, including the following:
• A final rule that amends certain of its disclosure requirements “that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, [U.S. GAAP], or changes in the information environment.”
• A proposed rule that would amend certain disclosure requirements related to registered debt securities.
1 For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.”
In This Issue• Accounting — Newly
Issued Standards
• Accounting — Exposure Drafts
• Accounting — Other Key Developments
• Auditing Developments
• Regulatory and Compliance Developments
• Appendix A: Significant Adoption Dates
• Appendix B: Current Status of FASB Projects
• Appendix C: New Deloitte U.S. Accounting Publications
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Featured Deloitte PublicationsIn the third quarter of 2018, Deloitte released the following new and updated Roadmaps:
• A Roadmap to Consolidation — Identifying a Controlling Financial Interest (update) — Updated to reflect (1) the issuance of ASU 2017-02, which clarifies the circumstances in which a not-for-profit entity that is a general partner or limited partner would consolidate a for-profit limited partnership or similar entity, and (2) the current status and content of the FASB’s proposed ASUs on related parties and the proposed reorganization of the consolidation guidance.
• A Roadmap to Distinguishing Liabilities From Equity (update) — Provides an overview of the guidance in ASC 480-10 as well as Deloitte’s insights into and interpretations of how to apply it in practice.
• A Roadmap to Initial Public Offerings — Addresses financial reporting, accounting, and auditing considerations to help companies navigate challenges related to preparing an IPO registration statement and ultimately going public.
• A Roadmap to Segment Reporting (update) — Provides Deloitte’s insights into and interpretations of the guidance in ASC 280 on segment reporting, including key takeaways and illustrative examples.
• A Roadmap to the Preparation of the Statement of Cash Flows (update) — Provides Deloitte’s insights into and interpretations of the accounting guidance on the statement of cash flows, primarily that in ASC 230. The 2018 edition Incorporates additional interpretations and guidance related to the amendments in ASUs 2016-152 and 2016-18.3
• A Roadmap to SEC Reporting Considerations for Business Combinations — Combines the SEC’s guidance on reporting for business acquisitions — including acquisitions of real estate operations and pro forma financial information — with Deloitte’s interpretations (Q&As) and examples in a comprehensive, reader-friendly format.
2 FASB Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments — a consensus of the FASB Emerging Issues Task Force.
FASB Amends Guidance on Cloud Computing ArrangementsAffects: All entities.
Summary: On August 29, 2018, the FASB issued ASU 2018-154 to provide guidance on implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract. The ASU, which was released in response to a consensus reached by the EITF at its June 2018 meeting, aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, the ASU amends ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in such a CCA.
Next Steps: For the ASU’s effective date and transition provisions, see Appendix A.
Other Resources: Deloitte’s September 11, 2018, Heads Up and June 2018 EITF Snapshot. Also see the press release on the FASB’s Web site.
Codification Improvements
FASB Makes Improvements to CodificationAffects: All entities.
Summary: On July 17, 2018, the FASB issued ASU 2018-09,5 which contains amendments to “clarify, correct errors in, or make minor improvements to the Codification.” Specifically, the ASU makes improvements to the following ASC topics:
• ASC 220-10, Income Statement — Reporting Comprehensive Income: Overall.
• ASC 470-50, Debt: Modifications and Extinguishments.
• ASC 480-10, Distinguishing Liabilities From Equity: Overall.
• ASC 718-740, Compensation — Stock Compensation: Income Taxes.
• ASC 805-740, Business Combinations: Income Taxes.
• ASC 815-10, Derivatives and Hedging: Overall.
• ASC 820-10, Fair Value Measurement: Overall.
• ASC 940-405, Financial Services — Brokers and Dealers: Liabilities.
• ASC 962-325, Plan Accounting — Defined Contribution Pension Plans: Investments — Other.
4 FASB Accounting Standards Update No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract — a consensus of the FASB Emerging Issues Task Force.
FASB Issues Guidance on Improving Disclosure EffectivenessAffects: All entities.
Summary: On August 28, 2018, the FASB issued two ASUs and two changes to its conceptual framework that are intended to improve the effectiveness of disclosures in notes to financial statements. Specifically, the FASB released the following:
• ASU 2018-136 — Removes, modifies, and adds certain disclosure requirements related to fair value measurements in ASC 820.
• ASU 2018-147 — Modifies ASC 715-20 to improve disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.
• Chapter 8, “Notes to Financial Statements,” of the conceptual framework — “[E]xplains what information the Board should consider including in notes to financial statements by describing the purpose of notes, the nature of appropriate content, and general limitations. It also addresses the Board’s considerations specific to interim reporting disclosure requirements.”
• Amendments to Chapter 3, “Qualitative Characteristics of Useful Financial Information,” of the conceptual framework — Updates the FASB’s definition of materiality to be consistent with the definition used by the SEC, PCAOB, AICPA, and U.S. judicial system.
Next Steps: ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, for public companies and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for both ASUs.
Other Resources: Deloitte’s August 29, 2018, and August 31, 2018, Heads Up newsletters. For more information, see the press release and FASB in Focus newsletter on the FASB’s Web site.
Insurance Contracts
FASB Makes Targeted Improvements to the Accounting for Certain Long-Duration Insurance ContractsAffects: All entities.
Summary: On August 15, 2018, the FASB issued ASU 2018-12,8 which amends the accounting and disclosure model for certain long-duration insurance contracts under U.S. GAAP. The goal of the ASU’s amendments is to improve the following aspects of financial reporting related to long-duration insurance contracts:
• Measurement of the liability for future policy benefits related to nonparticipating traditional and limited-payment contracts.
• Measurement and presentation of market risk benefits.
• Amortization of deferred acquisition costs.
• Presentation and disclosures.
6 FASB Accounting Standards Update No. 2018-13, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.
7 FASB Accounting Standards Update No. 2018-14, Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans.
8 FASB Accounting Standards Update No. 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts.
Next Steps: For public business entities, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application is permitted.
Other Resources: Deloitte’s August 21, 2018, Insurance Spotlight. Also see the press release, FASB in Focus newsletter, and cost-benefit analysis on the FASB’s Web site.
Leases
FASB Makes Targeted Improvements to ASC 842Affects: All entities.
Summary: On July 30, 2018, the FASB issued ASU 2018-119 to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU 2016-0210 (codified as ASC 842). Specifically, under the amendments in ASU 2018-11:
• Entities may elect not to recast the comparative periods presented when transitioning to ASC 842.
• Lessors may elect not to separate lease and nonlease components when certain conditions are met.
In addition, on July 19, 2018, the FASB issued ASU 2018-10,11 which made 16 separate narrow-scope amendments to ASC 842.
Next Steps: For the effective date and transition provisions of ASUs 2018-10 and 2018-11, see Appendix A.
Other Resources: Deloitte’s August 7, 2018, Heads Up. Also see the press release on the FASB’s Web site.
FASB Proposes Narrow-Scope Amendments to Guidance on Credit LossesAffects: All entities.
Summary: On August 20, 2018, the FASB issued a proposed ASU12 that would make narrow-scope amendments to its guidance on credit losses. Specifically, the proposed amendments would (1) align the implementation date for annual financial statements with the implementation date for interim financial statements and (2) clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842.
Comments on the proposed ASU were due by September 19, 2018.
Other Resources: Deloitte’s August 31, 2018, journal entry. Also see the press release on the FASB’s Web site.
Leases
FASB Issues Proposed ASU on Additional Narrow-Scope Improvements to the Lessor Accounting Model in ASC 842Affects: All entities.
Summary: On August 13, 2018, the FASB issued a proposed ASU13 that would provide lessors with additional narrow-scope improvements under ASC 842. Specifically, the proposal would affect the following issues:
• Sales taxes and other similar taxes collected from lessees.
• Certain lessor costs paid directly by lessees.
• Recognition of variable payments for contracts with lease and nonlease components.
Comments on the proposed ASU were due by September 12, 2018.
Other Resources: Deloitte’s August 16, 2018, journal entry.
OCC Updates Bank Accounting Advisory SeriesAffects: All entities.
Summary: In August 2018, the Office of the Comptroller of the Currency (OCC) updated its Bank Accounting Advisory Series (BAAS), which “expresses the [OCC’s] views on accounting topics relevant to national banks and federal savings associations.” Changes to the BAAS include revisions as a result of ASUs issued by the FASB on hedging and credit losses.
Cash Flows
Classification of Certain Cash Receipts and Cash PaymentsAffects: All entities.
Summary: The SEC’s Office of the Chief Accountant has addressed questions regarding how to apply the guidance in ASU 2016-1514 on beneficial interests in securitization transactions, particularly for entities that have sold trade receivables to a multiseller commercial paper conduit structure.
Other Resources: Deloitte’s August 3, 2018, Financial Reporting Alert.
Credit Losses
AICPA Issues Two Working Drafts Related to Credit LossesAffects: All entities.
Summary: On August 10, 2018, the AICPA’s Financial Reporting Executive Committee released for public comment two working drafts on accounting issues associated with the implementation of ASU 2016-13,15 which “provides a new current expected credit loss (‘CECL’) model to measure impairment for financial assets (and instruments) measured at amortized cost.” The working drafts are part of a new accounting and auditing guide related to credit losses that is focusing on lending institutions and insurance companies. The following two issues are addressed in the working drafts:
• Zero expected credit losses.
• Reversion method: estimation versus accounting policy.
Next Steps: Comments on the working drafts are due by October 10, 2018.
Other Resources: For more information, see the CECL issues page on the AICPA’s Web site.
14 FASB Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments — a consensus of the FASB Emerging Issues Task Force.
15 FASB Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments.
Accounting — Other Key DevelopmentsIn This Section• Banking
Classification of Cryptocurrency HoldingsAffects: All entities.
Summary: Cryptocurrency is a new type of value and payment method that is distinctly different from fiat currency (e.g., U.S. dollars and foreign currencies). Instead of possessing a physical form, cryptocurrency exists as immutable distributed ledgers maintained on public blockchains. Cryptocurrencies are not financial assets because they are not cash, an ownership interest in an entity, or a contract establishing a right or obligation to deliver or receive cash or another financial instrument. Since they lack physical substance, they are generally considered intangible assets.
Other Resources: Deloitte’s July 9, 2018, Financial Reporting Alert.
Highly Inflationary Economies
Recent Developments Related to the Classification of Argentina as a Highly Inflationary Economy Under U.S. GAAP Affects: All entities.
Summary: Recent developments have occurred that suggest Argentina should be accounted for as a highly inflationary economy under ASC 830 beginning no later than July 1, 2018. Argentina has continued to experience negative economic trends, as demonstrated by (1) multiple periods of increasing inflation rates, (2) devaluation of the peso, and (3) increasing borrowing rates.
Other Resources: Deloitte’s July 3, 2018, Financial Reporting Alert and July 9, 2018, IFRS in Focus.
Share-Based Payment
Adoption of ASU 2018-07 in an Interim PeriodAffects: All entities.
Summary: For entities that choose to early adopt ASU 2018-0716 in an interim period, questions have arisen about how to determine the adoption date for the calculation of the transition adjustments. On the basis of discussions with the FASB staff, we believe that it is acceptable to determine the adoption date as of either (1) the beginning of the fiscal year in which the entity adopts the ASU or (2) the beginning of the interim period in which the entity adopts the ASU. In addition, because the guidance may not be clear, other approaches may be acceptable. However, under any approach, any transition adjustments should be reflected as of the beginning of the fiscal year of adoption.
Other Resources: Deloitte’s August 1, 2018, Financial Reporting Alert.
IASB Publishes Discussion Paper on Financial Instruments With Characteristics of EquityAffects: Entities reporting under IFRS® Standards.
Summary: On June 28, 2018, the International Accounting Standards Board (IASB) issued a discussion paper (DP)17 that proposes new principles for classifying financial instruments as financial liabilities and equity and assesses how the presentation and disclosure requirements for those financial instruments could be improved. The objective of the DP is to help investors understand the features of those instruments and implications related to the entity’s prospects for future cash flows.
Next Steps: Comments on the DP are due by January 7, 2019.
Other Resources: Deloitte’s August 15, 2018, IFRS in Focus. Also see the press release on the IASB’s Web site.
17 IASB Discussion Paper, Financial Instruments With Characteristics of Equity.
CAQ Publishes Resource on Critical Audit MattersAffects: Audit committees, investors, and other financial statement users.
Summary: On July 24, 2018, the CAQ released a publication18 on critical audit matters (CAMs). The publication provides information on:
• Understanding CAMs.
• CAM reporting in the auditor’s report.
• Auditor reporting occurring outside the United States.
• Differences between PCAOB and IAASB auditor reporting standards.
Other Resources: For more information, see the press release on the CAQ’s Web site.
PCAOB
PCAOB Updates Staff Guidance on Auditor’s ReportAffects: Auditors.
Summary: The PCAOB has updated its December 2017 staff guidance19 on the auditor’s report. The staff guidance is intended to help firms as they implement the first phase of changes to the auditor’s report. The August 2018 update amends the following sections:
• Annotated sample auditor’s report.
• Auditor tenure.
• Auditor reporting regarding internal control over financial reporting.
• Explanatory and emphasis paragraphs.
• Voluntary disclosure about certain audit participants.
• Other reporting situations.
18 CAQ Publication, Critical Audit Matters: Key Concepts and FAQs for Audit Committees, Investors, and Other Users of Financial Statements.19 PCAOB Staff Guidance, Changes to the Auditor’s Report.
Auditing DevelopmentsIn This Section• CAQ
o CAQ Publishes Resource on Critical Audit Matters
SEC Proposes Rule on Single Issuer Exemption for Broker-DealersAffects: SEC registrants.
Summary: The SEC has issued a proposed rule,20 which would amend the exemption provisions in the broker-dealer annual reporting rule under the Securities Exchange Act of 1934. Specifically, the rule would “provide that a broker-dealer is not required to engage an independent public accountant to certify the broker-dealer’s annual reports if, among other things, the securities business of the broker-dealer has been limited to acting as broker (agent) for a single issuer in soliciting subscriptions for securities of that issuer.”
Next Steps: Comments on the proposed rule are due 30 days after the date of its publication in the Federal Register.
CAQ Releases Highlights of July 2018 Meeting With SEC StaffAffects: All entities.
Summary: On September 17, 2018, the CAQ released the highlights of the July 12, 2018, CAQ SEC Regulations Committee joint meeting with the SEC staff. Topics discussed at the meeting included:
• Disclosures required by ASC 606.
• Letters about serious deficiencies.
• Smaller reporting companies.
• SEC Regulation S-X, Rule 3-10.21
• Audit requirements for transactions involving special-purpose acquisition companies.
• Transition from emerging growth company status.
• CAMs.
• Non-GAAP measures.
Other Resources: Deloitte’s September 18, 2018, journal entry.
SEC Updates and Simplifies Disclosure RequirementsAffects: SEC registrants.
Summary: On August 17, 2018, the SEC issued a final rule22 that amends certain of its disclosure requirements “that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, [U.S. GAAP], or changes in the information environment.” The objective of the final rule is to “facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors.” The final rule was issued as part of the SEC Division of Corporation Finance’s overall effort to improve the effectiveness of the SEC’s financial
20 SEC Proposed Rule Release No. 34-84225, Amendment to Single Issuer Exemption for Broker-Dealers.21 SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being
Registered.”22 SEC Final Rule Release No. 33-10532, Disclosure Update and Simplification.
In This Section• SEC
o SEC Proposes Rule on Single Issuer Exemption for Broker-Dealers
o CAQ Releases Highlights of July 2018 Meeting With SEC Staff
o SEC Updates and Simplifies Disclosure Requirements
o SEC Proposes Disclosure Simplification and Relief Related to Collateralizations and Guarantors of Securities
o SEC Amends Disclosure Requirements Related to Municipal Securities
o SEC Issues Final Rule to Amend ATS Regulations
o SEC Issues Final Rule on Compensatory Arrangements
o SEC Division of Corporation Finance Announces Further Improvements to Transparency of Staff Actions
o SEC Staff Updates C&DIs on Proxy Rules and Schedules 14A/14C
reporting requirements and to implement certain elements of the Fixing America’s Surface Transportation Act.
A few noteworthy changes in the final rule, which eliminate certain disclosure requirements but add or modify a few others, include amendments related to the following:
• Ratio of earnings to fixed charges — The final rule removes the requirement to disclose the historical and pro forma ratio of earnings to fixed charges and the related exhibit.
• Changes in stockholders’ equity for interim periods — The final rule extends to interim periods the annual disclosure requirement in SEC Regulation S-X, Rule 3-04,23 of presenting (1) changes in stockholders’ equity and (2) the amount of dividends per share for each class of shares. An analysis of changes in stockholders’ equity will now be required for the current and comparative year-to-date interim periods.
• Market price information — The final rule replaces the requirement to disclose the high and low trading prices of an entity’s common stock for specified quarterly periods with a requirement to disclose the ticker symbol of the entity’s common equity or include other disclosures if that information is not available.
Next Steps: The final rule will become effective 30 days after the date of its publication in the Federal Register.
Other Resources: Deloitte’s August 28, 2018, Heads Up and September 11, 2018, Financial Reporting Alert.
SEC Proposes Disclosure Simplification and Relief Related to Collateralizations and Guarantors of SecuritiesAffects: SEC registrants.
Summary: Summary: On July 24, 2018, the SEC issued a proposed rule24 that would amend certain disclosure requirements related to registered debt securities in Regulation S-X, Rules 3-10 and 3-16.25 With respect to the disclosure requirements related to issuers and guarantors of guaranteed debt securities or affiliates whose securities collateralize debt, the proposed rule would:
• Replace the requirement under Rule 3-10 to provide condensed consolidating financial information with a requirement to provide summarized financial information and other narrative disclosures when certain conditions are met.
• Simplify the requirements under Rule 3-10 to qualify for exceptions to provide alternative disclosure rather than full audited financial statements (e.g., by replacing the requirement that a subsidiary issuer or guarantor be 100 percent owned with a requirement that it be consolidated in the parent company’s financial statements).
• Remove the requirement under Rule 3-10(g) to provide preacquisition financial statements for recently acquired subsidiary issuers and guarantors.
• Replace the requirement to provide separate financial statements for an affiliate that collateralizes a substantial portion of a security with a requirement to provide summarized financial information and other narrative disclosures.
• Reduce the periods for which summarized financial information is required to only the most recent annual and interim periods.
23 SEC Regulation S-X, Rule 3-04, “Changes in Stockholders’ Equity and Noncontrolling Interests.”24 SEC Proposed Rule Release No. 33-10526, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates and
Whose Securities Collateralize a Registrant’s Securities.25 SEC Regulation S-X, Rule 3-16, “Financial Statements of Affiliates Whose Securities Collateralize an Issue Registered or Being
Next Steps: Comments on the proposed rule are due 60 days after the date of its publication in the Federal Register.
Other Resources: Deloitte’s July 31, 2018, Heads Up. Also see the press release on the SEC’s Web site.
SEC Amends Disclosure Requirements Related to Municipal Securities Affects: SEC registrants.
Summary: On August 20, 2018, the SEC issued a final rule26 to enhance the transparency of disclosures in the municipal securities market. Specifically, the final rule increases “the amount of information that is publicly disclosed about material financial obligations incurred by issuers and obligated persons.”
Next Steps: The final rule will become effective on October 30, 2018.
Other Resources: For more information, see the press release on the SEC’s Web site.
SEC Issues Final Rule to Amend ATS RegulationsAffects: SEC registrants.
Summary: On July 18, 2018, the SEC issued a final rule27 that enhances “transparency and oversight of alternative trading systems (ATSs) that trade stocks listed on a national securities exchange (NMS Stock ATSs).” Specifically, the final rule will “require NMS Stock ATSs to publicly disclose detailed information about their operations and the ATS-related activities of their broker-dealer operators.”
Next Steps: The final rule will become effective on October 9, 2018.
Other Resources: For more information, see the press release on the SEC’s Web site.
SEC Issues Final Rule on Compensatory ArrangementsAffects: SEC registrants.
Summary: On July 18, 2018, the SEC issued a final rule28 on compensatory arrangements that increases “from $5 million to $10 million the aggregate sales price or amount of securities sold during any consecutive 12-month period in excess of which the issuer is required to deliver additional disclosures to investors.” The final rule became effective on July 23, 2018.
In addition, the SEC has issued a concept release29 to solicit feedback on ways to modernize existing rules related to compensatory arrangements. Comments on the concept release were due by September 24, 2018.
Other Resources: For more information, see the press release on the SEC’s Web site.
26 SEC Final Rule Release No. 34-83885, Amendments to Municipal Securities Disclosure.27 SEC Final Rule Release No. 34-83663, Regulation of NMS Stock Alternative Trading Systems.28 SEC Final Rule Release No. 33-10520, Exempt Offerings Pursuant to Compensatory Arrangements.29 SEC Concept Release No. 33-10521, Concept Release on Compensatory Securities Offerings and Sales.
SEC Division of Corporation Finance Announces Further Improvements to Transparency of Staff ActionsAffects: SEC registrants.
Summary: On August 20, 2018, the staff in the SEC’s Division of Corporation Finance announced that starting on October 1, 2018, it will begin releasing, through EDGAR, orders “granting or denying regulatory relief on behalf of the Commission.” The release is part of the SEC’s “efforts to enhance transparency in subsequent phases by releasing additional types of documents, including those memorializing actions or positions taken by the Division staff, such as interpretive guidance and no-action relief.”
SEC Staff Updates C&DIs on Proxy Rules and Schedules 14A/14CAffects: SEC registrants.
Summary: On July 31, 2018, the staff in the SEC’s Division of Corporation Finance added two questions to its Compliance and Disclosure Interpretations (C&DIs) related to proxy rules and Schedules 14A/14C. Specifically, the SEC added Questions 126.06 and 126.07, which clarify the submission of a Notice of Exempt Solicitation.
Appendix B: Current Status of FASB ProjectsThis appendix summarizes the current status and next steps for the FASB’s active standard-setting projects (excluding research initiatives).
Project Status and Next Steps Deloitte Resources
Recognition and Measurement Projects
Codification improvements
GeneralOn July 16, 2018, the FASB issued ASU 2018-09, which makes improvements to various Codification topics. Some of the amendments are effective upon issuance, while others are effective for annual periods beginning after December 15, 2018, for public business entities (PBEs).
Credit LossesOn August 20, 2018, the FASB issued a proposed ASU that would make narrow-scope improvements to its credit losses standard. Comments were due by September 19, 2018.
Financial InstrumentsOn September 5, 2018, the FASB directed its staff to draft a proposed ASU that would amend the guidance related to credit losses, hedging, and recognition and measurement of financial instruments. The final ASU is expected to be issued in the fourth quarter of 2018.
LeasesOn July 18, 2018, the FASB issued ASU 2018-10, which makes minor amendments to the new leasing standard.
Journal Entry — FASB Proposes Certain Targeted Improvements to Credit Losses Standard (August 31, 2018)
Journal Entry — FASB Provides Interpretations on ASU 2017-12 Implementation, and Tentatively Decides on Certain Targeted Improvements to Accounting for Hedging Activities (September 12, 2018)
Heads Up — FASB Re-Leases Targeted Improvements to ASC 842 (August 7, 2018)
Collaborative arrangements: targeted improvements
On April 26, 2018, the FASB issued a proposed ASU that would amend ASC 808 to clarify when transactions between participants in a collaborative arrangement should be accounted for as revenue transactions under ASC 606. Comments were due by June 11, 2018. On July 25, 2018, the FASB directed its staff to draft a final ASU for a vote by written ballot. The final ASU is expected to be issued in the fourth quarter of 2018.
Heads Up — FASB Proposes Guidance on Collaborative Arrangements (April 30, 2018)
Consolidation reorganization and targeted improvements
On September 20, 2017, the FASB issued a proposed ASU that would reorganize the consolidation guidance in ASC 810 by dividing it into separate subtopics for voting interest entities and variable interest entities (VIEs). The new subtopics would be included in a new topic, ASC 812, which would supersede ASC 810. Comments on the proposal were due by December 4, 2017. On June 27, 2018, the FASB decided to continue the project.
Heads Up — FASB Proposes to Reorganize Its Consolidation Guidance (October 5, 2017)
Consolidation: targeted improvements to related-party guidance for VIEs
On June 22, 2017, the FASB published a proposed ASU under which (1) private companies “would not have to apply VIE guidance to legal entities under common control . . . if both the parent and the legal entity being evaluated for consolidation are not [PBEs]”; (2) “[i]ndirect interests held through related parties in common control arrangements would be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests”; and (3) consolidation would no longer be mandatory when “power is shared among related parties or when commonly controlled related parties, as a group, have the characteristics of a controlling financial interest but no reporting entity individually has a controlling financial interest.” Comments on the proposal were due by September 5, 2017. The Board directed the staff to draft a final ASU that reflects the tentative decisions reached to date for a vote by written ballot. The FASB expects to issue the final ASU in the fourth quarter of 2018.
Heads Up — FASB Proposes Targeted Amendments to the Related-Party Guidance for Variable Interest Entities (July 14, 2017)
Customer’s accounting for implementation costs incurred in a cloud computing arrangement that is considered a service contract (EITF Issue 17-A)
On August 29, 2018, the FASB issued ASU 2018-15, which amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.
Heads Up — FASB Amends Guidance on Cloud Computing Arrangements (September 11, 2018)
Distinguishing liabilities from equity (including convertible debt)
The FASB added this project to its technical agenda on September 20, 2017. The purpose of the project is “to improve understandability and reduce complexity, without sacrificing the information that users of financial statements need.” The project will focus on “indexation and settlement (within the context of the derivative scope exception), along with convertible debt, disclosures, and earnings per share.” On June 6, 2018, the Board discussed the direction of the project with respect to convertible instruments and indexation.
Facilitation of the effects of the LIBOR-to-SOFR transition on financial reporting
On August 29, 2018, the FASB added a project to its agenda to consider changes to GAAP necessitated by the market-wide transition from LIBOR to SOFR, with the objective of facilitating the transition.
Hedging: last-of-layer method
On March 28, 2018, the FASB decided to add a narrow-scope project to address the accounting for last-of-layer basis adjustments and hedging multiple layers under the last of layer method in accordance with ASU 2017-12.
Improvements to accounting for episodic television series (EITF Issue 18-B)
On March 28, 2018, the FASB decided to add a narrow-scope project to the EITF’s agenda to address the capitalization, amortization, and impairment of, and disclosures about, episodic television series costs. On June 7, 2018, the EITF began deliberating this Issue.
EITF Snapshot (June 2018)
Journal Entry — FASB Adds Three Projects to the Technical Agenda (April 3, 2018)
Improving the accounting for asset acquisitions and business combinations
On August 2, 2017, the FASB tentatively decided that this project should (1) address differences between the accounting for acquisitions of assets and that for acquisitions of businesses and (2) focus on the accounting for transaction costs, in-process research and development, and contingent consideration. On May 8, 2018, the FASB discussed how certain aspects of the accounting for asset acquisitions could be aligned with those for business combinations.
Inclusion of the Overnight Index Swap (OIS) Rate based on the Secured Overnight Financing Rate (SOFR)
On February 20, 2018, the FASB issued a proposed ASU that would add the OIS rate based on the SOFR to the list of permissible benchmark rates for hedge accounting purposes. Comments were due by March 30, 2018. On August 29, 2018, the Board directed the staff to draft a final ASU for a vote by written ballot. The final ASU is expected to be issued in the fourth quarter of 2018.
Journal Entry — FASB Concludes Deliberations on Proposed Accounting Standards Update on Adding a New Benchmark Interest Rate in the United States (August 31, 2018)
Insurance: targeted improvements to the accounting for long-duration contracts
On August 15, 2018, the FASB issued ASU 2018-12, which makes targeted improvements to the recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by insurance entities. For PBEs, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted for all entities.
Insurance Spotlight — FASB Makes Targeted Improvements to the Accounting for Certain Long-Duration Insurance Contracts (August 21, 2018)
Leases: targeted amendments to ASC 842
On July 30, 2018, the FASB issued ASU 2018-11, which makes targeted improvements to certain aspects of its new leasing standard, ASU 2016-02. Except for early adopters of ASC 842, entities apply the same effective date and transition requirements as those for ASC 842.
Heads Up — FASB Re-Leases Targeted Improvements to ASC 842 (August 7, 2018)
Narrow-scope improvements to lessor accounting model
On August 13, 2018, the FASB issued a proposed ASU that would make narrow-scope improvements to its leasing standard. Comments were due by September 12, 2018.
Journal Entry — FASB Issues Proposed ASU on Additional Narrow-Scope Improvements to the Lessor Accounting Model in ASC 842 (August 16, 2018)
Recognition under ASC 805 for an assumed liability in a revenue contract (EITF Issue 18-A)
On March 28, 2018, the FASB decided to add a project to the EITF’s agenda to address the recognition of an assumed liability in a revenue contract acquired in a business combination. On June 7, 2018, the EITF reached a consensus-for-exposure, which was ratified by the Board on June 27, 2018. The FASB expects to issue the proposed ASU in the third quarter of 2018.
EITF Snapshot (June 2018)
Journal Entry — FASB Adds Three Projects to the Technical Agenda (April 3, 2018)
Updating the definition of collections
On June 26, 2018, the FASB issued a proposed ASU that would update the definition of collections (i.e., works of art, historical treasures, or similar assets that meet specific criteria) in the ASC master glossary. Comments were due by August 10, 2018.
Journal Entry — FASB Adds Three Projects to the Technical Agenda (April 3, 2018)
On August 28, 2018, the FASB issued ASU 2018-14, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU is effective for fiscal years ending after December 15, 2020, for PBEs and December 15, 2021, for all other entities. Early adoption is permitted.
Heads Up — FASB Amends Guidance on Disclosures Related to Defined Benefit Plans (August 29, 2018)
Disclosure framework: disclosure review — fair value measurement
On August 28, 2018, the FASB issued ASU 2018-13, which modifies the disclosure requirements related to fair value measurement. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted.
Heads Up — FASB Issues Standard to Amend Required Fair Value Measurement Disclosures (August 31, 2018)
On June 26, 2016, the FASB issued a proposed ASU that would modify existing and add new income tax disclosure requirements. Comments on the proposed ASU were due by September 30, 2016. On January 25, 2017, the Board discussed the feedback received on the proposed ASU.
Heads Up — FASB Proposes Updates to Income Tax Disclosure Requirements (July 29, 2016)
On January 10, 2017, the FASB issued a proposed ASU that would modify or eliminate certain disclosure requirements related to inventory and establish new requirements. Comments on the proposed ASU were due by March 13, 2017. On June 21, 2017, the Board discussed a summary of comments received.
Heads Up — FASB Proposes Updates to Inventory Disclosures (January 12, 2017)
The purpose of this project is to improve the effectiveness of interim disclosures. At its May 28, 2014, meeting, the FASB decided to amend ASC 270 “to reflect that disclosures about matters required to be set forth in annual financial statements should be provided on an updated basis in the interim report if there is a substantial likelihood that the updated information would be viewed by a reasonable investor as significantly altering the ’total mix’ of information available to the investor.” On July 11, 2018, the Board directed the staff to develop principles for interim disclosure.
Disclosures by business entities about government assistance
On November 12, 2015, the FASB issued a proposed ASU that would require specific disclosures about government assistance received by businesses. Comments on the proposed ASU were due by February 10, 2016.
At its June 8, 2016, meeting, the FASB made tentative decisions about the project’s scope, whether to require disclosures about government assistance received but not recognized directly in the financial statements, and omission of information when restrictions preclude an entity from disclosing the information required. On April 5, 2018, the Board directed the staff to perform additional research.
Journal Entry — FASB Begins Redeliberating Project on Business Entities’ Disclosures About Government Assistance (June 14, 2016)
Heads Up — FASB Proposes ASU to Increase Transparency of Accounting for Government Assistance Arrangements (November 20, 2015)
Financial performance reporting: disaggregation of performance information
The FASB added this project to its technical agenda on September 20, 2017, “to focus on the disaggregation of performance information either through presentation in the statement of income or disclosure in the notes.” On December 13, 2017, the FASB discussed the project plan. On March 28, 2018, the FASB directed its staff to perform additional outreach.
Segment reporting The FASB added this project to its technical agenda on September 20, 2017. The purpose of the project is to improve “the aggregation criteria and segment disclosures.” On December 13, 2017, the FASB discussed the project plan. On February 7, 2018, the FASB discussed potentially reordering the reportable segments process. On June 13, 2018, the FASB discussed a plan to perform extended outreach.
Simplifying the balance sheet classification of debt
On January 10, 2017, the FASB issued a proposed ASU that would reduce the complexity of determining whether debt should be classified as current or noncurrent in a classified balance sheet. Comments on the proposal were due by May 5, 2017. On June 28, 2017, the Board discussed a summary of comments received. On August 22, 2018, the Board directed the staff to draft a final ASU for a vote by written ballot. The FASB expects to issue this ASU in the fourth quarter of 2018.
Journal Entry — FASB Addresses Sweep Issues Related to Simplifying the Balance Sheet Classification of Debt (August 24, 2018)
Journal Entry — FASB Concludes Redeliberations on Simplifying the Balance Sheet Classification of Debt (Current Versus Noncurrent) (September 15, 2017)
Heads Up — FASB Proposes Changes to Simplify the Balance Sheet Classification of Debt (January 12, 2017)
Framework Projects
Conceptual framework PresentationOn August 11, 2016, the FASB issued a proposed concepts statement that would add a new chapter on presentation of financial statement information to the conceptual framework. Comments were due by November 9, 2016. On May 3, 2017, the FASB discussed feedback received.
MeasurementOn June 18, 2014, the Board decided to begin developing concepts related to measurement. The Board most recently discussed this project on November 30, 2016.
ElementsOn May 3, 2017, the FASB decided to add a conceptual framework project on elements. The FASB most recently discussed this project on August 22, 2018.
Disclosure framework On August 28, 2018, the FASB issued Chapter 8, “Notes to Financial Statements,” and amendments to Chapter 3, “Qualitative Characteristics of Useful Financial Information,” of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting. The new chapter explains what information the Board should consider including in the notes to financial statements, and the amendments align the FASB’s definition of materiality with other definitions in the financial reporting system.
Journal Entry — FASB Issues and Amends Conceptual Framework for Financial Reporting Chapters (August 30. 2018)
Appendix C: New Deloitte U.S. Accounting PublicationsRoadmap SeriesA Roadmap to Consolidation — Identifying a Controlling Financial Interest (September 2018)
A Roadmap to Distinguishing Liabilities From Equity (September 2018)
A Roadmap to Initial Public Offerings (September 2018)
A Roadmap to Segment Reporting (August 2018)
A Roadmap to the Preparation of the Statement of Cash Flows (August 2018)
A Roadmap to SEC Reporting Considerations for Business Combinations (July 2018)
Heads Up NewslettersFASB Amends Guidance on Cloud Computing Arrangements (September 11, 2018)
FASB Issues Standard to Amend Required Fair Value Measurement Disclosures (August 31, 2018)
FASB Amends Guidance on Disclosures Related to Defined Benefit Plans (August 29, 2018)
SEC Issues Final Rule That Updates and Simplifies Its Disclosure Requirements (August 28, 2018)
FASB Re-Leases Targeted Improvements to ASC 842 (August 7, 2018)
SEC Proposes Disclosure Simplification and Relief Related to Guarantors and Collateralizations of Securities (July 31, 2018)
ASC 606 Is Here — How Do Your Revenue Disclosures Stack Up? (July 11, 2018)
SEC Requires the Use of Inline XBRL in Certain Filings (July 3, 2018)
Industry Spotlight SeriesPower & Utilities Spotlight — Making Power and Utilities Companies More Risk-Aware and Resilient (September 6, 2018)
Insurance Spotlight — FASB Makes Targeted Improvements to the Accounting for Certain Long-Duration Insurance Contracts (August 21, 2018)
Power & Utilities Spotlight — Effects of the New Revenue Standard: Observations From a Review of First-Quarter 2018 Public Filings by Power and Utilities Companies (July 13, 2018)
Other Industry PublicationsTechnology Alert — Challenges Associated With Applying the New Revenue Standard: Termination Rights (July 2018)
Power and Utilities — Accounting, Financial Reporting, and Tax Research Guide (July 2018)
Financial Reporting AlertFinancial Reporting Alert 18-11 — Clarifying the Interim Stockholders’ Equity and Effective Date Requirements in the SEC’s Final Rule on Disclosure Simplification (September 11, 2018)
Financial Reporting Alert 18-1 — Frequently Asked Questions About Tax Reform (originally issued January 3, 2018; updated August 30, 2018)
Financial Reporting Alert 18-5 — Application of ASU 2016-15 to the Sale of Trade Receivables to Multi-Seller Commercial Paper Conduit Structures (originally issued April 9, 2018; updated August 3, 2018)
Financial Reporting Alert 18-10 — Adoption of ASU 2018-01 in an Interim Period (August 1, 2018)
Financial Reporting Alert 18-8 — Recent Developments Related to the Classification of Argentina as a Highly Inflationary Economy Under U.S. GAAP (July 3, 2018)
Deloitte Accounting Journal EntriesCAQ SEC Regulations Committee Releases Highlights of July 12, 2018, Joint Meeting With the SEC Staff (September 18, 2018)
FASB Provides Interpretations on ASU 2017-12 Implementation, and Tentatively Decides on Certain Targeted Improvements to Accounting for Hedging Activities (September 12, 2018)
FASB Concludes Deliberations on Proposed Accounting Standards Update on Adding a New Benchmark Interest Rate in the United States (August 31, 2018)
FASB Proposes Certain Targeted Improvements to Credit Losses Standard (August 31, 2018)
FASB Issues and Amends Conceptual Framework for Financial Reporting Chapters (August 30, 2018)
FASB Addresses Sweep Issues Related to Simplifying the Balance Sheet Classification of Debt (August 24, 2018)
FASB Issues Proposed ASU on Additional Narrow-Scope Improvements to the Lessor Accounting Model in ASC 842 (August 16, 2018)
FASB Votes to Expose Additional Narrow-Scope Improvements to the Lessor Accounting Model for Public Comment (July 27, 2018)
FASB Proposes Amendments to Current Expected Credit Losses Standard (July 27, 2018)
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