Certified Public Accounting Firm

Intangibles

Articles On This Page

Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment — Broadcasters — Intangibles — Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials

FASB Accounting Standards Updates - No. 2019-06 —Intangibles —Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities 

FASB Invitation to Comment 2019-720 - Identifiable Intangible Assets and Subsequent Accounting for Goodwill 

FASB ASU No. 2019-06 - Intangibles - Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Assets to Not-for-Profit Entities 

FASB Discusses Extending Private Company Alternatives for Intangible Assets and Goodwill 

FASB Accounting Standards Updates No. 2019-02 —Entertainment —Films —Other Assets —Film Costs (Subtopic 926-20) and Entertainment —Broadcasters —Intangibles —Goodwill and Other (Subtopic 920-350) —Improvements to Accounting for Costs of Films and License Agreements for Program Materials 

FASB Proposed Accounting Standards Update 2018-320 —Intangibles —Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities 

Entertainment – Films – Other Assets – Film Costs (Subtopic 926-20) and Entertainment – Broadcasters – Intangibles – Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials – FASB Proposed ASU 2018-290 

FASB Accounting Standards Updates No. 2018-15 —Intangibles —Goodwill and Other —Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract 

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract; Disclosures for Implementation Costs Incurred for Internal-Use Software and Cloud Computing Arrangements (a consensus of the FASB Emerging Issuses Task Force) - FASB Proposed ASU 2018-230 - Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) 

Intangibles - Goodwill and Other (Topic 350); Business Combinations (Topic 805); Consolidation (Topic 810); Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance - FASB ASU 2016-03 

FASB Accounting Standards Update No. 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

FASB Proposed Accounting Standards Update No. 2016-230 - Intangibles - Goodwill and Other (Topic 350) - Simplifying the Accounting for Goodwill Impairment

FASB Accounting Standards Update No. 2015-05, Intangibles -Goodwill and Other -Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement

FASB Accounting Standards Update No. 2016-03, Intangibles -Goodwill and Other (Topic 350); Business Combinations (Topic 805); Consolidation (Topic 810); Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance

Articles

Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment — Broadcasters — Intangibles — Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials

Summary - The standard addresses when an organization should assess films and license agreements for program material for impairment at the film-group level. The amendments in the standard also:

  • Revise presentation requirements;
  • Require that an organization provide new disclosures about content that is either produced or licensed; and
  • Address cash flow classification for license agreements.

For public companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other organizations, the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Updates - No. 2019-06 —Intangibles —Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2019-06, Intangibles—Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities (NFPs). This ASU is intended to reduce the cost of accounting for goodwill and measuring certain identifiable intangible assets for not-for-profit organizations.

History
In 2014, the Private Company Council (PCC) worked with the FASB to issue two private company alternatives on accounting for goodwill and accounting for identifiable intangible assets in a business combination. Stakeholders told the FASB that these two private company alternatives would also benefit not-for-profit organizations.

ASU No. 2019-06
This ASU extends the scope of the two private company alternatives to not-for-profits, enabling organizations to recognize fewer items as separate intangible assets in acquisitions and to account for goodwill in a more cost-effective manner.

In ASU No. 2019-06, instead of testing goodwill for impairment annually at the reporting unit level, a not-for-profit organization that elects the accounting alternative will:
• Amortize goodwill over 10 years or less, on a straight-line basis;
• Test for impairment upon a triggering event; and
• Have the option to elect to test for impairment at the entity level.

A not-for-profit organization also has the option to subsume certain customer-related intangible assets and all noncompete agreements into goodwill, which it subsequently must amortize.

Effective Date
The standard is effective immediately.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Back to Top

FASB Invitation to Comment 2019-720 - Identifiable Intangible Assets and Subsequent Accounting for Goodwill

Summary - The FASB issued an Invitation to Comment (ITC) seeking stakeholder input on the accounting for certain identifiable intangible assets acquired in a business combination and subsequent accounting for goodwill. Stakeholders are asked to comment on the ITC by October 7, 2019.

Private companies and not-for-profit organizations currently have accounting alternatives on this topic. However, in preliminary outreach with public company stakeholders, the FASB staff received mixed feedback on whether the utility of the information currently being provided justifies the cost of providing it. Therefore, the staff is seeking further input from a broader base of stakeholders to inform the FASB’s future deliberations.

After receiving comments, the FASB will host a formal roundtable (at a to-be-determined date) to supplement stakeholders’ feedback.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Back to Top

FASB ASU No. 2019-06 - Intangibles - Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Assets to Not-for-Profit Entities

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2019-06, Intangibles—Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities (NFPs). This ASU is intended to reduce the cost of accounting for goodwill and measuring certain identifiable intangible assets for not-for-profit organizations.

History
In 2014, the Private Company Council (PCC) worked with the FASB to issue two private company alternatives on accounting for goodwill and accounting for identifiable intangible assets in a business combination. Stakeholders told the FASB that these two private company alternatives would also benefit not-for-profit organizations.

ASU No. 2019-06
This ASU extends the scope of the two private company alternatives to not-for-profits, enabling organizations to recognize fewer items as separate intangible assets in acquisitions and to account for goodwill in a more cost-effective manner.

In ASU No. 2019-06, instead of testing goodwill for impairment annually at the reporting unit level, a not-for-profit organization that elects the accounting alternative will:
  • Amortize goodwill over 10 years or less, on a straight-line basis;
  • Test for impairment upon a triggering event; and
  • Have the option to elect to test for impairment at the entity level.

A not-for-profit organization also has the option to subsume certain customer-related intangible assets and all noncompete agreements into goodwill, which it subsequently must amortize.

Effective Date
The standard is effective immediately.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Back to Top

FASB Discusses Extending Private Company Alternatives for Intangible Assets and Goodwill

Summary - As discussed in its “Summary of Board Decisions” publication, the FASB met on April 10, 2019, and discussed comment letter and other stakeholder feedback and redeliberated the proposed ASU, Intangibles—Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities.

The Board decided to permit a not-for-profit entity (NFP) to elect the accounting alternatives described in ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, and No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination. The FASB decided to extend the Topic 805 alternative without modifications and decided to permit an NFP conduit bond obligor to elect the same accounting alternatives.

Consistent with the current requirement for NFPs to present expenses by both nature and function, the FASB decided that an NFP is required to functionalize goodwill amortization. The FASB also decided the guidance on functionalizing goodwill amortization is sufficient.

The FASB considered comments raised by comment letter respondents concerning the presentation in health care organization financial statements, the amortization period, and the application of the alternatives in specific financial structures. The FASB decided the current guidance is sufficient for these areas.

The FASB also decided that an NFP should apply the transition guidance in the private company accounting alternatives, which requires prospective application for new goodwill recognized, prospective amortization of existing goodwill, and prospective application for newly acquired eligible identifiable intangible assets. The FASB decided NFPs should not subsume existing customer-related intangible assets and noncompete agreements into goodwill upon adoption of the accounting alternative.

The FASB decided not to specify an effective date; thus, NFPs electing to adopt these alternatives would not have to demonstrate preferability and would follow the transition guidance above the first time they elect to adopt the alternatives.

The FASB directed its staff to draft a final ASU for vote by written ballot.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Back to Top

FASB Accounting Standards Updates No. 2019-02 —Entertainment —Films —Other Assets —Film Costs (Subtopic 926-20) and Entertainment —Broadcasters —Intangibles —Goodwill and Other (Subtopic 920-350) —Improvements to Accounting for Costs of Films and License Agreements for Program Materials

Summary - The FASB has issued ASU 2019-02, Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials. ASU 2019-02 helps organizations align their accounting for production costs for films and episodic content produced for television and streaming services.

In recent years, the entertainment industry experienced a significant change in production and distribution models. For example, online streaming services have introduced subscription-based revenue models. However, current accounting guidance provides organizations in the entertainment industry with differing capitalization requirements for content production:
• For films, production costs are capitalized.
• For episodic content (e.g., a TV series that airs a new episode each week), production costs are capitalized subject to a constraint based on contracted revenues in the initial and secondary markets.

The standard addresses when an organization should assess films and license agreements for program material for impairment at the film-group level.

The amendments in the standard also:
• Revise presentation requirements;
• Require that an organization provide new disclosures about content that is either produced or licensed; and
• Address cash flow classification for license agreements.
For public companies, the standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other organizations, the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Back to Top

FASB Proposed Accounting Standards Update 2018-320 —Intangibles —Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities

Summary - The FASB has issued a proposed ASU that would reduce the cost and complexity of accounting for goodwill and measuring certain identifiable intangible assets for not-for-profit (NFP) organizations. Stakeholders are encouraged to review and provide input on the proposed ASU by February 18, 2019.

In this proposed ASU, instead of testing goodwill for impairment annually at the reporting unit level, a NFP organization that elects the accounting alternative would:

  • Amortize goodwill over 10 years or less, on a straight-line basis;
  • Test for impairment upon a triggering event;
  • Have the option to elect to test for impairment at the entity level; and
  • Have the option to subsume certain customer-related intangible assets and all non-compete agreements into goodwill.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Back to Top

Entertainment – Films – Other Assets – Film Costs (Subtopic 926-20) and Entertainment – Broadcasters – Intangibles – Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials – FASB Proposed ASU 2018-290

Summary - The FASB has issued a proposed Accounting Standards Update (ASU) that would align the accounting for production costs for films and episodic content produced for television and streaming services. Stakeholders are encouraged to review and provide input on the ASU, based on an Emerging Issues Task Force (EITF) consensus-for-exposure, by December 7, 2018.

Current accounting guidance provides different capitalization requirements for entertainment industry content production depending on the type of content being produced. For films, production costs are capitalized. For episodic content (e.g., a TV series that airs a new episode each week), production costs are capitalized subject to a constraint based on contracted revenues in the initial and secondary markets.

In recent years, however, the entertainment industry has experienced a significant change in production and distribution models. For example, online streaming services and new participants into the industry have introduced different business models, such as subscription-based revenue models. As a result, some stakeholders have questioned whether the constraint in the capitalization guidance for episodic content still provides relevant information to investors considering these changes.

The proposed ASU would address this issue by converging the capitalization guidance for films and episodic content. It would also address when a company or organization should assess films and license agreements for program material for impairment at the film-group level, while amending the presentation and disclosure requirements for content that is either produced or licensed.

For more information, click here.

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Back to Top

FASB Accounting Standards Updates No. 2018-15 —Intangibles —Goodwill and Other —Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which reduces complexity for the accounting for costs of implementing a cloud computing service arrangement. This standard aligns the accounting for implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software. The ASU aligns the following requirements for capitalizing implementation costs:

  • Those incurred in a hosting arrangement that is a service contract, and
  • Those incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

For calendar-year public companies, the changes will be effective for annual periods, including interim periods within those annual periods, in 2020. For all other calendar-year companies and organizations, the changes will be effective for annual periods in 2021, and interim periods in 2022.

For more information, click here.

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Back to Top

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract; Disclosures for Implementation Costs Incurred for Internal-Use Software and Cloud Computing Arrangements (a consensus of the FASB Emerging Issuses Task Force) - FASB Proposed ASU 2018-230 - Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)

Summary The FASB has issued a proposed ASU that would clarify the accounting for implementation costs related to a cloud computing arrangement that is a service contract. If adopted as proposed, the proposed ASU also would enhance disclosures around implementation costs for internal-use software and cloud computing arrangements. Stakeholders are encouraged to review and provide comment on the proposal by April 30, 2018.
 
In April 2015, the FASB issued ASU No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, to help companies evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license.
 
During the comment period and after the issuance of the standard, several stakeholders asked the FASB to provide additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. Because existing guidance is not explicit in that area, the FASB decided to issue this proposed ASU to address the resulting diversity in practice.
 
If adopted as proposed, the amendments in this proposed ASU would align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license), as well as require an organization to disclose certain qualitative and quantitative information about implementation costs associated with internal-use software and all hosting arrangements, not just hosting arrangements that are service contracts. The accounting for the service element of a hosting arrangement that is a service contract would not be affected by the proposed amendments.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Intangibles - Goodwill and Other (Topic 350); Business Combinations (Topic 805); Consolidation (Topic 810); Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance - FASB ASU 2016-03

Summary The amendments make the guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 effective immediately by removing their effective dates. The amendments also include transition provisions that provide that private companies are able to forgo a preferability assessment the first time they elect the accounting alternatives within the scope of this ASU. Any subsequent change to an accounting policy election requires justification that the change is preferable under Topic 250, Accounting Changes and Error Corrections.
 
The amendments in this ASU also extend the transition guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 indefinitely. While this ASU extends transition guidance for Updates 2014-07 and 2014-18, there is no intention to change how transition is applied for those two ASUs.

Effective - The amendments make the guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 effective immediately by removing their effective dates. The amendments also include transition provisions that provide that private companies are able to forgo a preferability assessment the first time they elect the accounting alternatives within the scope of this ASU. Any subsequent change to an accounting policy election requires justification that the change is preferable under Topic 250, Accounting Changes and Error Corrections.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Update No. 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

Click here to view the video below to hear Steven Vertucci, Audit Partner, explain Topic 350, as well as who is affected by this update and when it will go into effect.

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.

To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.

The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

The amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition.

A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

A public business entity that is not an SEC filer should adopt the amendments for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020.

All other entities, including not-for-profit entities, which adopt the amendments should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Back to Top

FASB Proposed Accounting Standards Update No. 2016-230 - Intangibles - Goodwill and Other (Topic 350) - Simplifying the Accounting for Goodwill Impairment

Summary -  The FASB has issued a proposed ASU,  Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.  Comments are due by July 11, 2016.
 
The proposed amendments would modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. The FASB proposes removing Step 2 from the current goodwill impairment test, which includes determining the implied fair value of goodwill and comparing it with the carrying amount of that goodwill. In computing the implied fair value of goodwill under Step 2, an entity must perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in a purchase price allocation for an acquired business.

Under the proposed amendments, an entity would perform its annual, or any interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity generally would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. However, that amount should not exceed the carrying amount of goodwill allocated to that reporting unit. An entity would still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

 
The FASB also proposes to remove the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment would apply to all reporting units. An entity would be required to disclose the existence of any reporting units with zero or negative carrying amounts and the amount of goodwill allocated to those reporting units.
For more information, click here.
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Back to Top

FASB Accounting Standards Update No. 2015-05, Intangibles -Goodwill and Other -Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement

Summary -  The FASB has issued ASU No. 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. Existing GAAP does not include explicit guidance about a customer's accounting for fees paid in a cloud computing arrangement. Examples of cloud computing arrangements include: (a) software as a service; (b) platform as a service; (c) infrastructure as a service; and (d) other similar hosting arrangements.
 
The amendments add guidance to Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software, which will help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement. The guidance already exists in the FASB Accounting Standards Codification™ in paragraphs 985-605-55-121 through 55-123, but it is included in a Subtopic applied by cloud service providers to determine whether an arrangement includes the sale or license of software.
 
The amendments provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments do not change the accounting for a customer's accounting for service contracts. As a result of the amendments, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets.
 
For public business entities, the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. For all other entities, the amendments will be effective for annual periods beginning after December 15, 2015, and interim periods in annual periods beginning after December 15, 2016. Early adoption is permitted for all entities.
 
An entity can elect to adopt the amendments either: (1) prospectively to all arrangements entered into or materially modified after the effective date; or (2) retrospectively. For prospective transition, the only disclosure requirements at transition are the nature of and reason for the change in accounting principle, the transition method, and a qualitative description of the financial statement line items affected by the change. For retrospective transition, the disclosure requirements at transition include the requirements for prospective transition and quantitative information about the effects of the accounting change.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Back to Top

FASB Accounting Standards Update No. 2016-03, Intangibles -Goodwill and Other (Topic 350); Business Combinations (Topic 805); Consolidation (Topic 810); Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance

Summary -  The FASB has issued ASU No. 2016-03, Intangibles - Goodwill and Other (Topic 350), Business Combinations (Topic 805), Consolidation (Topic 810), Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance (a consensus of the Private Company Council). The amendments in this ASU are effective immediately.

The amendments could affect all private companies within the scope of ASU 2014-02, Intangibles - Goodwill and Other (Topic 350): Accounting for Goodwill; ASU 2014-03 Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps - Simplified Hedge Accounting Approach; ASU 2014-07, Consolidation (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements; or ASU 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination.

The amendments make the guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 effective immediately by removing their effective dates. The amendments also include transition provisions that provide that private companies are able to forgo a preferability assessment the first time they elect the accounting alternatives within the scope of this ASU. Any subsequent change to an accounting policy election requires justification that the change is preferable under Topic 250, Accounting Changes and Error Corrections.

The amendments in this ASU also extend the transition guidance in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 indefinitely. While this ASU extends transition guidance for Updates 2014-07 and 2014-18, there is no intention to change how transition is applied for those two ASUs.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Back to Top