Other FASB

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on March 10, 2021 and continued its deliberations of a principle-based disclosure requirement to report the significant segment expenses that are both: (1) regularly provided to the chief operating decision maker (CODM); and (2) included in the reported measure of segment profit or loss. Among other things, the FASB decided:

That each significant expense category disclosed under the principle should be reconciled to its corresponding consolidated amount.
To retain the current expense disclosures in Topic 280 and that a public entity would be additionally required to comply with the principle.
A public entity would be required to disclose the following information by reportable segment irrespective of whether the CODM is regularly provided with this information: (a) an amount for other items that is the difference between segment revenue less the significant expenses disclosed under the principle and the segment profit or loss measure; and (b) a description of the composition of other items.

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FASB Accounting Standards Updates - Accounting Standards Update No. 2021-01 —Reference Rate Reform (Topic 848): Scope

Summary - The FASB has published ASU 2021-01, Reference Rate Reform. ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that re affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition

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Joint Ventures – FASB Discusses Accounting by a Joint Venture for Nonmonetary Assets Contributed by Investors

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on February 17, 2021 and continued its initial deliberations on the project. The FASB discussed disclosures, transition, and sweep issues. The FASB decided to:

Require that a joint venture formed after the effective date of the new guidance apply the measurement and recognition guidance upon formation prospectively. An existing joint venture entity would have an option to apply the new guidance retrospectively.
Require that a joint venture upon formation measure its net assets (including goodwill) using the fair value of the joint venture as a whole. Therefore, a joint venture would measure its total net assets upon formation as the fair value of 100 percent of the joint venture’s equity immediately after formation.

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Segment Reporting – FASB Discusses Segment Reporting

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on January 20, 2021. The FASB continued its deliberations of a principle-based disclosure requirement to report the significant segment expenses that are both: (1) regularly provided to the chief operating decision maker (CODM); and (2) included in the reported measure of segment profit or loss. The FASB reached a number of decisions, including:

Applying the principle would involve the following steps: (1) An entity should identify segment expenses from the information that is regularly provided to the CODM; (2) The entity would then apply the significance threshold to determine which of those expenses should be disclosed.
The FASB discussed stakeholder feedback that the effect of the significance threshold within the principle may be perceived in different ways. The FASB decided to retain the significance threshold and make no further changes.
The FASB decided to include clarifying guidance that if a CODM is regularly provided with multiple sets of segment expenses that are measured under different accounting bases, the expenses to be reported under the principle should be those that are included in the reported measure of segment profit or loss.
The FASB considered stakeholder feedback that segment expenses are regularly provided to a CODM under various fact patterns, including when an amount for total segment expenses is provided or when segment expenses on a variance basis are provided.

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Goodwill – FASB Discusses Interim Goodwill Evaluation

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on November 18, 2020, and discussed an issue related to the cost and complexity of private companies performing an interim goodwill triggering event evaluation. The FASB decided to:

Add a project to its technical agenda to address the cost and complexity associated with interim goodwill impairment testing for private companies and not-for-profit entities.
Introduce an accounting alternative that would allow entities within the scope of the guidance to perform a goodwill triggering event evaluation on the annual reporting date only.
Limit the scope of the alternative to entities that meet the definition of private companies and not-for-profit entities as those terms are defined in the Codification’s Master Glossary.
Limit the scope of the alternative to entities that report GAAP-compliant financial statements on an annual basis only.
Limit the scope of the alternative to goodwill that is tested for impairment in accordance with Subtopic 350-20, Intangibles—Goodwill and Other—Goodwill.
Not limit the guidance to a specified time period but instead make it available on an ongoing basis.
Require no additional disclosures beyond the current requirements in Topic 235, Notes to Financial Statements, and Subtopic 350-20.

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Reference Rate Reform – FASB Discusses Scope of Topic 848

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on December 9, 2020 and discussed comment letter feedback received on its proposed ASU, Reference Rate Reform (Topic 848): Scope Refinement.

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FASB Agenda – FASB Discusses FASB Agenda

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on October 21, 2020, and discussed the results of staff research and outreach on five potential projects related to recent agenda requests.

The FASB decided to add the following projects to its technical agenda:

Disclosure of supplier finance programs involving trade payables
Consolidation of a not-for-profit entity by a for-profit sponsor.

The FASB decided not to add the following potential projects to its agenda:

Digital currencies
Change to diluted earnings per share reporting
Determining a lessee’s discount rate: when use of the rate implicit in a lease is required.

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Exposure Draft - Proposed Accounting Standards Update 2020-900 —Reference Rate Reform (Topic 848): Scope Refinement

Summary - The FASB issued for public comment a proposed Accounting Standards Update (ASU) that would clarify the scope of the FASB’s recent reference rate reform guidance. Stakeholders are asked to review and provide input on the proposed ASU by November 13, 2020.

Trillions of dollars in loans, derivatives, and other financial contracts reference the London Interbank Offered Rate (LIBOR), the benchmark interest rate banks use to make short-term loans to each other. With global capital markets expected to move away from LIBOR, the FASB took on a project to help ease the potential accounting burden.

As a result of that project, in March 2020 the FASB issued ASU No. 2020-04—Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. Topic 848 provides temporary, optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

Since then, stakeholders have raised questions about whether Topic 848 can be applied to derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Stakeholders indicated that the modification, commonly referred to as the “discounting transition,” may have accounting implications. These stakeholders raised concerns about the need to reassess previous accounting determinations related to those contracts and about the hedge accounting consequences of the discounting transition.

The amendments in this proposed ASU would clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to contracts that are affected by the discounting transition. Amendments in this proposed ASU to the expedients and exceptions in Topic 848 are included to capture the incremental consequences of the proposed scope refinement and to tailor the existing guidance to derivative instruments affected by the discounting transition.

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Exposure Draft - Proposed Accounting Standards Update 2020-800 —Earnings Per Share (Topic 260), Debt —Modifications and Extinguishments (Subtopic 470-50), Compensation —Stock Compensation (Topic 718), and Derivatives and Hedging —Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Forwards and Options (a consensus of the Emerging Issues Task Force)

Summary - The FASB issued a proposed Accounting Standards Update (ASU) that would clarify an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified forwards and options (e.g., warrants) that remain equity classified after modification. Stakeholders are asked to review and provide input on the proposed ASU by December 28, 2020.

The proposed ASU is based on a consensus of the FASB’s Emerging Issues Task Force (EITF). The proposed ASU would provide guidance on how an issuer would measure and recognize the effect of these transactions. Specifically, it would provide a principles-based framework to determine whether an issuer would recognize the modification or exchange as an adjustment to equity or an expense.

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FASB Accounting Standards Updates - No. 2020-07 —Not-for-Profit Entities (Topic 958) —Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets

Summary - The FASB issued Accounting Standards Update (ASU) No. 2020-07 Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, intended to improve transparency in the reporting of contributed nonfinancial assets, also known as gifts-in-kind, for not-for-profit organizations.

Examples of contributed nonfinancial assets include fixed assets such as land, buildings, and equipment; the use of fixed assets or utilities; materials and supplies, such as food, clothing, or pharmaceuticals; intangible assets; and recognized contributed services.

The ASU requires a not-for-profit organization to present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets. It also requires a not-for-profit to disclose:

Contributed nonfinancial assets recognized within the statement of activities disaggregated by category that depicts the type of contributed nonfinancial assets; and
For each category of contributed nonfinancial assets recognized (as identified in (a)):
- Qualitative information about whether the contributed nonfinancial assets were either monetized or utilized during the reporting period. If utilized, a description of the programs or other activities in which those assets were used.
- The not-for-profit’s policy (if any) about monetizing rather than utilizing contributed nonfinancial assets.
- A description of any donor-imposed restrictions associated with the contributed nonfinancial assets.
- The valuation techniques and inputs used to arrive at a fair value measure, in accordance with the requirements in Topic 820, Fair Value Measurement, at initial recognition.
- The principal market (or most advantageous market) used to arrive at a fair value measure if it is a market in which the recipient NFP is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets.

The amendments in this ASU should be applied on a retrospective basis and are effective for annual reporting periods beginning after June 15, 2021, and interim periods with annual reporting periods beginning after June 15, 2022. Early adoption is permitted.

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Software Development – New Edition of Interpretation on Software Development Costs and Cloud Computing Arrangements Published

We have published a new edition of our Interpretation, Accounting for Software Development Costs and Cloud Computing Arrangements. This new edition includes the following revisions and updates:

Made verbiage changes to reflect conforming changes to other GAAP guidance following the issuance of ASU 2018-15; and
Clarified the accounting for content development costs in a cloud computing arrangement.

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FASB Agenda – FASB Discusses Agenda Prioritization

As reported in its “Summary of Board Decisions” publication, the FASB met on July 29, 2020, and discussed the results of staff research and outreach on eight potential projects related to recent agenda requests and other implementation requests.
The FASB decided to add a targeted improvements project for Topic 842, Leases, to its technical agenda to address the following issues:

Sales-type leases with substantial variable lease payments
Remeasurement of lease payments based on a reference index or rate
Reduction of scope in a lease contract.

The FASB decided not to consider the issue on transition disclosures under Topic 842 as part of that project. The FASB decided to add a project to its technical agenda to address the effect of underwriter restrictions on fair value measurements and to add a project to its research agenda to evaluate the effects of other types of sale restrictions on fair value measurements.

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FASB Accounting Standards Updates - No. 2020-04 —Reference Rate Reform (Topic 848) —Facilitation of the Effects of Reference Rate Reform on Financial Reporting

Summary - The FASB issued an Accounting Standards Update (ASU) that provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. This guidance is ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

LIBOR and other interbank offered rates are widely used benchmark or reference rates in the United States and globally. Trillions of dollars in loans, derivatives, and other financial contracts reference LIBOR, the benchmark interest rate banks use to make short-term loans to each other.

With global capital markets expected to move away from LIBOR and other interbank offered rates toward rates that are more observable or transaction based and less susceptible to manipulation, the FASB launched a broad project in late 2018 to address potential accounting challenges expected to arise from the transition.

The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

The ASU is intended to help stakeholders during the global market-wide reference rate transition period. Therefore, it will be in effect for a limited time through December 31, 2022.

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Debt vs. Equity – FASB Discusses Debt vs. Equity

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on February 5, 2020, and continued redeliberating the amendments in proposed ASU, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The FASB reached a number of decisions, including:

Clarify the scope of the guidance in Subtopic 470-20 for convertible debt instruments and in Subtopic 505-10, Equity—Overall, for convertible preferred stock.
Clarify the difference between a convertible debt and a debt instrument that could be converted to a variable number of shares with an aggregate fair value equal to a fixed monetary amount (such as share-settled debt).
Require that an entity apply the if-converted method of calculating diluted EPS to all convertible instruments and that interest expense not be added back to the numerator for convertible debt instruments if the principal is required to be settled in cash.
Exclude certain share-based payment arrangements (instruments that are liability-classified in accordance with guidance in paragraph 718-10-25-15) from the scope of the EPS amendments on instruments that may be settled in cash or shares.
Clarify that the reassessment guidance in paragraph 815-40-35-8 applies to both freestanding instruments and embedded features (similar to the scope as written in paragraph 815-40-15-5).
Add a cross-reference in Section 815-40-35 to the guidance in Subtopic 815-15, Derivatives and Hedging—Embedded Derivatives, on the accounting for embedded features upon a change in assessment of the derivatives scope exception.

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FASB Agenda – FASB Discusses Agenda Prioritization

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on September 18, 2019, and discussed the results of FASB staﬀ research on four potential projects related to six recent agenda requests.

The FASB added a project to the EITF agenda to address the issuers’ accounting for modiﬁcations of equity classiﬁed warrants, that is, equity classiﬁed freestanding call options that are outside the scope of Topic 718, Compensation—Stock Compensation, or Topic 815, Derivatives and Hedging. The FASB limited the scope of the project to equity classiﬁed freestanding call options that remain equity classiﬁed after the modiﬁcations.

The FASB also added a project to its technical agenda on the accounting by a joint venture for contributions of nonmonetary assets by the ventures.

The FASB decided not to add the following potential projects to its agenda:

Acquired ﬁnancial assets in a business combination that do not meet the deﬁnition of purchased ﬁnancial assets with credit deterioration; and
Recognition and measurement of interest income.

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FASB Proposed Accounting Standards Update 2019-760 —Financial Services —Insurance (Topic 944): Effective Date

Summary - The FASB issued a proposed Accounting Standards Update (ASU) that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply a standard that addresses this area of financial reporting. Stakeholders are encouraged to review and provide comment on the proposed ASU by September 20, 2019.

On August 15, 2018, the FASB issued ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The ASU made targeted amendments to improve, simplify, and enhance the financial reporting requirements for long-duration contracts issued by insurance companies.

Since that time, the FASB received an agenda request to delay its effective date by one year. In response, FASB members and staff conducted outreach with numerous insurance companies that issue and/or reinsure long-duration contracts to better understand their implementation challenges and progress.

Furthermore, last week, the FASB issued a proposed ASU that describes a new FASB philosophy for determining how effective dates for major standards are staggered between larger public companies and all other entities. Under this philosophy, a major standard would first be effective for larger public companies; effective dates for all other public and private companies and organizations would be staggered at least two years later. Generally, it is expected that early application would continue to be permitted for all entities.

The proposed ASU would amend the effective dates for the long-duration insurance standard.

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FASB Proposed Accounting Standards Update 2019-770 —Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

Summary - The FASB has issued for public comment a proposed ASU that would provide temporary optional guidance to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. Comments on the proposed ASU are due by October 7, 2019.

Trillions of dollars in loans, derivatives, and other financial contracts reference LIBOR, the benchmark interest rate banks use to make short-term loans to each other. With global capital markets expected to move away from LIBOR and other interbank offered rates toward rates that are more observable or transaction based and less susceptible to manipulation, the FASB launched a broad project in late 2018 to address potential accounting challenges expected to arise from the transition.

If adopted as proposed, the ASU would provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships affected by reference rate reform. The guidance would apply only to contracts or hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

The guidance is intended to help stakeholders during the global market-wide reference rate transition period and would therefore be in effect for a limited time. Accordingly, the guidance would be effective upon issuance of final guidance and would not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022.

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Segment Reporting – FASB Discusses Segment Reporting and Other Matters

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on July 23, 2019. The FASB held educational sessions on the following topics:
• Segment reporting;
• Primary financial statements/financial performance reporting;
• Financial instruments with characteristics of equity/distinguishing liabilities from equity;
• IBOR reform/reference rate reform;
• Goodwill and impairment/identifiable intangible assets and subsequent accounting for goodwill;
• Disclosure initiative/disclosure framework;
• Implementation of the revenue (Topic 606, IFRS 15) and leases (Topic 842, IFRS 16) standards; and
• The FASB’s project on effective date consideration for private companies, not-for-profit organizations, and small public companies.

No decisions were made.

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FASB Discusses Improvements to Segment Reporting

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on May 29, 2019, and discussed improvements to segment reporting. As part of developing the topics for a study on segment disclosures, the FASB discussed options to both require that segment information be reported in a financial statement format and require additional general disclosures in Topic 280, Segment Reporting.

The FASB discussed the merits of the financial statement format alternative. Because the complexities related to that alternative would likely overwhelm the other issues included in the study, the FASB decided to exclude that alternative from the study. However, the FASB directed the staff to undertake research into how the segment reconciliation requirements could be improved.

The FASB also directed the staff to study the effect of including additional general segment disclosure requirements.

The FASB gave permission for the staff to proceed with the study.

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FASB Discusses Financial Performance Reporting

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on April 24, 2019, and discussed an internal view approach to disaggregating income statement expense information. The FASB staff identified and explained the main issues and alternatives for FASB consideration on that approach and the draft preparer outreach materials. The goal of the internal view approach is to disaggregate income statement expense information based on how management internally views consolidated expenses.

The FASB directed its staff to proceed with outreach, affirmed the staff’s outreach strategy, and recommended several types of entities for outreach efforts. Additionally, the FASB highlighted areas for the staff to focus on during outreach with preparers and users.

The FASB directed its staff to conduct outreach with preparers on the operability of the internal view approach as well as other follow-on issues and to conduct outreach with users in order to understand the usefulness of potential outcomes from the internal view approach.

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FASB Discusses Agenda Prioritization

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on May 8, 2019 and discussed the results of staff research on six potential projects related to eight recent agenda requests and a technical inquiry.The Board decided to add the following projects to the EITF agenda:

Financial Instruments—Clarifying the Interactions between Topic 321, Investments—Equity Securities, and Topic 323, Investments—Equity Method and Joint Ventures.
Revenue Recognition—Contract Modifications of Licenses of Intellectual Property.

The FASB also decided to expand the scope of its project, Improving the Accounting for Asset Acquisitions and Business Combinations, to include the accounting for in-process research and development and contingent consideration obligations recognized upon the initial consolidation of a variable interest entity that is not a business.The FASB decided not to add the following potential projects to its agenda:

Collective Defined Contribution Plans and the Definition of a Defined Contribution Plan
Share Repurchase Disclosures—Price and Earnings Per Share Effects; or
Accounting for Emissions Trading and Other Environmental Market Transactions.

The FASB also decided to remove the project, Measurement Alternative and Observable Transactions Identified after the Reporting Date, from its research agenda.

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Not-for-Profit Entities (Topic 958) - Updating the Definition of Collections - FASB ASU 2019-03

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections.

These amendments modify the definition of the term collections and require that a collection-holding entity disclose its policy for the use of proceeds from when collection items are deaccessioned (i.e., removed from a collection). If a collection-holding entity has a policy that allows proceeds from deaccessioned collection items to be used for direct care, it should disclose its definition of direct care.

The amendments apply to all entities, including business entities, that maintain collections. However, accounting for collections is primarily an issue for certain not-for-profit (NFP) entities because collections often are held by museums; botanical gardens; libraries; aquariums; arboretums; historic sites; planetariums; zoos; art galleries; nature, science, and technology centers; and similar educational, research, and public service organizations that have those divisions.

The amendments are effective for annual financial statements issued for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early application of the amendments is permitted. The amendments should be applied on a prospective basis.

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Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting

Summary - Among other things, the amendments require a plan’s interest in that master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively.

The amendments also remove the requirement to disclose the percentage interest in the master trust for plans with divided interests and require that all plans disclose the dollar amount of their interest in each of those general types of investments.

The amendments require all plans to disclose: (a) their master trust’s other asset and liability balances; and (b) the dollar amount of the plan’s interest in each of those balances.

Lastly, the amendments eliminate redundant investment disclosures (e.g., those required by Topics 815 and 820) relating to 401(h) account assets.

Effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The amendments should be applied retrospectively to each period for which financial statements are presented.

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Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made

Summary - These amendments clarify and improve the scope and accounting guidance around contributions of cash and other assets received and made by not-for-profit organizations (NFPs) and business enterprises.

The ASU clarifies and improves current guidance about whether a transfer of assets, or the reduction, settlement, or cancellation of liabilities, is a contribution or an exchange transaction. It provides criteria for determining whether the resource provider is receiving commensurate value in return for the resources transferred which, depending on the outcome, determines whether the organization follows contribution guidance or exchange transaction guidance in the revenue recognition and other applicable standards.

It also provides a more robust framework for determining whether a contribution is conditional or unconditional, and for distinguishing a donor-imposed condition from a donor-imposed restriction. This is important because such classification affects the timing of contribution revenue and expense recognition.

The new ASU does not apply to transfers of assets from governments to businesses.

For a public business entity or a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market for transactions in which the entity serves as a resource recipient to annual periods beginning after June 15, 2018, including interim periods within those annual periods. For all other entities, the requirements are effective for transactions in which the entity serves as a resource recipient to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

An entity that is either a public business entity or a not-for-profit entity (NFP) that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market should apply ASU No. 2018-08 for transactions in which the entity serves as a resource provider to annual periods beginning after December 15, 2018, including interim periods within those annual periods. All other entities should apply ASU No. 2018-08 for transactions in which the entity serves as the resource provider to annual periods beginning after December 15, 2019, and interim periods within those annual periods beginning after December 15, 2020. Early adoption is permitted.

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Collaborative Arrangements (Topic 808) – Clarifying the Interaction between Topic 808 and Topic 606 – FASB ASU No. 2018-18

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, that clarifies the interaction between the guidance for certain collaborative arrangements and the Revenue Recognition financial accounting and reporting standard.

A collaborative arrangement is a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success. The ASU provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. It accomplishes this by allowing organizations to only present units of account in collaborative arrangements that are within the scope of the revenue recognition standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition standard.

For public companies, the amendments in ASU No. 2018-18 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other organizations, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted.

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Employee Benefit Plan Master Trust Reporting - ASU 2017-06

Summary - Effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The amendments should be applied retrospectively to each period for which financial statements are presented.

Among other things, the amendments require a plan's interest in that master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively.

The amendments require all plans to disclose: (a) their master trust's other asset and liability balances; and (b) the dollar amount of the plan's interest in each of those balances.

Lastly, the amendments eliminate redundant investment disclosures (e.g., those required by Topics 815 and 820) relating to 401(h) account assets.

Earliest Effective Annual period (years beginning or ending after) December 15, 2018.

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Collaborative Arrangements (Topic 808): Targeted Improvements - FASB Proposed ASU 2018-240

Summary - The FASB has released a proposed Accounting Standard Update (ASU), Collaborative Arrangement (Topic 808): Targeted Improvements.

The amendments in this proposed ASU would affect all entities that have collaborative arrangements. If adopted as proposed, this proposal would make targeted improvements to generally accepted accounting principles (GAAP) for collaborative arrangements as follows:

Add unit-of-account guidance in Topic 808 to align with the guidance in Topic 606, Revenue from Contracts with Customers, (i.e., a distinct good or service) limited to when an entity is assessing the scope of Topic 606;
Clarify that certain transactions between collaborative participants should be accounted for as revenue under Topic 606 when the collaborative participant is a customer in the context of the unit of account. In these situations, all of the guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements; and
Clarify that in a transaction that is not directly related to sales to third parties, presenting the transaction as revenue would be precluded if the collaborative participant counterparty is not a customer.

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FASB Discusses Agenda Prioritization

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on March 28, 2018, and discussed the results of its staff's research on the following five potential projects:

Determining a Highly Inflationary Economy;
Interest Rate Lock Commitments;
Misalignment of Collections Definition;
Cost Capitalization for Episodic Television Series; and
Recognition under Topic 805 for an Assumed Liability in a Revenue Contract.

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Collaborative Arrangements - FASB Discusses Targeted Improvements and Other Matters

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on February 7, 2018, and discussed the project scope for potential improvements to Topic 808, Collaborative Arrangements, based on the feedback received during workshops held with stakeholders in December 2017. The FASB decided to retain the current scope of the project. The current scope includes certain transactions between participants of a collaborative arrangement; it excludes transactions directly related to sales to third parties. The current scope clarifies when certain transactions are within the scope of the revenue guidance; it does not include the development of a model for the financial reporting for non-revenue transactions.

On the remaining issues for deliberations, the FASB decided the following:

Entities would be required to apply the amendments resulting from the proposed ASU using a retrospective approach. The amendments would be required to be applied retrospectively as of an entity’s adoption date of Topic 606, Revenue from Contracts with Customers, subject to modification using the practical expedients in paragraph 606-10-65-1(h).
Additional recurring disclosures should not be required as a result of the targeted improvements, given the existing disclosures in Topics 606 and 808.

The FASB concluded that it received sufficient information and analysis to make an informed decision on the expected costs of the targeted improvements. Subject to what it learns from comment letters, the FASB believes that the expected benefits of the targeted improvements justify the expected costs. The FASB authorized its staff to draft a proposed Update for vote by written ballot that will be issued for public comment for a 45-day comment period.

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FASB Discusses Future Agenda Items

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on September 20, 2017, and discussed: (1) the results of staff research and analysis on the projects included in the FASB Invitation to Comment, Agenda Consultation, and (2) the status of its research agenda. The FASB reached a number of decisions, including the following:

Intangibles. The FASB decided to remove the holistic project on Intangibles from its research agenda and maintain a component on its research agenda focused on developing qualitative disclosures about intangibles as part of the overall disclosure framework project. The FASB also decided to combine the following two projects on its research agenda: (a) Accounting for Identifiable Intangible Assets in a Business Combination for Public Business Entities (PBEs) and Not-for-Profit Entities (NFPs) and (b) Subsequent Accounting for Goodwill for PBEs and NFPs.

Pensions and Other Postretirement Benefit Plans. The FASB decided to remove from its research agenda a project on pensions and other postretirement benefit plans.

Distinguishing Liabilities from Equity (Including Convertible Debt). The FASB decided to add to its agenda a project on distinguishing liabilities from equity. The objective of the project is to improve understandability and reduce complexity (without loss of information for users). The project will focus on indexation and settlement (in the context of the derivative scope exception), convertible debt, disclosures, and earnings-per-share.

Financial Performance Reporting. The FASB decided to add a project to its agenda to focus on the disaggregation of performance information. The project would consider disaggregation either through presentation in the income statement or through disclosure in the notes. The project would base the disaggregation on requiring functional lines to be disaggregated into natural components. The FASB also retained a component of the project on its research agenda associated with improving the structure of the performance statement and developing an operating performance measure.

Segment Reporting. The FASB decided to add a project to its agenda on segment reporting. The objective of the project is to improve the segment aggregation criteria and to improve the disclosure requirements.

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FASB Discusses Conceptual Framework Project

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on October 11, 2017, and discussed working definitions of revenues and expenses, which are currently defined in FASB Concepts Statement No. 6, Elements of Financial Statements, and the relationship of those definitions with the definitions of gains and losses. The FASB provided the following tentative leanings and reactions to the working definitions:

Retain the phrase or other activities in the working definitions of revenues and expenses to ensure the terms are sufficiently inclusive.
Excluding the phrase carrying out from the working definitions was an improvement.
Not remove the phrase that constitute the entity's ongoing major or central operations in the working definitions at this time.

The FASB directed its staff to develop working definitions of gains and losses in order to further analyze whether the phrase that constitute the entity's major or central operations can be excluded from the working definitions of revenues and expenses.

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Conceptual Framework - FASB Discusses the Conceptual Framework Elements

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on August 30, 2017, and discussed working definitions of an asset and a liability. The FASB decided to eliminate the terms probable, future economic benefits, sacrifices of economic benefits, and past transactions or events from the FASB's revised definitions. The FASB directed its staff to further analyze whether the term control is necessary in the definition of an asset.

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Not-for-Profit Entities (Topic 958) - Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made - FASB Proposed ASU 2017-270

Summary - The FASB has issued a proposed Accounting Standard Update (ASU) to clarify and improve the scope and the accounting guidance for contributions received and made, primarily by not-for-profits. Stakeholders are asked to review and provide comment on the proposed ASU by November 1, 2017.

The proposed ASU helps organizations decide if transactions should be accounted for as a contribution or an exchange. Organizations would accomplish this by using clarifying guidance to evaluate whether a resource provider is receiving value in return for the resources transferred.

The proposed ASU also helps organizations evaluate such arrangements by using an improved framework to determine whether a contribution is conditional or unconditional, and better distinguish a donor-imposed condition from a donor-imposed restriction

Accounting for contributions is an issue primarily for not-for-profit organizations because contributions are a significant source of revenue. However, the amendments in this proposed ASU would apply to all organizations that receive or make contributions of cash and other assets, including business enterprises.

The proposed amendments would not apply to transfers of assets from the government to businesses. The guidance would apply to both a recipient of contributions received and a resource provider of contributions made.

The proposed standard follows the same effective dates as ASC Topic 606, Revenue from Contracts with Customers:

A public company or a not-for-profit organization that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market would apply the new standard to annual reporting periods beginning after December 15, 2017, including interim periods within that annual period.
Other organizations would apply the standard to annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

Early adoption would be permitted irrespective of the early adoption of the amendments in ASC Topic 606.

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FASB Invitation to Comment 2016-290 - Agenda Consultation

Summary - The FASB has issued for public comment an Invitation to Comment-Agenda Consultation. The purpose of this document is to solicit feedback about the financial reporting issues that the FASB considers adding to its agenda. The FASB requests feedback about the following:

Are the financial reporting issues described in this ITC areas for which there is potential for significant improvement?
What is the priority of addressing each issue?
What approach should the FASB take to address each issue?
Are there other major areas of financial reporting not described in this ITC that the FASB should consider adding to its agenda?

Comments are due by October 17, 2016.

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