FASB Update December 2013

FASB Update December 2013

What is going on?

• Interesting last few years– 2010 29 ASUs issued– 2011-2013 30 ASUs issued

• Changes have gotten bottled up– Big three projects

• Getting closer to the jam being removed

2013 ASUs

• 01 – Offsetting Assets & Liabilities• 02 – Reclassifications out of Other

Comprehensive Income• 03 – Nonpublic disclosures for financial

instruments• 04 – Joint and several liability arrangements

(EITF)• 05 – Foreign currency issue (EITF)

2013 ASUs

• 06 – NFP services received issue (EITF)• 07 – Liquidation basis• 08 – Financial services – investment company

issues• 09 – Deferral of certain disclosure

requirements of ASU 2011-04• 10 – Derivative and Hedging issue (EITF)• 11 – Unrecognized tax benefit reporting (EITF)

Revenue Recognition

• Final Draft expected for Board consideration this month

• Expected to pass• Effective years beginning after 12/15/16• Five step process– Identify contracts with customers– Identify separate performance obligations– Determine transaction price– Allocate price to obligations– Recognize revenue as obligations satisfied

Costs of Implementation

• FASB staff identified specific anticipated cost increases associated with:– Construction & production type contracts– Time value adjustments to transaction prices– Bundled telecommunication contracts– The revenue constraint– Licenses of intellectual property– Transition requirements

Areas Requiring Judgment

• Who is a customer• Collectibility issues• Separating performance obligations• Significant revenue reversal• Time value of money• Recognition over time vs. point in time

Leases

• Who knows?• Type A vs. Type B dilemma• Seemingly no support• Is doing nothing an option

Financial Instruments

• Three stage project– Classification & Measurement– Impairment– Hedging

• Classification & Measurement ASU and Impairment ASU expected in first half of 2014

Classification & Measurement

• Classification of financial asset will be based on its cash flow characteristics and the entity’s business model for managing the asset

• Three possible classifications– Amortized cost– Fair value – net income– Fair value – other comprehensive income

• Changes to fair value option

Impairment

• Proposes a current expected credit loss model that would apply to all impairments of financial instruments

• Model would reflect management’s current estimate of the contractual cash flows the entity does not expect to collect

Discontinued Operations

• Big change is to the definition of “component of the entity”

• Expanded disclosures for discontinued operations

• Balance sheet effects• Expected to be completed in early 2014 and

implemented for public companies in 2015 and non-public companies in 2016

Going Concern Disclosures

• Provides guidance on when and how entities should disclose going concern uncertainties in financial statements

• Must assess ability to meet obligations due within 24 months to determine if disclosures are necessary

• Plan calls for review of comments in first quarter and proceed from there

PCC Proposals

• Accounting for identifiable intangible assets acquired in a business combination

• Accounting for goodwill• Accounting for receive-variable, pay-fixed

interest rate swaps

Other Projects

• Definition of NonPublic entity• Disclosure Framework• Development Stage Enterprises• NFP Financial Statements