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December

Year in review — 2014

Dec 30, 2014

US GAAP Plus turned one in September and 2014 marked our first full calendar year in existence. We've devoted significant resources to bring you comprehensive coverage of all things U.S. GAAP, IFRS, and broader financial reporting and other relevant topics.

We've steadily improved the site during the year to make it more mobile friendly and easier to navigate, and to provide more comprehensive content, including our industry and topical collections. Our overall visitor numbers grew exponentially and our @DeloitteAcctg Twitter handle provides followers with a wealth of financial reporting information included on US GAAP Plus as well as other Web sites.

Overall, our most popular pages remain our accounting standards summaries, and we continued to witness strong demand for our news, publications, resource pages, and project summaries.

Our 10 most popular stories of 2014
  1. IASB and FASB issue new, converged revenue standards (May).
  2. IASB publishes final version of IFRS 9 (July).
  3. FASB issues guidance on hybrid financial instruments (November).
  4. FASB meets to discuss financial statement presentation (June).
  5. AICPA issues SAS 128 (February).
  6. FASB issues guidance on goodwill and interest rate swaps for private companies (January).
  7. FASB redefines discontinued operations (April).
  8. FASB issues guidance on the reclassification of collateralized mortgage loans (January).
  9. SASB issues provisional transportation standards (September).
  10. FASB issues guidance on going concern (August).

We wish you a happy and safe New Year. We look forward to bringing you the latest financial reporting news in 2015.

FASB issues ASU simplifying private-company accounting for intangible assets in a business combination

Dec 23, 2014

The FASB has issued Accounting Standards Update (ASU) No. 2014-18, “Accounting for Identifiable Intangible Assets in a Business Combination,” in response to the PCC’s final consensus on Issue 13-01A. The ASU contains an accounting alternative for private companies that acquire identifiable intangible assets in a business combination.

Under the accounting alternative, many customer-related intangible assets and all noncompete agreements would not be recognized separately and would be subsumed into goodwill. An entity that elects this alternative is also required to adopt the alternative accounting in FASB Accounting Standards Update No. 2014-02, Accounting for Goodwill. (However, an entity that elects to adopt the goodwill alternative does not need to adopt the guidance in ASU 2014-18.) ASU 2014-18 does not require an entity to provide any incremental disclosures beyond those required by ASC 805.

Once elected, the accounting alternative would be applied to all future business combinations entered into in the first annual period beginning after December 15, 2015. Early adoption would be permitted.

For more information, see the press release, ASU, and FASB in Focus newsletter on the FASB’s Web site.

Highlights from the FASB’s December 16-17 meeting

Dec 19, 2014

At its December 16–17, 2014, meeting, the FASB discussed its projects on (1) the conceptual framework, (2) employee share-based payments, (3) the measurement of inventory, (4) the definition of a business, and (5) government assistance disclosures. In addition, the FASB jointly discussed leases with the IASB.

 

Conceptual framework

The FASB discussed how to separate liabilities into concepts for establishing standards for determining changes in carrying amounts. In particular, the Board identified three liability concepts: (1) fixed amounts and timings, (2) liabilities with variable amounts or variable amounts and timings, and (3) liabilities with fixed amounts and variable timings.

In addition, the Board tentatively decided to focus on line items in developing standards for presentation in financial statements. Further, the Board tentatively decided that “the activity from which (or within which) the recognized item resulted is the primary factor for identifying useful subtotals in an income statement and that the timing of realization or settlement is the primary factor in identifying useful subtotals on the balance sheet.”

For more in­for­ma­tion, see the meeting minutes on the FASB’s Web site.

 

Improving employee share-based payment accounting

The FASB tentatively decided:

  • To allow private companies to use the simplified method to estimate the expected term for awards when it is probable that the awards’ service conditions or performance conditions will be met. If it is not probable that an award’s performance conditions will be met, private entities applying the practicable expedient would use the award’s contractual term as the estimate for the expected term.
  • To align the classification guidance on put and call rights that are contingent on an event that is within an employee’s control.
  • To allow private companies make a one-time election to switch from fair value to intrinsic value measurement for share-based payment awards classified as liabilities.
  • To apply the existing and proposed practical expedients in ASC 718 for entities that meet the current definition in ASC 718 of a “public entity” rather than the definition of a “public business entity” in the FASB Accounting Standards Codification Master Glossary.

For more in­for­ma­tion, see the related Deloitte Accounting Journal entry as well as the meeting minutes on the FASB’s Web site.

 

Simplifying the subsequent measurement of inventory

The FASB discussed comments it received on its proposed Accounting Standards Update, Inventory, and ten­ta­tively decided to retain the project’s current scope (i.e., focus on the measurement of inventory impairment). It instructed its staff to perform additional research and analysis on how the concepts in the proposal can be applied by entities that use the LIFO and RIM inventory methods.

For more in­for­ma­tion, see the related Deloitte Accounting Journal entry as well as the meeting minutes on the FASB’s Web site.

 

Definition of a business

As part of considering potential amendments to the definition of a business, the FASB decided to continue to explore what processes must be included in a transaction. The Board tentatively decided:

  • “That a business must include inputs and one or more substantive processes that together contribute to the creation of outputs.”
  • To retain the notion of “capable” in the definition of a business and instructed the staff explore revising the definition of “outputs.”
  • To retain the market-participant concept in the definition of a business but to ask the staff to provide clarifying guidance on how to analyze an acquisition from a market-participant perspective.

In addition, the FASB asked the staff to explore the possibility of adding a de minimis or similar threshold to the definition of a business as well as the factors an entity would consider in making its assessment.  

For more in­for­ma­tion, see the related Deloitte Accounting Journal entry as well as the meeting minutes on the FASB’s Web site.

 

Government assistance disclosures

The FASB ten­ta­tively decided to require disclosure of arrangements “that are the result of a contract in which the entity receives value or benefit from the government.” However, the requirements would not apply to either of the following:

  • “Assistance received from a government as the result of law entitling an entity to receive value or benefits simply by meeting eligibility requirements.”
  • “Transactions between an entity and a government in which the government is a customer. If a contract has multiple components, only components of the contract in which the government is a customer would be exempt from disclosure requirements.”

Also, the Board tentatively decided that transactions would not be excluded if the government participates in the ownership of an entity and the arrangement is “the result of a contract in which the entity receives value or benefit from the government.”

For more in­for­ma­tion, see the meeting minutes on the FASB’s Web site.

 

Leases

The FASB and IASB continued redeliberating their revisions to lease accounting guidance and tentatively decided to retain the approach from the May 2013 proposal for evaluating whether a customer has obtained, or has the ability to obtain, substantially all of the economic benefits from directing the use of the underlying asset. That is, the final leases standard would not include a requirement that for a contract to be a lease, the customer must be able to derive the economic benefits from directing the use of an identified asset on its own or together with other resources that are readily available to the customer. As a result, a customer would control the use of an asset if it directs the use of the asset (i.e., directs how and for what purpose the asset is used) and has the right to obtain substantially all the economic benefits from directing the use of the asset during the period of use.

For more in­for­ma­tion, see the related Deloitte Accounting Journal entry as well as the meeting minutes on the FASB’s Web site.

SEC proposes revised registration requirements

Dec 19, 2014

The SEC has issued a proposal that would revise the rules in Section 12(g) of the Securities Exchange Act of 1934 related to the thresholds for registration, termination of registration, and suspension of reporting.

The pro­posed rule (Release No. 33-9693, Changes to Exchange Act Registration Requirements to Implement Title V and Title VI of the JOBS Act) was issued in re­sponse to mandates under the Jumpstart Our Business Startups Act (JOBS Act). Specifically, the proposal would:

  • Amend “Exchange Act Rules 12g-1 through 4 and 12h-3 which govern the procedures relating to registration, termination of registration under Section 12(g), and suspension of reporting obligations under Section 15(d) to reflect the new thresholds established by the JOBS Act.”
  • Revise “the rules so that savings and loan holding companies are treated in a similar manner to banks and bank holding companies for the purposes of registration, termination of registration, or suspension of their Exchange Act reporting obligations.”
  • Apply “the definition of ‘accredited investor’ in Securities Act Rule 501(a) to determinations as to which record holders are accredited investors for purposes of Exchange Act Section 12(g)(1). The accredited investor determination would be made as of the last day of the fiscal year.”

In addition, the proposal provides revisions to the definition of “held of record” and establishes a nonexclusive safe harbor under Exchange Act Section 12(g).

Com­ments on the pro­posal are due 60 days after its publication in the Federal Register.

For more information, see the press release and the proposed rule on the SEC’s Web site.

FASB releases 2015 U.S. GAAP Financial Reporting Taxonomy

Dec 19, 2014

The FASB has released the 2015 U.S. GAAP Financial Reporting Taxonomy, which is pending SEC approval.

The taxonomy “is a list of computer-readable tags in XBRL that allows companies to tag precisely the thousands of pieces of financial data that are included in typical long-form financial statements and related footnote disclosures.” The 2015 version of the taxonomy “contains updates for accounting standards and other improvements to the 2014 Taxonomy currently used by SEC issuers.”

For more information, see the press release and taxonomy page on the FASB’s Web site.

IASB finalizes amendments related to the application of the investment entities exception

Dec 18, 2014

The IASB has published "Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)." The amendments address issues that have arisen in the context of applying the consolidation exception for investment entities. They are effective for annual periods beginning on or after January 1, 2016, with earlier application permitted.

 

Background

In October 2012, the IASB issued Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), which provided an exemption from consolidation of subsidiaries under IFRS 10, Consolidated Financial Statements, for entities that meet the definition of an "investment entity." Subsequently, the IFRS Interpretations Committee received several submissions regarding the implementation of the exemption. The Committee recommended that the IASB address the issues in a narrow-scope project, and in March 2014, the IASB formally added a project on IFRS 10/IAS 28 — Investment entity amendments to its work program. In June 2014, it published an exposure draft of proposed amendments in June 2014, with comments due by September 15, 2014.

 

Key Provision of the Amendments

The amendments are intended to clarify the following:

  • Exemption from preparing consolidated financial statements The exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.
  • A subsidiary providing services that relate to the parent's investment activities — A subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity.
  • Application of the equity method by a non-investment entity investor to an investment entity investee — When applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.
  • Disclosures required — An investment entity measuring all of its subsidiaries at fair value provides the disclosures related to investment entities required by IFRS 12.

 

Changes to guidance proposed in exposure draft

ED/2014/2, Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28) would have provided relief to non-investment entity investors for their interests in investment entity associates but not for their interests in investment entity joint ventures. To retain consistency in the treatment of the application of the equity method to both associates and joint ventures, the final amendments provide relief to noninvestment entity investors in both investment entity associates and joint ventures.

The IASB amended IFRS 12, Disclosure of Interests in Other Entities, because the comments received in response to the ED highlighted that constituents were unclear about the applicability of IFRS 12 to the financial statements of an investment entity. The amendments clarify that the scope exclusion in paragraph 6(b) of IFRS 12 does not apply to the financial statements of a parent that is an investment entity and measures all of its subsidiaries at fair value.

 

Additional information

IASB finalizes amendments to IAS 1 as part of its disclosure initiative

Dec 18, 2014

The IASB has published Disclosure Initiative (Amendments to IAS 1). The amendments are intended to clarify IAS 1 to address perceived impediments to the exercise of judgment by preparers in presenting their financial reports. They are effective for annual periods beginning on or after January 1, 2016, with earlier application permitted.

 

Background

The IASB added a disclosure initiative to its work program in 2013 to complement its efforts in  conceptual framework project. The initiative consists of a number of smaller projects involving the exploration of opportunities to improve the presentation and disclosure principles and requirements in existing standards. Among them was a narrow-scope project on IAS 1, Presentation of Financial Statements, to ensure that entities were able to use judgement when presenting their financial reports because the wording of some of the requirements in IAS 1 had in certain cases been interpreted to prevent the use of judgement. An exposure draft of proposed amendments was published in March 2014, with comments due by July 23, 2014.

 

Key provisions of the amendments

The amendments to IAS 1 do the following:

  • Materiality — Clarify (1) that entities should not obscure information by aggregating or providing immaterial information and (2) that materiality considerations apply to all parts of the financial statements, even when a standard requires a specific disclosure.
  • Statement of financial position and statement of profit or loss and other comprehensive income — Clarify (1) that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant (as well as add guidance on subtotals in these statements) and (2) that an entity's share of other comprehensive income of equity-accounted associates and joint ventures should be presented in the aggregate as single line items according to whether the share will subsequently be reclassified as profit or loss.
  • Notes — Add examples of possible ways to arrange the notes to clarify that entities should consider understandability and comparability when determining the order of the notes and to demonstrate that the notes need not be presented in the order listed in paragraph 114 of IAS 1. The IASB also removed guidance and examples related to the identification of significant accounting policies that were perceived as being potentially unhelpful.

 

Changes to guidance proposed in exposure draft

ED/2014/1, Disclosure Initiative (Proposed amendments to IAS 1), stated that entities "shall not aggregate or disaggregate information in a manner that obscures useful information." Because disaggregation often means expanding totals and subtotals and thus providing added transparency, the IASB decided to rephrase the clarification to state that entities "shall not reduce the understandability of its financial statements by obscuring material information with immaterial information."

ED/2014/1 also proposed that the term "disclose" would be used to mean information in the notes and that the term "present" would be used otherwise. Because respondents to the ED noted that a change in terminology should be part of a comprehensive review of IAS 1 and would be outside the scope of a narrow-scope amendment, the IASB did not finalize the proposals regarding use of the terms "present" and "disclose."

Finally, the ED proposed that an entity would disclose the fact that it applied the amendments when it did so for the first time. However, the transition provisions in the standard state that an entity need not disclose the fact that it has applied these amendments (regardless of early application or application on the effective date) because the IASB considers the amendments to be clarifying (i.e., they do not directly affect an entity's accounting policies or accounting estimates).

 

Additional information

For more information, see:

SASB issues provisional services standards

Dec 17, 2014

The SASB has issued provisional standards for the services sector. The standards are the sixth set in a planned series of industry-related SASB standards on accounting for environmental, social, and governance issues that could be material to a corporation’s performance. The standards focus on material sustainability matters that corporations are already required to disclose in their Form 10-K or 20-F filings with the SEC.

The standards apply to the following industries:

  • Advertising and marketing.
  • Cable and satellite.
  • Casinos and gaming.
  • Cruise lines.
  • Education.
  • Hotels and lodging.
  • Leisure facilities.
  • Media production and distribution.
  • Professional services.
  • Restaurants.

The Board’s first five sets of provisional standards focus on communications, financials, health care, nonrenewable resources, and transportation.

The new provisional standards and corresponding industry briefs are available on the SASB’s Web site.

SEC updates EDGAR filer manual and technical specifications

Dec 16, 2014

The SEC has updated its Electronic Data Gathering, Analysis, and Retrieval (EDGAR) System Filer Manual (Volumes I and II) and has issued Version 14 of the EDGARLink Online XML Technical Specification and Version 5.5.0 of the EDGAR TA-2 Technical Specification.

Updates to the EDGAR Filer Manual include the fol­low­ing:

  • Revised submission form types.
  • New exhibit on EDGARLink Online.
  • Changes to Item 3(a) and validations for Item 5 of Form TA-2.
  • New option to the EDGAR Portal.

For more information, see the final rule and the EDGAR page on the SEC’s Web site.

Summary of the December 2014 PCC meeting

Dec 12, 2014

At its meeting this week, the Private Company Council (PCC) principally discussed (1) the definition of a public business entity (PBE), (2) partnership accounting, (3) share-based compensation, (4) and select FASB projects.

For more information about the PCC’s December 11, 2014, meeting, see the related Deloitte Accounting Journal entry and the media recap on the FASB’s Web site.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.