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FASB proposes clarifications to its new revenue standard

Sep 30, 2015

The FASB has issued a proposed ASU, “Narrow-Scope Improvements and Practical Expedients,” that would amend certain aspects of the Board’s May 2014 revenue standard, ASU 2014-09, “Revenue From Contracts With Customers.”

The amendments, which are being proposed in response to feedback received by the FASB–IASB joint revenue recognition transition resource group (TRG), include the following:

  • Collectibility and contract termination — The term “contract termination” would be clarified with respect to determining when an entity would recognize as revenue consideration it receives if the entity concludes that collectibility is not probable.
  • Presentation of sales tax collected from customers — A practical expedient would be added to allow entities to present revenue net of sales taxes collected on behalf of governmental authorities (i.e., to exclude sales taxes that meet certain criteria from the transaction price).
  • Noncash consideration — In determining the transaction price for contracts containing noncash consideration, an entity would include the fair value of the noncash consideration to be received as of the contract inception date. Further, subsequent changes in the fair value of noncash consideration after contract inception would be subject to the variable consideration constraint only if the fair value varies for reasons other than its form.
  • Contract modifications at transition — The proposal would add a practical expedient that would permit entities to allocate the transaction price of the contract to all satisfied and unsatisfied performance obligations, thereby relieving them of the need to evaluate the effects of each contract modification that occurred before the initial adoption of the new revenue standard.
  • Transition technical correction — Entities that elect to use the full retrospective transition method to adopt the new revenue standard would no longer be required to disclose the effect of the change in accounting principle on the period of adoption (as is currently required by ASC 250-10-50-1(b)(2)3); however, entities would still be required to disclose the effects on preadoption periods that were retrospectively adjusted.

The proposed ASU’s effective date and transition provisions would be aligned with the requirements of ASU 2014-09, which, once finalized, will be deferred by one year.

Comments on the proposed ASU are due by November 16, 2015.

In July 2015, the IASB issued an ED proposing similar clarifications to its new revenue standard, IFRS 15, Revenue From Contracts With Customers. The FASB’s proposed ASU states:

The amendments in this proposed Update are not identical to those proposed by the IASB, and some are incremental to the amendments proposed by the IASB. The FASB expects that the amendments in this proposed Update would not result in financial reporting outcomes that are significantly different from those reported under IFRS for similar transactions.

For more information, see Deloitte's related Heads Up newsletter and the press release and proposed ASU on the FASB’s Web site.

SASB issues second set of provisional standards for consumption industries

Sep 28, 2015

The SASB has issued a second set of provisional standards for consumption industries. The standards are the ninth 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:

  • Apparel, accessories, and footwear.
  • Appliance manufacturing.
  • Building products and furnishings.
  • Drug retailers and convenience stores.
  • E-commerce.
  • Food retailers and distributors.
  • Multiline and specialty retailers and distributors.
  • Toys and sporting goods.

The Board’s first eight sets of pro­vi­sional stan­dards focus on com­mu­ni­ca­tions, consumption I, fi­nan­cial, health care, non­re­new­able re­sources, pro­vi­sional ser­vices, re­source trans­for­ma­tion, and trans­porta­tion.

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

Summary of the September 2015 PCC meeting

Sep 25, 2015

At today’s meeting, the Private Company Council (PCC) discussed the results of the FASB’s future agenda prioritization survey. The PCC identified the following as top priorities: (1) other comprehensive income, (2) consolidations, (3) liabilities with characteristics of equity, (4) improving cash flow classification, and (5) financial statement presentation.

In addition, the PCC and FASB discussed the EITF’s project on cash flow statements related to the classification of certain cash receipts and cash payments, hedge accounting, the disclosure framework, and liabilities versus equity.  

The next PCC meeting is sched­uled for December 4, 2015.

For more in­for­ma­tion, see the media recap on the FASB’s Web site.

IASB decides to propose IFRS 9 deferral for insurers

Sep 25, 2015

At its September 23, 2015, meeting, the IASB decided to propose a deferral of the effective date of IFRS 9, "Financial Instruments" for entities that primarily issue insurance contracts.

Specifically, the IASB decided to propose amendments to IFRS 4, Insurance Contracts, to give insurance entities the option of deferring — from 2018 to 2021 — IFRS 9’s effective date. The purpose of the deferral would be to address implementation issues related to IFRS 9 before the IASB’s upcoming standard on insurance contracts (which is expected to be issued in 2016) becomes effective.

The IASB also considered how long the deferral should last and decided that it would expire in 2020 if the new insurance contracts standard has an effective date of January 1, 2020.

The IASB is expected to issue an exposure draft proposing the deferral for public comment later this year.

For more information, see press release on the IASB’s Web site.

FASB issues ASU simplifying measurement-period adjustments

Sep 25, 2015

The FASB has issued Accounting Standards Update (ASU) No. 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments,” as part of its simplification initiative (i.e., the Board’s effort to reduce the cost and complexity of certain aspects of U.S. GAAP).

Under the ASU, an acquirer would be required to “recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.” Further, the acquirer must record, in the financial statements for the same period, “the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.”

Entities must also “present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.”

For more information, see Deloitte's related Heads Up newsletter and the ASU on the FASB’s Web site.

SEC proposes rules to modernize its administrative proceedings

Sep 25, 2015

The SEC has issued two proposed rules to modernize its administrative proceedings.

The proposed amendments constitute three primary changes:

  • Adjustment of “the timing of administrative proceedings, including by extending the time before a hearing occurs in appropriate cases.”
  • Permitting “parties to take depositions of witnesses as part of discovery.”
  • Requiring “parties in administrative proceedings to submit filings and serve each other electronically, and to redact certain sensitive personal information from those filings.”

For more information, see the press release and proposed rules (34-75976 and 34-75977) on the SEC’s Web site.

FASB proposes improvements to materiality guidance

Sep 24, 2015

As part of its disclosure framework project, the FASB has issued a proposed Accounting Standards Update (ASU), “Assessing Whether Disclosures Are Material,” and a proposed concepts statement, “Conceptual Framework for Financial Reporting Chapter 3: Qualitative Characteristics of Useful Financial Information.”

Under the proposed ASU, materiality would be described as a legal concept (i.e., the concept defined by the U.S. legal system) and “would be applied to quantitative and qualitative disclosures individually and in the aggregate in the context of the financial statements as a whole.” Further, this proposal would indicate that the omission of disclosures about immaterial information is not an accounting error.

The proposed concepts statement would amend the discussion of materiality in chapter 3 of FASB Concepts Statement 8 by (1) removing the existing definition of materiality, (2) indicating that “materiality is a legal concept”, and (3) adding a summary of the U.S. Supreme Court’s current description of materiality (i.e., “information is material if there is a substantial likelihood that the omitted or misstated item would have been viewed by a reasonable resource provider as having significantly altered the total mix of information.”)

Comments on both proposals are due by December 8, 2015.

For more information, see Deloitte's related Heads Up newsletter as well as the press release and FASB in Focus newsletter on the FASB’s Web site. 

SEC proposes reforms to promote effective liquidity management

Sep 23, 2015

The SEC has issued a proposed rule that would introduce a package of reforms “designed to enhance effective liquidity risk management by open-end funds, including mutual funds and exchange-traded funds (ETFs).”

The proposal would require mutual funds and ETFs to “implement liquidity risk management programs and enhance disclosure regarding fund liquidity and redemption practices.” The proposed reforms would “better ensure investors can redeem their shares and receive their assets in a timely manner.”

Comments on the proposed rule are due by January 13, 2016.

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

PCAOB and CSSF enter into cooperative agreement

Sep 21, 2015

The Luxembourgian audit regulator, the Commission de Surveillance du Secteur Financier (CSSF), and the PCAOB have entered into a cooperative agreement related to “the over-sight of audit firms subject to the regulatory jurisdictions of both regulators.”

The agree­ment, which is ef­fec­tive im­me­di­ately, allows the two reg­u­la­tors to ex­change con­fi­den­tial in­for­ma­tion re­gard­ing firms op­er­at­ing in both ju­ris­dic­tions and is in­tended to enhance their su­per­vi­sory over­sight, in­spec­tions, and in­ves­ti­ga­tions of the firms.

The PCAOB and CSSF also signed a data pro­tec­tion agree­ment to ensure that they comply with na­tional data pro­tec­tion re­quire­ments when trans­fer­ring in­for­ma­tion.

For more in­for­ma­tion, see the press release and the agree­ment on the PCAOB’s Web site.

EITF discusses two Issues at September meeting

Sep 18, 2015

At its meeting yesterday, the EITF discussed Issues related to (1) recognition of breakage for certain prepaid stored-value cards and (2) statement of cash flows: classification of certain cash receipts and cash payments.

For a de­tailed summary of the meeting, see De­loitte’s September 2015 EITF Snap­shot.

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