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December

US GAAP Plus year in review — 2018

Dec 27, 2018

US GAAP Plus turned five in September.

Over the past year, our overall visitor numbers grew exponentially and our Twitter followers (@DeloitteAcctg) received regular updates about the content on US GAAP Plus and other financial reporting Web sites.

Our most popular pages remain our accounting standards summaries, but interest in our news, publications, resource pages, and project summaries continues to be high.

Our 10 most popular stories of 2018
  1. FASB issues ASU on income tax accounting related to new tax reform law (February).
  2. FASB combines ASC 305 and ASC 210 (January).
  3. FASB adds SEC-related income tax guidance to Codification (March).
  4. FASB clarifies guidance on cloud computing arrangements (August).
  5. FASB issues ASU amending certain SEC guidance (March).
  6. FASB makes improvements to leasing guidance (July).
  7. SEC issues report on implementing internal accounting controls for cyber threats (October).
  8. FASB makes targeted improvements to lease accounting guidance (July).
  9. FASB makes targeted improvements to the accounting for long-duration insurance contracts (August).
  10. FASB makes technical corrections to guidance on financial instruments (February).
Our 10 most popular publications of 2018
  1. Financial Reporting Alert 18-1 — Frequently asked questions about tax reform (August).
  2. Heads Up — SEC issues final rule that updates and simplifies its disclosure requirements (August).
  3. Heads Up — Observations from a review of public filings by early adopters of the new revenue standard (January).
  4. Financial Reporting Alert 18-2 — FASB makes decisions about the application of income tax guidance to certain tax reform provisions (January).
  5. Heads Up — What private companies should know about the new revenue recognition standard (April).
  6. Financial Reporting Alert 18-11 — Clarifying the interim stockholders’ equity and effective date requirements in the SEC’s final rule on disclosure simplification (October).
  7. Heads Up — ASC 606 is here — How do your revenue disclosures stack up? (July).
  8. Heads Up — FASB issues standard to amend required fair value measurement disclosures (August).
  9. Heads Up — At "lease" there are answers to transition questions (October).
  10. Heads Up — SEC comments reflect registrants’ efforts to implement ASC 606 (September).

We wish you a happy and safe New Year and look forward to bringing you the latest financial reporting news in 2019.

SEC posts information on its operational status during the government shutdown

Dec 26, 2018

The SEC has posted a plan for operating under the government shutdown. During this period, the agency “will have a very limited number of staff members available . . . to respond to emergency situations involving market integrity and investor protection, including law enforcement.”

The SEC’s Di­vi­sion of Cor­po­ra­tion Finance page notes that “[r]egardless of our operating status, EDGAR will accept registration statements, offering statements and other filings; however, . . . during a shutdown we will not be able to declare registration statements effective nor qualify Form 1-A offering statements.”

For more information, see the following pages on the SEC's Web site:

Highlights of the FASB’s December 19 meeting

Dec 21, 2018

At the FASB’s December 19, 2018, meeting, the Board discussed its projects on (1) segment reporting, (2) financial performance reporting, (3) the definition of collections, and (4) credit losses implementation.

Segment reporting

The Board discussed feedback received on its segment aggregation study. It determined that the alternatives considered in the study for improving the aggregation criteria and reportable segments process do not provide cost-beneficial solutions. The Board directed its staff to conduct a second segment reporting study that will focus on “regularly reviewed” information.

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

Financial performance reporting — disaggregation of performance information

The Board discussed feedback received from companies on their system capabilities for disaggregating income statement line items. The Board directed its staff to consider various ways of disaggregating expense information on the basis of how management views such information internally.

The Board also discussed whether to combine its financial performance reporting project with its segment reporting project, but it decided to keep the projects separate.

For more information, see the tentative Board decisions on the FASB’s Web site.

Updating the definition of collections

The Board completed redeliberations of its June 2018 proposed Accounting Standards Update (ASU) Updating the Definition of Collections. It made decisions related to (1) direct care of collections, (2) disclosures, (3) transition, (4) effective date, and (5) analysis of cost and benefits. The Board directed its staff to draft a final ASU for vote by written ballot.

For more information, see the tentative Board decisions on the FASB’s Web site.

Financial instruments — credit losses implementation

The Board discussed its November 2018 proposed ASU Codification Improvements — Financial Instruments. The Board decided to extend the comment letter deadline by 30 days to January 18, 2019.

The Board also decided to (1) conduct further research and analysis on the presentation of total gross write-offs and total gross recoveries within the credit quality information vintage disclosure and (2) hold a related public roundtable in January 2019.

For more information, see the tentative Board decisions on the FASB’s Web site.

Highlights of the December 2018 FASAC meeting

Dec 21, 2018

At its December 13, 2018, meeting, the FASB’s Financial Accounting Standards Advisory Council (FASAC) discussed (1) a technology case study, (2) distinguishing liabilities from equity (including convertible debt), and (3) the relative benefits and costs of disclosures in GAAP.

Technology case study

The FASAC discussed the impact of emerging technologies on financial reporting. As noted in the meeting recap on the FASB’s Web site, FASAC members:

  • “Explained how emerging technology has helped to create process efficiencies.”
  • “Discussed the timeframes and complexities with legacy systems.”
  • “Emphasized the importance of managing high-quality data and controls over the data.”

Distinguishing liabilities from equity (including convertible debt)

FASAC members provided feedback on the FASB’s project related to distinguishing liabilities from equity (including convertible debt). Specifically, they discussed (1) the disclosure of earnings-per-share treatment of convertible instruments and (2) the derivatives scope exception.

Relative benefits and costs of disclosures in GAAP

FASAC members noted that (1) some of the costliest disclosures are not always the most useful and (2) relevant disclosures may change over time or be dependent on the user. They supported continued research on this topic.

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

FASB issues proposed ASU that would extend private-company accounting alternatives to NFPs

Dec 21, 2018

The FASB has issued a proposed Accounting Standards Update (ASU), “Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities,” to reduce complexity for not-for-profit (NFP) organizations.

The proposed ASU would allow NFPs to forgo testing goodwill for impairment annually at the reporting level and instead use an accounting alternative that 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.”

Comments on the proposed ASU are due by February 18, 2019. For more information, see the press release and proposed ASU on the FASB’s Web site.

On December 20, 2018, the FASB issued for comment Proposed Taxonomy Improvements for 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. Comments on the proposed taxonomy improvements are due by February 18, 2019.

SEC issues six rules after its December meeting

Dec 21, 2018

After meeting this week, the SEC has issued four final rules and two proposals.

The final rules are summarized as follows:

  • Rule of Practice 194 — This final rule “creates a transparent, efficient, and comprehensive process for a registered security-based swap dealer or major security-based swap participant, collectively known as SBS Entities, to apply to the Commission for relief from the statutory disqualification prohibition found in Exchange Act Section 15F(b)(6). Rule of Practice 194 also provides an exclusion for an SBS Entity from the prohibition in Exchange Act Section 15F(b)(6) with respect to associated persons entities, consistent with the Commodity Futures Trading Commission’s (CFTC) approach with respect to the statutory prohibition for swap entities.”
  • “Transaction Fee Pilot for NMS Stocks” — The pilot will apply to all stock exchanges and “is designed to generate data that will help the Commission analyze the effects of exchange transaction fee and rebate pricing models on order routing behavior, execution quality, and market quality generally.”
  • “Amendments to Regulation A” — Please see our earlier story on this final rule.
  • “Disclosure of Hedging by Employees, Officers and Directors” — Please see our earlier story on this final rule.

 

The proposed rules are summarized as follows:

  • “Risk Mitigation Techniques for Uncleared Security-Based Swaps” — This proposed rule would require “the application of risk mitigation techniques to portfolios of uncleared security-based swaps. Proposed Rules 15Fi-3 through 15Fi-5 would establish requirements for registered security-based swap dealers and major security-based swap participants (SBS Entities).” Comments on the proposed rule are due 60 days after the date of its publication in the Federal Register.
  • “Fund of Funds Arrangements” — This proposed rule and related amendments would “streamline and enhance the regulatory framework for fund of funds arrangements. Funds of funds are created when a mutual fund or other type of fund invests in shares of another fund.” Comments on the proposed rule are due 90 days after the date of its publication in the Federal Register.

For more information, see the press releases page of the SEC’s Web site.

PCAOB adopts new estimates standard and amendments

Dec 21, 2018

The PCAOB has adopted a new standard, “Auditing Accounting Estimates, Including Fair Value Measurements and Amendments to PCAOB Auditing Standards,” and amendments to its auditing standards, “Amendments to Auditing Standards for Auditor's Use of the Work of Specialists.”

The new standard “replaces three standards with a single, uniform standard that sets forth an updated approach to auditing accounting estimates. It emphasizes that auditors need to apply professional skepticism, including addressing potential management bias, when auditing accounting estimates. Additionally, the new standard provides more specific direction on auditing fair values of financial instruments that are based on information from third-party pricing sources.”

The amendments “strengthen the requirements for evaluating the work of a company's specialist, whether employed or engaged by the company. They also apply a supervisory approach to both auditor-employed and auditor-engaged specialists.”

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

SEC issues final rule allowing Exchange Act reporting companies to use Regulation A

Dec 21, 2018

In response to a mandate from the Economic Growth, Regulatory Relief, and Consumer Protection Act, the SEC has issued “Amendments to Regulation A,” a final rule that allows companies that are subject to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) to use the Regulation A exemption from registration under the Securities Act of 1933 for offerings of securities up to $50 million.

As stated in the SEC’s press release on the final rule, the rule also allows Exchange Act reporting companies to “meet their Regulation A ongoing reporting obligations through their Exchange Act reports” and makes conforming changes to Form 1-A.

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

FASB proposes ASU to address lessor implementation issues

Dec 19, 2018

The FASB has issued a proposed Accounting Standards Update (ASU), “Codification Improvements for Lessors.”

The proposed ASU would make the following improvements:

  • “[Align] the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842, with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply.”
  • Require lessors within the scope of ASC 942, Financial Services — Depository and Lending, to present all “principal payments received under leases” within investing activities.

Comments on the proposed ASU are due by January 15, 2019.

For more information, see Deloitte's related journal entry as well as the press release and proposed ASU on the FASB’s Web site.

On December 20, 2018, the FASB issued for comment Proposed Taxonomy Improvements for Leases (Topic 842): Codification Improvements for Lessors. Comments on the proposed taxonomy improvements are due by January 15, 2019.

SEC issues final rule on hedging disclosures

Dec 19, 2018

In response to a mandate from the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC has issued a final rule that requires companies to disclose “hedging practices or policies in any proxy statement or information statement relating to the election of directors.”

The final rule adds Item 407(i) to Regulation S-K and “will require a company to describe any practices or policies it has adopted regarding the ability of its employees (including officers) or directors to purchase securities or other financial instruments, or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of equity securities granted as compensation, or held directly or indirectly by the employee or director.”

The disclosure requirements in the final rule must be complied with in proxy and information statements with respect to elections of directors during fiscal years beginning on or after July 1, 2019. However, for smaller reporting companies and emerging growth companies, the requirements are effective in proxy and information statements for elections of directors during fiscal years beginning on or after July 1, 2020.

For more information, see the press release and final rule on the SEC’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.