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Accounting Roundup — November 2016

Published on: Dec 02, 2016

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by Magnus Orrell and Joseph Renouf, Deloitte & Touche LLP

Welcome to the November 2016 edition of Accounting Roundup. Highlights of this issue include the following:

  • The FASB’s issuance of an ASU on restricted cash and proposed ASUs on (1) determining the customer of operation services in service concession arrangements and (2) amending the scope of modification accounting for share-based payment arrangements.
  • The AICPA’s release of revenue working drafts for broker-dealers and depository and lending institutions.
  • The SEC’s issuance of a report on the modernization and simplification of Regulation S-K.

Be sure to monitor upcoming issues of Accounting Roundup for new developments. We value your feedback and would appreciate any comments you may have on this publication. Take a moment to tell us what you think by sending us an e-mail at accountingstandards@deloitte.com.

Leadership Changes

FASB: On November 15, 2016, the FAF board of trustees announced that it has reappointed FASB Chairman Russell G. Golden for a second term and has appointed two new members to the Board, Masha L. Hunt and Harold L. Monk Jr. Chairman Golden’s second term will begin on July 1, 2017, and end on June 30, 2020. Ms. Hunt, whose term will end on June 30, 2022, will succeed Lawrence W. Smith, whose term concludes on June 30, 2017. Mr. Monk, whose term will end on June 30, 2022, will succeed Daryl E. Buck, who is retiring from his position on December 31, 2016.

IASB: On November 29, 2016, the IFRS Foundation trustees announced that Françoise Flores has been appointed to the IASB for a five-year term that begins on January 1, 2017, and ends on December 21, 2021.

IFRS Advisory Council: On November 4, 2016, the trustees of the IFRS Foundation announced 21 appointments and reappointments to the IFRS Advisory Council.

PCC: On November 15, 2016, the FAF board of trustees announced that Beth I. van Bladel, David J. Hirsch, Richard N. Reisig, and Yan Zhang have been appointed to the PCC. The new members will begin their three-year terms on January 1, 2017.

SEC: On November 22, 2016, the SEC announced that Chief Accountant James Schnurr will be retiring from the agency and will be succeeded by Wesley R. Bricker. Mr. Schnurr began his tenure in October 2014 but suffered injuries from a serious bicycle accident in April 2016. Mr. Bricker assumed the role of interim chief accountant in July 2016. In addition, on November 2, 2016, the Commission announced that Marc A. Panucci has been appointed as deputy chief accountant to replace Brian T. Croteau. Further, on November 14, 2016, the SEC announced that Chair Mary Jo White plans to leave the SEC at the end of the Obama Administration.

For the latest news and publications, visit Deloitte’s US GAAP Plus Web site or subscribe to Weekly Roundup. Also see our Twitter feed for up-to-date information on the latest news, research, events, and more.

Accounting — New Standards and Exposure Drafts

Service Concession Arrangements

FASB Proposes Amendments to Guidance on Service Concession Arrangements

Affects: All entities.

Summary: On November 4, 2016, the FASB issued for public comment a proposed ASU on determining the customer of operation services in service concession arrangements. The proposed ASU, which is being released in response to an EITF consensus-for-exposure, “would clarify that the grantor (government), rather than the third-party [users], is the customer of the operation services in all cases for service concession arrangements within the scope of [ASC] 853.” In addition, the proposal would eliminate diversity in practice related to the “customer determination for the operation services” and would “enable more consistent application of other aspects of the revenue guidance” associated with this determination.

Next Steps: Comments on the proposed ASU are due by January 6, 2017.

Other Resources: Deloitte’s September 2016 EITF Snapshot.

Share-Based Payment

FASB Proposes to Amend the Scope of Modification Accounting for Share-Based Payment Arrangements

Affects: All entities.

Summary: On November 17, 2016, the FASB issued a proposed ASU that that would amend the scope of modification accounting for share-based payment arrangements, limiting the instances in which such accounting is applied. Specifically, the proposal states that entities “would account for the effects of a modification unless all the following are the same immediately before and after the modification:

  1. The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the award
  2. The vesting conditions of the award
  3. The classification of the award as an equity instrument or a liability instrument.”

In addition, to help reduce diversity in practice, the proposal would remove the phrase “any of” from the definition of “modification” in the Codification master glossary as follows: “A change in any of the terms or conditions of a share-based payment award.”

The proposal would not amend the current disclosure requirements in ASC 718.

Editor's Note

Editor’s Note

Entities would still be required to disclose any significant changes to the terms or conditions of share-based payment awards that meet the definition of a modification under ASC 718-20-20, even if modification accounting is not applied under the proposed ASU. For example, under the proposed ASU, if an entity changes the settlement terms of its share-based payment awards but such a change does not result in a change in fair value, vesting condition, or classification, modification accounting would not be applied. However, the entity may still be required to disclose the change in settlement terms if the modification is significant.

Next Steps: Comments on the proposed ASU are due by January 6, 2017.

Other Resources: Deloitte’s November 18, 2016, Heads Up.

Statement of Cash Flows

FASB Issues Guidance on Restricted Cash

Affects: All entities.

Summary: On November 17, 2016, the FASB issued ASU 2016-18, which amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. Key requirements of the ASU are as follows:

  • An entity should include in its cash and cash-equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. The ASU does not define the terms “restricted cash” and “restricted cash equivalents” but states that an entity should continue to provide appropriate disclosures about its accounting policies pertaining to restricted cash in accordance with other GAAP. The ASU also states that any change in accounting policy will need to be assessed under ASC 250.
  • A reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents.
  • Changes in restricted cash and restricted cash equivalents that result from transfers between cash, cash equivalents, and restricted cash and restricted cash equivalents should not be presented as cash flow activities in the statement of cash flows.
  • An entity with a material balance of amounts generally described as restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions.
Editor's Note

Editor’s Note

The classification of restricted cash in the statement of cash flows, along with eight other cash-flow-related issues, was initially addressed by the EITF in Issue 15-F. However, after deliberation of those issues, the EITF decided to address the diversity in practice related to the cash flow classification of restricted cash separately, in Issue 16-A. ASU 2016-18 is based on the EITF’s consensuses reached on that Issue.

Next Steps: For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods therein. For all other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods thereafter. Early adoption is permitted for all entities.

Other Resources: Deloitte’s November 17, 2016, Heads Up.

Accounting — Other Key Developments

Revenue Recognition

TRG Holds November Meeting

Affects: All entities.

Summary: On November 7, 2016, the FASB’s revenue recognition TRG met to discuss the following four topics:

  • Revenue recognition over time.
  • Capitalization and amortization of the incremental costs of obtaining a contract.
  • Sales-based or usage-based royalties with a minimum guarantee.
  • Payments to customers.

The TRG generally agreed with the FASB staff’s analysis of the topics; it did not recommend changes to the new revenue standard.

Editor's Note

Editor’s Note

At the end of the meeting, the FASB announced that no additional TRG meetings are scheduled. However, the Board encouraged stakeholders to continue submitting implementation questions either directly to the TRG or through the FASB’s technical inquiry process. While it acknowledged that it would be open to scheduling future TRG meetings to discuss implementation issues that are significant and far-reaching, the Board noted that it would be judicious in selecting topics, partly because some entities will be early adopting the standard as of January 1, 2017.

Other Resources: Deloitte’s November 2016 TRG Snapshot.

AICPA Issues Revenue Working Drafts for Broker-Dealers and Depository and Lending Institutions

Affects: All entities.

Summary: On November 1, 2016, the AICPA’s Revenue Recognition Task Force released for public comment two working drafts on accounting issues associated with the implementation of the new revenue standard for broker-dealers and one working draft for depository and lending institutions. The broker-dealer working drafts provide guidance on commission income and the trade date versus settlement date with respect to commission income, while the working draft for depository and lending institutions discusses the sale of nonoperating assets.

Next Steps: Comments on the working drafts are due by January 2, 2017.

Other Resources: For more information, see the broker-dealers and depository and lending institutions Revenue Recognition Task Force pages on the AICPA’s Web site.

Governmental Accounting and Auditing Developments

FASAB

FASAB Issues Proposed Technical Release Related to Property, Plant, and Equipment

Affects: Entities reporting under federal financial accounting standards.

Summary: On November 22, 2016, the FASAB issued an ED of a proposed technical release that would amend certain previously issued technical releases to conform them with the provisions in FASAB Statement 50, which provides guidance on establishing opening balances for general property, plant, and equipment. In addition, the proposal would clarify that FASAB Statement 6, as amended, now contains “all standards-level implementation guidance for general property, plant, and equipment (with the exception of certain provisions applicable to internal use software).”

Next Steps: Comments on the ED are due by January 9, 2017.

Other Resources: For more information, see the press release on the FASAB’s Web site.

GASB

GASB Proposes Implementation Guide

Affects: Entities reporting under financial accounting and reporting standards for state and local governments.

Summary: On November 30, 2016, the GASB issued a proposed implementation guide consisting of Q&As that would “clarify, explain, or elaborate on” certain GASB Statements. Topics addressed in the proposed guide’s Q&As include:

  • Pensions.
  • Cash flow statements.
  • The financial reporting entity.
  • Certain investments.
  • External investment pools.
  • Fund balances.
  • Tax abatements.

In addition, the proposed implementation guide amends certain Q&As from previously issued implementation guides.

Next Steps: Comments on the proposed implementation guide are due by January 31, 2017.

Other Resources: For more information, see the press release on the GASB’s Web site.

Regulatory and Compliance Developments

SEC

SEC Staff Publishes Guide on EDGAR Filings for Issuers of Asset-Backed Securities

Affects: Issuers of asset-backed securities.

Summary: On November 30, 2016, the staff in the SEC’s Division of Corporation Finance published a guide containing Q&As that provide issuers of asset-backed securities with guidance on EDGAR filings. Specifically, the guide addresses “certain programming changes to the EDGAR system that have been made to support recently adopted revisions to Regulation AB [footnote omitted] and new Exchange Act Rule 15Ga-2.”

SEC Issues Report on Modernization and Simplification of
Regulation S-K

Affects: SEC registrants.

Summary: On November 29, 2016, the SEC issued a report on the modernization and simplification of Regulation S-K. The report is being issued in response to a mandate in Section 72003 of the Fixing America’s Surface Transportation (FAST) Act, which requires the report to include “(1) all findings and determinations made in carrying out the study . . . ; (2) specific and detailed recommendations on modernizing and simplifying the requirements in [R]egulation S-K in a manner that reduces the costs and burdens on companies while still providing all material information; and (3) specific and detailed recommendations on ways to improve the readability and navigability of disclosure documents and to discourage repetition and the disclosure of immaterial information.”

The report includes staff recommendations on the following topics:

  • Core company business information.
  • Company performance, financial information, and future prospects.
  • Management and certain security holders.
  • Corporate governance.
  • Registration statement and prospectus provisions.
  • Exhibits.
  • Manner of delivery recommendations.
Editor's Note

Editor’s Note

The SEC encourages the public to submit comments on the recommendations discussed in this report and related matters in anticipation of the rulemakings required by the FAST Act.

CAQ SEC Regulations Committee Releases Highlights of September 27, 2016, Joint Meeting With SEC Staff

Affects: SEC registrants.

Summary: On November 8, 2016, the CAQ posted to its Web site the highlights of the September 27, 2016, CAQ SEC Regulations Committee joint meeting with the SEC staff. Topics discussed at the meeting include:

  • Requests for interpretive guidance.
  • Disclosure effectiveness.
  • Non-GAAP measures.
  • SAB Topic 13 update.
  • Regulation S-X, Rule 3-10, reporting requirements.
  • Pro forma financial statement requirements.
  • Transition questions related to the new leasing standard, ASU 2016-02.

Other Resources: Deloitte’s November 8, 2016, journal entry.

SEC Approves National Market System to Create a Consolidated
Audit Trail

Affects: SEC registrants.

Summary: On November 15, 2016, the SEC announced that it has approved a national market system (NMS) plan under which a consolidated audit trail and other related data would be created, implemented, and maintained. The NMS plan provides “methods by which SROs and broker-dealers will record and report information, including the identity of the customer, resulting in a range of data elements that together provide the complete lifecycle of all orders and transactions in the U.S. equity and options markets.”

Other Resources: For more information, see the press release on the SEC’s Web site.

SEC Updates Financial Reporting Manual

Affects: SEC registrants.

Summary: On November 9, 2016, the SEC’s Division of Corporation Finance published an update to its Financial Reporting Manual (FRM). The revisions include:

  • Paragraphs 1140.3 and 10220.7 — Revised “guidance on the number of years of financial statements of a target company in a proxy statement when an emerging growth company is involved.”
  • Paragraph 1330.5 — Clarified the filings that will be required after Form 10 becomes effective.
  • Paragraph 5120.1 — Elucidated the “effect of loss of smaller reporting company status on accelerated filer determination and filing due dates.”
  • Paragraph 8110.2 — Reflected changes to C&DIs on non-GAAP financial measures.
  • Paragraph 10220.5 — Clarified “emerging growth company guidance on financial statements of entities other than the registrant and pro forma information.”
  • Paragraph 11120.4 — Added implementation guidance related to new revenue standards (ASU 2014-09 and IFRS 15).
  • Section 11200 — Incorporated implementation guidance related to new lease standards (ASU 2016-02 and IFRS 16).
  • Section 11300 — Added implementation guidance related to short-duration contract disclosures (ASU 2015-09).

Other Resources: For more information, see Deloitte’s related journal entry as well as the updated FRM on the SEC’s Web site.

SEC Staff Updates C&DIs

Affects: SEC registrants.

Summary: In November 2016, the SEC staff issued updates to its C&DIs related to the following:

  • New C&DI on proxy rules and Schedule 14A — Explains that in addition to mailing or submitting to EDGAR an annual report, registrants can meet the requirement of providing an annual report to security holders by posting it on their corporate Web sites for one year.
  • Question 116.25 of C&DIs on Securities Act forms — Addresses the transaction requirements in Instructions I.B.3 and I.B.6 of Form S-3.
  • Questions 126.06, 126.43, and 126.44 of the Securities Act forms C&DIs and Questions 240.11, 240.15, and 240.16 of the Securities Act rules C&DIs — Discuss filing considerations associated with Form S-8 registration statements for securities to be offered to employees under employee benefit plans.
  • Questions 182.12–14 and Question 256.34 of C&DIs on Securities Act rules — Address certain questions related to Regulations A and D.
  • Updated C&DIs on tender offers and schedules — Provide guidance on tender offers and schedules.

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Featured Publication

Deloitte recently issued A Roadmap to Accounting for Contracts on an Entity’s Own Equity, which provides Deloitte’s insights into and interpretations of the guidance in ASC 815-40 and how to apply it in practice. Contracts on an entity’s own equity are often lengthy and complex, and the related accounting guidance contains many details and exceptions. The goal of this Roadmap is to help entities navigate the guidance, overcome the complexity, and arrive at appropriate accounting conclusions.

Other Deloitte Publications

Publication

Title

Affects

November 18, 2016, Heads Up

FASB Proposes to Amend the Scope of Modification Accounting for Share-Based Payment Arrangements

All entities.

November 17, 2016, Heads Up

FASB Issues Guidance on Restricted Cash

All entities.

November 16, 2016, Financial Reporting Alert

Financial Reporting Considerations Related to Pension and Other Postretirement Benefits

All entities.

November 2016 Banking & Securities — Accounting and Financial Reporting Update

Banking and securities entities.

November 2016 EITF Snapshot

All entities.

November 2016 TRG Snapshot

Meeting on Revenue: November 2016

All entities.

Appendix A: Current Status of FASB Projects

Please see Appendix A in the attached PDF.

Appendix B: Significant Adoption Dates and Deadlines

Please see Appendix B in the attached PDF.

Appendix C: Glossary of Standards and Other Literature

Please see Appendix C in the attached PDF.

Appendix D: Abbreviations

Please see Appendix D in the attached PDF.

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