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Financial Reporting and Regulatory Update

Fourth Quarter 2017

ASU Effective Dates Checklist

Accounting Standards Update (ASU)

Effective Dates for Dec. 31 Year-End PBEs

Early Adoption

Measurement of Inventory (ASU 2015-11)

Requires inventory that is measured using first-in, first-out (FIFO) or average cost methods to be measured at the lower of cost and net realizable value. The concept of market is eliminated for these two methods as well as two market valuation techniques: replacement cost and net realizable value less an approximately normal profit margin.

March 31, 2017 Permitted as of the beginning of an interim or annual period

Classification of Deferred Taxes (ASU 2015-17)

Simplifies classification of deferred taxes in a classified balance sheet. Classification as noncurrent only is required.

March 31, 2017 Permitted as of the beginning of an interim or annual period

Derivative Novations (ASU 2016-05)

Applies when there is a change in the counterparty to a derivative instrument that has been designated as a hedging instrument.

March 31, 2017 Permitted, including in an interim period

Contingent Puts and Calls on Debt Instruments (ASU 2016-06)

Applies to debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded put or call options. When those options are contingently exercisable, there is no requirement that an entity must assess whether the event that triggers the ability to exercise the options is related to interest rates or credit risks.

March 31, 2017 Permitted, including in an interim period

Equity Method (ASU 2016-07)

Removes the requirement to retroactively adopt the equity method upon an increase in 1) the level of ownership interest or 2) the degree of influence of an investment.

March 31, 2017 Permitted

Share-Based Payments (ASU 2016-09)

Applies to share-based payment awards issued to employees and offers simplification in several areas including income taxes, forfeitures, minimum statutory tax withholding requirements, cash flow presentation, and practical expedients for nonpublic entities to use intrinsic value measurement for liability-classified awards and to estimate expected term for certain awards.

March 31, 2017 Permitted, including in an interim period

VIE Consolidation Model for Related Party Interests (ASU 2016-17)

Applies to the variable interest entity (VIE) consolidation analysis for single decisionmakers evaluating certain interests held by related parties under common control.

March 31, 2017 Permitted, including in an interim period

Technical Corrections and Improvements (ASU 2016-19)

Various corrections to existing GAAP guidance, including six that may result in a change in practice for the following:

  • Accounting for internal-use software licensed from third parties in the scope of Subtopic 350-40 (relates to ASU 2015-05)
  • Technical correction for Federal Housing Administration (FHA) or Veterans Benefits Administration (VA) insured loans that do not have to be fully insured by those programs to recognize profit using the full accrual method
  • Disclosure is required when a fair value valuation approach (that is, market, cost, or income) or valuation technique (such as present value or option pricing models) changes
  • Subtopic 405-40 (joint and several liability arrangement obligations) is clarified that for an obligation amount to be considered fixed, the entire obligation amount – and not the entity’s portion of the obligation – must be fixed at the reporting date
  • Subtopic 860-20 (sales of financial assets) is revised to align implementation and recognition guidance and to clarify considerations in determining whether a transferor once again has effective control over transferred financial assets (relates to ASU 2014-11)
  • Technical correction for Subtopic 860-50 (servicing assets and liabilities) to add existing guidance (from AICPA Statement of Position 01-6) on accounting for the sale of servicing rights when the transferor retains loans
March 31, 2017 [1] Permitted for amendments that require transition guidance

Revenue Recognition (ASU 2014-09)

For all entities, the transaction- and industry-specific recognition methods are eliminated and revenue is recognized by applying a defined principles-based approach.

Clarifying standards:

ASU 2015-14 – Deferral of Effective Date

ASU 2016-08 – Principal Versus Agent Considerations (Gross Versus Net Reporting)

ASU 2016-10 – Identifying Performance Obligations and Licensing

ASU 2016-11 – Rescission of SEC Guidance (Staff Announcements at March 3, 2016, EITF Meeting)

ASU 2016-12 – Narrow-Scope Improvements and Practical Expedients

ASU 2016-20 – Technical Corrections and Improvements

ASU 2017-14 – Rescission of SEC SAB Topics 8 and 13 and bill-and-hold guidance; revision of SAB Topic 11.A and SEC guidance for certain vaccine manufacturers

March 31, 2018 [2] Permitted only as of annual periods beginning after Dec. 15, 2016, including interims within

Derecognition and Partial Sales of Nonfinancial Assets (ASU 2017-05)

Primarily applies to the real estate industry but can impact other entities. Clarifies the scope of Subtopic 610-20 by defining an “in substance nonfinancial asset,” and provides guidance on partial sales, such as when an entity retains an equity interest in the entity that owns the transferred nonfinancial assets.

March 31, 2018, consistent with ASU 2014-09 Permitted only as of annual periods beginning after Dec. 15, 2016, including interims within

Service Concession Arrangements for Operators of Public Infrastructure (ASU 2017-10)

In all service concession arrangements between a public sector entity and the operator of the public sector entity’s infrastructure, the public sector entity (or the grantor) should be identified as the customer.

March 31, 2018

(if ASU 2014-09 has not yet been adopted)

Permitted, including in an interim period

Recognition and Measurement (ASU 2016-01)

Applies to the classification and measurement of financial instruments. Removes the available for sale category for equities. For PBEs, requires the use of exit pricing in fair value disclosure for instruments carried at amortized cost.

March 31, 2018 Not permitted, except for two provisions

Breakage for Prepaid Cards (ASU 2016-04)

Applies to prepaid stored-value products that are redeemable for monetary values of goods or services but also may be redeemable for cash, such as certain prepaid gift cards, prepaid telecommunication cards, and traveler’s checks.

March 31, 2018 Permitted, including in an interim period

Statement of Cash Flows: Certain Clarifications (ASU 2016-15)

Provides guidance on how eight specific cash flows should be classified in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of zerocoupon bonds, contingent consideration payments, insurance settlement proceeds, company-owned life insurance (COLI) policy settlements and premiums, equity method investee distributions, beneficial interests in securitization transactions, and predominance principle for receipts and payments.

March 31, 2018 Permitted, including in an interim period

Income Taxes for Intra-Entity Asset Transfers (ASU 2016-16)

Applies to the recognition of income taxes for intra-entity asset transfers.

March 31, 2018 Permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance

Statement of Cash Flows: Restricted Cash (ASU 2016-18)

Requires that restricted cash and cash equivalents be presented in total cash and cash equivalents in the statement of cash flows, and the nature of restrictions on restricted cash and cash equivalents be disclosed.

March 31, 2018 Permitted, including in an interim period

Definition of a Business (ASU 2017-01)

Applies to the analysis of whether an asset or business is acquired (which determines whether goodwill is recognized), as well as asset derecognition and business deconsolidation transactions.

March 31, 2018 Permitted for certain transactions

Presentation of Net Periodic Pension and Postretirement Benefit Costs (ASU 2017-07)

Rather than reporting pension expense as a net amount, the service cost component will be presented consistent with similar compensation for the same employees, and the other components will be separately presented in the income statement.

March 31, 2018 Permitted as of the beginning of an annual period, in the first interim period

Share-Based Payment Modification Accounting (ASU 2017-09)

Requires modification accounting when an award’s fair value, vesting provisions, or classification changes subsequent to a modification of the award.

March 31, 2018 Permitted, including in an interim period

Leases (ASU 2016-02)

Revises recognition and measurement for lease contracts by lessors and lessees; operating leases are recorded on the balance sheet for lessees.

March 31, 2019 [3] Permitted

Premium Amortization on Purchased Callable Debt (ASU 2017-08)

Shortens the amortization period for premiums on purchased callable debt securities to the earliest call date, instead of to the maturity date.

March 31, 2019 Permitted, including in an interim period

Financial Instruments with Down-Round Features (Part I) and Scope Exception for Certain Mandatorily Redeemable Financial Instruments (Part II) (ASU 2017-11)

Part I – Simplifies the accounting for certain financial instruments with down-round features by eliminating the requirement to consider the down-round feature in the liability or equity classification determination. For entities that present EPS, requires the effect of the down-round feature in a warrant or other freestanding equity-classified instrument to be presented as a dividend and an adjustment to EPS when it is triggered. Regardless of whether the entity presents EPS, requires the effect of the down-round feature in a convertible instrument such as debt or preferred stock to follow existing guidance for contingent beneficial conversion features and be presented as a discount to the convertible instrument with an offsetting credit to paid-in-capital when it is triggered.

Part II – Changes the indefinite deferral available to private companies with mandatorily redeemable financial instruments and certain noncontrolling interests to a scope exception, which does not have an accounting effect.

March 31, 2019 Permitted, including in an interim period

Hedging Activities (ASU 2017-12)

Expands the nonfinancial and financial risk components that can qualify for hedge accounting and simplifies financial reporting for hedging activities.

March 31, 2019 Permitted, including in an interim period

Certain Deferred Taxes for Steamship Entities (ASU 2017-15)

Requires steamship entities to recognize any remaining deferred taxes on certain statutory reserve deposits in accordance with Topic 740.

March 31, 2019 Permitted, including in an interim period

Goodwill Impairment Testing (ASU 2017-04)

Removes step two – the requirement to perform a hypothetical purchase price allocation when the carrying value of a reporting unit exceeds its fair value – of the goodwill impairment test.

For SEC filers, tests performed on or after Jan. 1, 2020

For PBEs that are not SEC filers, tests performed on or after Jan. 1, 2021

Permitted for interim or annual goodwill impairment tests performed on testing dates on or after Jan. 1, 2017

Credit Losses (ASU 2016-13)

Replaces the incurred loss model with the current expected credit loss (CECL) model for financial assets, including trade receivables, debt securities, and loan receivables.

For SEC filers, March 31, 2020

For PBEs that are not SEC filers, March 31, 2021

Permitted as of the fiscal years beginning after Dec. 15, 2018, including interim periods within
 
[1] Most of the amendments were effective immediately. With the exception of the change related to the already effective ASU 2014-11, items requiring transition are effective for interim and annual reporting periods beginning after Dec. 15, 2016.
 
[2] As codified in ASU 2017-13, in an SEC staff announcement at the July 20, 2017, EITF meeting, specifically related to PBEs that qualify as a PBE solely due to a requirement to include or the inclusion of its financial statements or financial information in another entity’s SEC filing (“certain PBEs”), the SEC stated that it will allow certain PBEs to elect to apply the non-PBE effective dates for the revenue recognition and lease accounting standards only. For certain PBEs, the revenue recognition guidance is effective for Dec. 31, 2019, annual financial statements for calendar year-end entities.
 
[3] As codified in ASU 2017-13, in an SEC staff announcement at the July 20, 2017, EITF meeting, specifically related to PBEs that qualify as a PBE solely due to a requirement to include or the inclusion of its financial statements or financial information in another entity’s SEC filing (“certain PBEs”), the SEC stated that it will allow certain PBEs to elect to apply the non-PBE effective dates for the revenue recognition and lease accounting standards only. For certain PBEs, the lease accounting standard is effective for Dec. 31, 2020, annual financial statement for calendar year-end entities.