Below is a list of finalized upcoming GAAP guidances that are not yet in effect as of January 24, 2018. If you have any questions about these upcoming guidances, please contact your CPA at Larson & Company.

 

ASU 2014-09, 2015-14, 2016-8, 2016-10, 2016-12, 2016-20, 2017-10

Revenue

During 2014 and 2015, the FASB issued Accounting Standards Update 2014-09 and 2015-14, Revenue from Contract with Customers, respectively, which revises previous revenue recognition standards to improve guidance on revenue recognition requirements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognize revenue when (or as) the entity satisfies a performance obligation.

The guidance also provides additional disclosure requirements and clarification for revenue recognition for principal vs. agent parties. Subsequent ASUs provided additional clarity to the specifics of terminology used in the core principal.

Effective Date:

Public – fiscal years beginning after December 15, 2017
Private – fiscal years beginning after December 15, 2018

 

  

 

ASU 2015-17

Income Taxes

In November of 2015, the FASB issued Accounting Standards Update 2015-17, Income Taxes, which requires all deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2016.
Private – for fiscal years beginning after December 15, 2017.

 

 

 

ASU 2016-01

Financial Instruments

In January of 2016, the FASB issued Accounting Standards Updates 2016-01, Financial Instruments – Overall, which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. An entity may choose, however, to measure equity investments that do not have readily determinable fair values at cost minus impairment. It also eliminates disclosure of fair value for investments recorded at amortized cost. The amendment also introduced regarding the process for determining impairments of securities and simplified certain disclosures. Any adjustment at adoption will be made by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2017.
Private – for fiscal years beginning after December 15, 2018.

 

  

ASU 2016-02

Leases

In March of 2016, the FASB issued Accounting Standards Update 2016-02, Leases, which requires all leases that have a term of more than 12 months will be required to be recognized as assets and liabilities on the balance sheet at inception. A lessee would recognize a lease liability to make lease payments owed to a lessor (liability) and a benefit for the right to use the leased asset (asset) for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee would depend on whether the lessee is expected to consume more than an insignificant portion of the economic benefits embedded in the underlying asset.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2017.
Private – for fiscal years beginning after December 15, 2018.

 

 

 

ASU 2016-04

Extinguishment of Liabilities

In March 2016, the FASB issued Accounting Standards Update 2016-04, Liabilities – Extinguishment of Liabilities, which clarifies that liabilities related to the sale of prepaid stored-value products, such as gift cards, are financial liabilities.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2017.
Private – for fiscal years beginning after December 15, 2018.

 

 

ASU 2016-13

Financial Instruments – Credit Losses

In June of 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses, which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. This requirement eliminates the probable initial recognition threshold in Current GAAP which has delayed recognition of credit losses until the loss was probable. Instead, the new treatment will better reflect an entity’s current estimate of all expected credit losses. In addition, the new guidance requires that any credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down. Initial allowance for credit losses is added to the purchase price rather than reported as a credit loss expense. Subsequent changes in the allowance for credit losses are recorded in credit loss expense. This will allow entities to also allow entities to record reversals of credit losses in current period net income, whereas the current GAAP prohibits reflecting these improvements in current period earnings.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2019.
Private – for fiscal years beginning after December 15, 2020.

 

 

 

ASU 2016-14

Not-For-Profit Entities

In August of 2016, the FASB issued Accounting Standards Update 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements for Not-for-Profit Entities (the “Standard”). The Standard establishes the new financial reporting framework for not-for-profit organizations. The update will result in changes to the presentation of the statements of financial position, activities, and cash flows. The new guidance reduces the classification of net assets to two categories: (1) net assets without donor restrictions and (2) net assets with donor restriction. It also changes the classification and accounting for underwater endowments. The Standard requires enhanced net asset disclosures which include information about the timing, nature of restrictions, and composition of the net assets with donor restrictions. Enhanced disclosures are also required for board designated net assets, which are classified as net assets without donor restrictions.

To improve the transparency and utility of liquidity information provided in not-for-profit financial statements, the Standard requires disclosure of quantitative and qualitative liquidity information, including how an entity manages liquidity risk and disclosures about availability of assets to meet cash needs within one year of the balance sheet date.

Changes to the statement of activities includes a requirement to report the total change in net assets and the changes in each of the two new classes of nets assets described above. All nonprofits will be required to present an analysis of expenses by function and by natural classification. This can be done on the face of the statement of activities, in a separate statement, or in the footnotes to the financial statements. The statement of cash flows may continue to be presented using the direct or indirect method. If the direct method is adopted, the organization is no longer required to include the indirect method reconciliation.

Date of Effectiveness

All-for fiscal years beginning after December 15, 2017.

 

  

ASU 2016-15

Statement of Cash Flows

In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230), which provides clarification on how certain transactions should be classified and presented in the statement of cash flows. These transactions includes debt prepayment or debt extinguishment costs, settlement of zero-coupon or insignificant interest rate debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization Transactions, separately identifiable cash flows and application of the predominance principle.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2017.
Private – for fiscal years beginning after December 15, 2018.

 

 

ASU 2016-16

Income Taxes

In October 2016, the FASB issued Accounting Standards Update 2016-16, Income Taxes (Topic 740). This update allows entity to recognize income tax consequences of an intra-entity transfer of an asset other than inventory at the time when transfer occurs. Two common examples of assets included in the scope are intellectual property and property, plant, and equipment. However, inventory remains excluded from this scope.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2017.
Private – for fiscal years beginning after December 15, 2018.

 

 

ASU 2016-18

Statement of Cash Flows

In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230). This update require that a statement of cash flows explain the change during the period to also include restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2017.
Private – for fiscal years beginning after December 15, 2018.

  

 

ASU 2017-01

Business Combinations

In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combination, to clarify and provide guidances to differentiate between asset purchase and a business combination. The amendment provides a screen to determine when a set of assets is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, the amendment in this Update (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2017.
Private – for fiscal years beginning after December 15, 2018.

 

  

ASU 2017-04

Goodwill and Other

In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles – Goodwill and Other (Topic 350). This eliminated Step 2 of goodwill impairment testing, which had required an entity to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unity had been acquired in a business combination. Instead, an entity will merely compare the entity’s fair value with its carrying value.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2020.
Private – for fiscal years beginning after December 15, 2021.

   

 

ASU 2017-05

Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets

In February 2017, the FASB issued Accounting Standards update 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets. The update provides additional guidance to the real estate industry surrounding revenue recognition by introducing the following:
– Further define what “in substance nonfinancial asset” represents
– Unifies guidance related to partial sales of nonfinancial assets
– Eliminates rules specifically addressing sales of real estate
– Removes exceptions to the financial asset derecognition model
– Clarifies the accounting for contributions of nonfinancial assets to joint ventures

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2018.
Private – for fiscal years beginning after December 15, 2019.

 

 

ASU 2017-06

Plan Accounting

In February 2017, the FASB issued Accounting Standards update 2017-06, Plan Accounting, to eliminate diversity of industry practice by prescribing the following:
1) A plan’s interest in a master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively.
2) Removes the requirement to disclose the percentage interest in the master trust for plans with divided interests and require that all plans disclose the dollar amount of their interest in each of those general types of investments.
3) All plans must disclose (1) their master trust’s other asset and liability balances and (2) the dollar amount of the plan’s interest in each of those balances.
4) Do not require investment disclosures relating to the 401 (h) account assets be provided in the health and welfare benefit plan’s financial statements.

Date of Effectiveness

All – fiscal years beginning after December 15, 2018.

 

  

ASU 2017-07

Compensation  – Retirement Benefits

In March 2017, the FASB issued Accounting Standards update 2017-07, Compensation – Retirement Benefits, which require an employer report the service cost component in the same line items of items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2017.
Private – for fiscal years beginning after December 15, 2018.

 

  

ASU 2017-08

Receivables – Nonrefundable Fees and Other Costs

In March 2017, the FASB issued Accounting Standards update 2017-08, Receivables – Nonrefundable Fees and Other Costs, which shortened the amortization period for certain callable debt securities held at a premium by requiring it to be amortized to the earliest call date.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2018.
Private – for fiscal years beginning after December 15, 2019.

 

  

ASU 2017-09

Compensation – Stock Compensation

In May 2017, the FASB issued Accounting Standards update 2017-09, Compensation – Stock Compensation, to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The update requires an entity to account for effects of modification unless all of the following are met:
1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified.
2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.
3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.

Date of Effectiveness

All – for fiscal periods beginning after December 15, 2017

 

 

ASU 2017-11

Earnings per Share

In July 2017, FASB issued Accounting Standards update 2017-11, provided additional guidance over the proper accounting treatment of complex financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. This amendment provides guidance over the classification and the recognition of the effects on earnings per share (EPS) of financial instruments with down round features.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2018.
Private – for fiscal years beginning after December 15, 2019.

 

  

ASU 2017-12

Derivatives and Hedging

In August 2017, FASB issued Accounting Standards update 2017-12, Derivatives and Hedging, to help improve the accounting for derivatives designated as hedges. The guidance improves this by:

  1. Providing more hedging strategies eligibility for hedge accounting
  2. Allowing public entities, public not-for-profit, and financial institutions till the end of the first quarter in which hedge is designated to perform an initial assessment. All other entities will have until their financial statements are available to be issued.
  3. Permits qualitative effectiveness assessments for certain hedges instead of quantitative test after the initial qualification test.
  4. For cash flow hedges, if hedge is highly effective, all changes in the fair value will be recorded in OCI and reclassified to earnings when hedged item impacts earnings.
  5. Changes in fair value of the derivative will be recorded against the same income statement line item as the earnings effect of the hedged item.
  6. Allows for cross-currency basis spreads to be excluded from the assessment of hedge effectiveness.
  7. Additional disclosure include cumulative basis adjustments for fair value hedges and the effect of hedging on individual income statement line items.

Date of Effectiveness

Public – for fiscal years beginning after December 15, 2018.

Private – for fiscal years beginning after December 15, 2019.

 

ASU 2017-14

Codification Improvements to Topic 995, U.S. Steamship Entities

In November 2017, FASB issued Accounting Standards update 2017-14, which eliminates an old Topic 995, U.S. Steamship Entities, as it is no longer relevant. The update states that if an entity has unrecognized income taxes related to statutory deposits made on or before December 15, 1992, the entity would be required to recognize the unrecognized income taxes in accordance with Topic 740.

Date of Effectiveness

All – fiscal years beginning after December 15, 2018.