quarterly review (06/2016) - kpmg institutes · quarterly review june 2016 ©2016 kpmg ... applying...
TRANSCRIPT
SummaryThe following discussion of Accounting Matters and SEC Filing and Disclosure Matters reminds entities of recently issued financial reporting guidance that may affect their financial statements in the second calendar quarter of 2016 or future periods. This summary generally does not address issues or activities for which accounting and financial reporting guidance is being developed. Readers should refer to final rules and standards for complete descriptions of the new requirements and their respective transition provisions.
The matters addressed in Part A may be applicable in the second quarter of 2016 or future periods for public entities with a calendar year end. Part B includes summaries of accounting matters that generally became effective in previous periods for public entities with a calendar year end, but may be effective in the current or future periods for public entities with fiscal year ends other than a calendar year end and nonpublic entities. Public entities that do not have a calendar year end and nonpublic entities should consider the items described in Part B.
Additionally, KPMG’s Quarterly Outlook publication provides insights about key developments that may affect an entity's accounting and financial reporting in the current or future periods.
Contents
I. Accounting Matters 7
II. SEC Filing andDisclosure Matters 40
Part B Quarterly Review for Public Entities with Fiscal Year Ends Other Than a Calendar Year End and Nonpublic Entities 49
Quarterly ReviewJune 2016
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Part A
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
PART A ...............................................................................................................................7
I. ACCOUNTING MATTERS .........................................................................................7
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (ASC 105) AND
OTHER GENERAL ACCOUNTING MATTERS .....................................................7
Economic Developments in Puerto Rico [UPDATED] ...........................................7 ASU 2016-03, Effective Date and Transition Guidance (a consensus of the
Private Company Council) .......................................................................................9
PRESENTATION OF FINANCIAL STATEMENTS (ASC 205) ..............................9 ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue
as a Going Concern .................................................................................................9
STATEMENT OF CASH FLOWS (ASC 230) ...........................................................9
Lessee Reporting of Tenant Improvement Allowances on the Statement of Cash
Flows [NEW] ...........................................................................................................9
INVESTMENTS—EQUITY METHOD AND JOINT VENTURES (ASC 323) .....10 ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting ...10
FINANCIAL INSTRUMENTS—CREDIT LOSSES (ASC 326) .............................11 ASU 2016-13, Measurement of Credit Losses on Financial Instruments [NEW] 11
INVENTORY (ASC 330) ..........................................................................................11 ASU 2015-11, Simplifying the Measurement of Inventory ....................................11
LIABILITIES (ASC 405) ..........................................................................................12
ASU 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value
Products (a consensus of the FASB Emerging Issues Task Force) .......................12
REVENUE FROM CONTRACTS WITH CUSTOMERS (ASC 606) .....................12 ASU 2014-09, Revenue from Contracts with Customers; ASU 2015-14, Deferral
of the Effective Date; and ASU 2016-11, Rescission of SEC Guidance Because of
Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff
Announcements at the March 3, 2016 EITF Meeting [UPDATED] ......................12 ASU 2016-12, Narrow-Scope Improvements and Practical Expedients [NEW] ..13
ASU 2016-10, Identifying Performance Obligations and Licensing [NEW] ........13 ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross
versus Net) .............................................................................................................14
COMPENSATION—RETIREMENT BENEFITS (ASC 715) .................................14
Contingent Liability Considerations Resulting from Implementing the Patient
Protection and Affordable Care Act ......................................................................14 Techniques for Computing Service Cost and Interest Cost Components of Net
Periodic Benefit Cost .............................................................................................15
COMPENSATION—STOCK COMPENSATION (ASC 718) ................................16 ASU 2016-09, Improvements to Employee Share-Based Payment Accounting ....16
INCOME TAXES (ASC 740) ...................................................................................16
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Consolidated Appropriations Act, 2016 ................................................................16
ASU 2015-17, Balance Sheet Classification of Deferred Taxes ...........................17
BUSINESS COMBINATIONS (ASC 805) ...............................................................17 ASU 2014-18, Accounting for Identifiable Intangible Assets in a Business
Combination (a consensus of the Private Company Council) ...............................17
CONSOLIDATION (ASC 810) ................................................................................18 Applying FASB ASC Subtopic 810-10 to Nonregistered Series Investment
Vehicles..................................................................................................................18 SEC Staff Speech about Applying ASU 2015-02 Consolidation Guidance ..........19
DERIVATIVES AND HEDGING (ASC 815) ..........................................................19 Considering Common Embedded Floors in Cash Flow Hedges [NEW] ...............19 ASU 2016-06, Contingent Put and Call Options in Debt Instruments (a consensus
of the FASB Emerging Issues Task Force)............................................................20 ASU 2016-05, Effect of Derivative Contract Novations on Existing Hedge
Accounting Relationships (a consensus of the FASB Emerging Issues Task
Force) .....................................................................................................................21 Accounting Considerations Related to Credit Risk Transfer Securities Issued by
Fannie Mae and Freddie Mac ................................................................................21 Potential Effect of CME Rule Change Related to Variation Margin.....................22
FINANCIAL INSTRUMENTS (ASC 825) ...............................................................23
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial
Liabilities ...............................................................................................................23
FOREIGN CURRENCY MATTERS (ASC 830) .....................................................23 Venezuelan Government Moves to Dual System of Exchange Rates and Devalues
Currency .................................................................................................................23
INTEREST (ASC 835) ..............................................................................................24
Treatment of Discounts, Premiums, Issuance Costs, and Penalties Related to Debt
Due on Demand [NEW].........................................................................................24
LEASES (ASC 840) ..................................................................................................25
Determining Whether a Lighting-as-a-Service Arrangement Contains a Lease
[NEW] ....................................................................................................................25
LEASES (ASC 842) ..................................................................................................26 ASU 2016-02, Leases (Topic 842).........................................................................26
TRANSFERS AND SERVICING (ASC 860) ..........................................................26
Transfers of Financial Assets [NEW] ....................................................................27
Accounting for Retained Servicing Rights When an Entity’s Contingent Call
Option Is Exercisable, and When It Is Exercised ..................................................27
EXTRACTIVE ACTIVITIES—OIL AND GAS (ASC 932) ....................................28 Considerations Associated with a Low Commodity Price Environment
[UPDATED] .........................................................................................................28
FINANCIAL SERVICES (ASC 940, 942, 944, 946, 948, AND 950) ......................29
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Mortgage Banking Entities and Depository Institutions Subject to New HUD
Compliance Reporting Requirements ....................................................................29 OCC Issues Semiannual Risk Perspective (Fall 2015) ..........................................29 OCC Issues September 2015 Bank Accounting Advisory Series ...........................31
DEFINED BENEFIT PENSION PLANS, DEFINED CONTRIBUTION PENSION
PLANS, AND HEALTH AND WELFARE BENEFIT PLANS (ASC 960, 962,
AND 965) ...................................................................................................................32 ASU 2015-12, (Part I) Fully Benefit-Responsive Investment Contracts, (Part II)
Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient
(consensuses of the FASB Emerging Issues Task Force) ......................................32
GOVERNMENTAL ..................................................................................................32 GASB Statement No. 82, Pension Issues, an amendment of GASB Statements No.
67, No. 68, and No. 73 [NEW] ..............................................................................32 GASB Issues Implementation Guide No. 2016-1 ..................................................33 GASB Statement No. 81, Irrevocable Split-Interest Agreements..........................33
GASB Statement No. 80, Blending Requirements for Certain Component Units,
an amendment of GASB Statement No. 14 .............................................................33
GASB Statement No. 79, Certain External Investment Pools and Pool
Participants ............................................................................................................34 GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer
Defined Benefit Pension Plans...............................................................................34 GASB Statement No. 77, Tax Abatement Disclosures ..........................................34
GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting
Principles for State and Local Governments .........................................................35 GASB Statement No. 75, Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions ....................................................35
GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans
Other Than Pension Plans .....................................................................................35 GASB Statement No. 73, Accounting and Financial Reporting for Pensions and
Related Assets That Are Not within the Scope of GASB Statement 68, and
Amendments to Certain Provisions of GASB Statements 67 and 68 .....................36
GASB Statement No. 72, Fair Value Measurement and Application ...................36 FASAB Statement of Federal Financial Accounting Standards 47, Reporting
Entity ......................................................................................................................36
INSURANCE .............................................................................................................37 Effective Date of Principles Based Reserving [NEW] ..........................................37 Oklahoma Third Party Administrator Report [NEW] ...........................................37
NAIC Updates Publication about States’ Prescribed Differences .........................37 SEC Comment Letters to Insurers Expected to Focus on Fair Value Disclosures 38 ASU 2015-09, Disclosures about Short Duration Contracts and AICPA Technical
Practice Aid on Required Supplementary Information ..........................................39
II. SEC FILING AND DISCLOSURE MATTERS ......................................................40
SEC FINAL RULES & GUIDANCE ........................................................................40
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SEC Adopts Final Rule for Payments by Resource Extraction Issuers [NEW] ....40
SEC Rules Allow Form 10-K Summary with Cross-References [NEW]..............40 Updated C&DIs: SEC Staff Warns about Non-GAAP Financial Measures
[NEW] ....................................................................................................................41
SEC Amendments Implement JOBS Act and FAST Act [NEW] .........................41 SEC Releases Compliance and Disclosure Interpretations Related to SEC
Regulation AB [NEW] ...........................................................................................42 SEC Adopts Business Conduct Standards for Security-Based Swap Dealers and
Major Security-Based Swap Participants [NEW] ..................................................42
SEC Permits Crowdfunding; Related SEC Guides [UPDATED] .........................43 SEC Adopts Cross-Border Security-Based Swap Rules for Activity in the United
States ......................................................................................................................44 SEC Amends Money Market Fund Rules; Form Also Revised ............................44
SEC Adopts Rule for Pay Ratio Disclosure ...........................................................45 Regulators Finalize Risk-Retention Rule for ABS ................................................45
SEC Adopts Asset-Backed Securities Reform Rules ............................................46
OTHER SEC FILING AND DISCLOSURE MATTERS .........................................46
SEC Allows Inline XBRL [NEW] .........................................................................46 SEC Reporting Matters Discussed at March 2016 Center for Audit Quality SEC
Regulations Committee Meeting [NEW]...............................................................47
PART B .............................................................................................................................49
ACCOUNTING MATTERS ...........................................................................................49
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (ASC 105) AND
OTHER GENERAL ACCOUNTING MATTERS ...................................................49
ASU 2015-10, Technical Corrections and Improvements .....................................49
PRESENTATION OF FINANCIAL STATEMENTS (ASC 205) ............................49
ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals
of Components of an Entity ....................................................................................49
INCOME STATEMENT (ASC 225) .........................................................................50 ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the
Concept of Extraordinary Items [UPDATED] ......................................................50
EARNINGS PER SHARE (ASC 260) ......................................................................51 ASU 2015-06, Effects on Historical Earnings per Unit of Master Limited
Partnership Dropdown Transactions (a consensus of the FASB Emerging Issues
Task Force) ............................................................................................................51
RECEIVABLES (ASC 310) ......................................................................................51 ASU 2014-14, Classification of Certain Government-Guaranteed Mortgage
Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force)
................................................................................................................................51
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ASU 2014-04, Reclassification of Residential Real Estate Collateralized
Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB
Emerging Issues Task Force) .................................................................................52
INVESTMENTS—EQUITY METHOD AND JOINT VENTURES (ASC 323) .....52
ASU 2014-01, Accounting for Investments in Qualified Affordable Housing
Projects (a consensus of the FASB Emerging Issues Task Force) ........................52
INTANGIBLES - GOODWILL AND OTHER (ASC 350) ......................................52 ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing
Arrangement ..........................................................................................................52
AICPA Technical Practice Aid Addresses a Not-for-Profit Entity with a For-Profit
Subsidiary and Adopting ASU 2014-02 about Goodwill ......................................53 ASU 2014-02, Accounting for Goodwill (a consensus of the Private Company
Council)..................................................................................................................53
COMPENSATION-RETIREMENT BENEFITS (ASC 715) ...................................54 ASU 2015-04, Practical Expedient for the Measurement Date of an Employer’s
Defined Benefit Obligation and Plan Assets ..........................................................54
COMPENSATION—STOCK COMPENSATION (ASC 718) ................................55
ASU 2014-12, Accounting for Share-Based Payments When the Terms of an
Award Provide That a Performance Target Could Be Achieved after the Requisite
Service Period ........................................................................................................55
INCOME TAXES (ASC 740) ...................................................................................55 ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward
Exists (a consensus of the FASB Emerging Issues Task Force) ............................55
BUSINESS COMBINATIONS (ASC 805) ...............................................................55 ASU 2015-16, Simplifying the Accounting for Measurement-Period
Adjustments ............................................................................................................56
CONSOLIDATION (ASC 810) ................................................................................56 ASU 2015-02, Amendments to the Consolidation Analysis...................................56
ASU 2014-13, Measuring the Financial Assets and the Financial Liabilities of a
Consolidated Collateralized Financing Entity (a consensus of the FASB
Emerging Issues Task Force) .................................................................................57 ASU 2014-07, Applying Variable Interest Entities Guidance to Common Control
Leasing Arrangements (a consensus of the Private Company Council) ................57
DERIVATIVES AND HEDGING (ASC 815) ..........................................................58
ASU 2014-16, Determining Whether the Host Contract in a Hybrid Financial
Instrument Issued in the Form of a Share Is More Akin to Debt or Equity (a
consensus of the FASB Emerging Issues Task Force) and ASU 2016-11,
Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09
and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF
Meeting [UPDATED] ............................................................................................58
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ASU 2014-03, Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate
Swaps—Simplified Hedge Accounting Approach (a consensus of the Private
Company Council) .................................................................................................58
FAIR VALUE MEASUREMENT (ASC 820) ..........................................................59
ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net
Asset Value per Share (or Its Equivalent) (a consensus of the FASB Emerging
Issues Task Force) [UPDATED] ...........................................................................59
FOREIGN CURRENCY MATTERS (ASC 830) .....................................................60 ASU 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment
upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign
Entity or of an Investment in a Foreign Entity (a consensus of the FASB
Emerging Issues Task Force) .................................................................................60
INTEREST (ASC 835) ..............................................................................................60 ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs and ASU
2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs
Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs
Pursuant to Staff Announcement at June 18, 2015 EITF Meeting ........................60
Potential Income Statement Effect of Applying New Debt Issuance Guidance to
Foreign Currency Denominated Debt ....................................................................61
SERVICE CONCESSION ARRANGEMENTS (ASC 853) ....................................62
ASU 2014-05, Service Concession Arrangements (a consensus of the FASB
Emerging Issues Task Force) .................................................................................62
TRANSFERS AND SERVICING (ASC 860) ..........................................................62 ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings,
and Disclosures ......................................................................................................62
DEVELOPMENT STAGE ENTITIES (ASC 915) ...................................................63
ASU 2014-10, Elimination of Certain Financial Reporting Requirements,
Including an Amendment to Variable Interest Entities Guidance in Topic 810,
Consolidation .........................................................................................................63
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PART A
I. ACCOUNTING MATTERS
The items in this section may be applicable for all entities. The accounting guidance is
effective in the current period or could require a registrant to disclose, under SEC Staff
Accounting Bulletin No. 74 (SAB Topic 11-M), the potential effects on the registrant's
financial statements of accounting standards that have been issued and that will be
adopted in a future period. This section includes:
Items that may be effective in the second quarter of 2016 for a calendar year end
public entity.
Items that are not yet effective but may require SAB 74 disclosures in the current
period.
Part B summarizes certain accounting matters that generally became effective in
previous periods (including prior interim periods) for public entities with a calendar year
end but may be reflected for the first time or be subject to SAB 74 disclosures in financial
statements for other entities. Accordingly, the items in Part B may represent new
matters for public entities with fiscal year ends other than a calendar year end and for
nonpublic entities.
Title
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (ASC 105) AND OTHER
GENERAL ACCOUNTING MATTERS
Economic
Developments in
Puerto Rico
[UPDATED]
Applies to: Entities with investments in debt securities issued by the
government of Puerto Rico, or other entities affected by the economic
conditions in Puerto Rico
Summary: Puerto Rico continues to be in a state of economic
uncertainty.
On May 2, 2016, this U.S. territory missed a $370 million bond
payment, the largest in a series of missed payments since 2015.
On June 30, 2016, U.S. Congress and President Obama approved
legislation1 to assist Puerto Rico with its $70 billion debt crisis. The bill
includes no federal funding to reduce the debt, and establishes a
financial control board appointed by Congress and the President. The
oversight board has powers to approve Puerto Rico's annual budget,
manage the territory’s fiscal affairs, and oversee negotiations to
restructure the debt.
1 H.R.4900 - Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA)
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On July 1, 2016, Puerto Rico failed to repay approximately half of the
$2 billion in bond payments that were due, marking the
commonwealth’s first ever default on its constitutionally guaranteed
debt. The overdue amount includes approximately $800 million of
general obligation bonds, which are supposed to be protected by Puerto
Rico’s constitution. While the legislation approved on June 30 did not
provide a method to avoid the default, the law provides a stay against
litigation from investors and creditors.
As a result of these events and continued economic uncertainty, entities
such as municipal bond funds, hedge funds, banks, and insurance
companies likely will have significant risk exposure to Puerto Rico
general obligation bonds and securities issued by public corporations
that provide critical services on the island, including electric power,
building, road, and water and sewer authorities.
Entities that have investments in the debt securities issued by the
government of Puerto Rico, including related agencies or other
governmental issuing authorities, have investments in debt and equity
securities issued by other types of entities that may be affected by
conditions in Puerto Rico, or otherwise may be affected by those
economic conditions may need to address potential issues related to
recent events, including determining:
Fair value of these securities and whether fair value measurements
or inputs to those measurements continue to be observable, which
may affect the appropriate level in the fair value hierarchy.
Whether investment securities were other-than-temporarily impaired
at the reporting date. The impairment assessment should take into
account characteristics of individual securities including:
- Legal protections afforded to holders of the security;
- Whether the security is guaranteed by an insurance company, the
financial position of the insurance company, and its ability to
honor claims under the guarantee; and
- Public information about whether the government intends to pay
principal and interest, or government intentions that may affect a
public company issuer’s ability to make scheduled principal and
interest payments.
The appropriate disclosures about risks and uncertainties related to
financial and nonfinancial exposures in Puerto Rico.
Effective Date: For immediate consideration.
Links: None
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ASU 2016-03,
Effective Date and
Transition
Guidance (a
consensus of the
Private Company
Council)
Applies to: All private entities
Summary: ASU 2016-03 eliminates the effective dates for four private
company accounting alternatives developed by the Private Company
Council (PCC). The ASU allows a private company to elect any of the
PCC alternatives at the beginning of any annual reporting period for the
first time without assessing preferability.
Effective Date: ASU 2016-03 was effective on issuance, which allows
a private company to adopt, for the first time, any of the four private
company accounting alternatives as of the beginning of:
Its 2015 annual reporting period (or prior annual reporting periods)
as long as those financial statements have not yet been made
available for issuance; or
Any subsequent annual period.
Links: ASU 2016-03, Defining Issues 16-8, and Podcast
PRESENTATION OF FINANCIAL STATEMENTS (ASC 205)
ASU 2014-15,
Disclosure of
Uncertainties
about an Entity’s
Ability to
Continue as a
Going Concern
Applies to: All entities
Summary: This ASU describes how an entity should assess its ability
to meet obligations and sets requirements for how this information
should be disclosed in the financial statements. The standard provides
accounting guidance that will be used with existing auditing standards.
Effective Date: The new standard applies to all entities for the first
annual period ending after December 15, 2016, and interim periods
thereafter.
Links: ASU 2014-15, FASB In Focus, Defining Issues 14-40, and
Podcast
STATEMENT OF CASH FLOWS (ASC 230)
Lessee Reporting
of Tenant
Improvement
Allowances on the
Statement of
Cash Flows
[NEW]
Applies to: All entities
Summary: A lessee may enter into an operating lease in which the
landlord provides a tenant improvement allowance. The allowance may
be paid directly to the lessee or to a third party on the lessee’s behalf
when the lessee presents invoices that evidence improvement costs
incurred. Additionally, assume that the lessee concluded that the
improvements are the lessee’s assets for accounting purposes rather than
assets of the lessor. Under FASB ASC paragraph 840-20-55-3, the
allowance is reported by the lessee as a liability and amortized straight
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line over the lease term as a reduction of rent expense. The lessee
capitalizes the related leasehold improvements at full cost and
depreciates them over the shorter of their useful lives or the lease term.
FASB ASC Topic 230, Statement of Cash Flows, requires a lessee to
present expenditures for leasehold improvements as cash outflows for
investing activities. Thus, a lessee should present as cash inflows from
operating activities a cash allowance received from the landlord or paid
to a third party on the lessee’s behalf. That is, the cash allowance from
the lessor is accounted for as an adjustment of rent expense. ASC Topic
230 does not identify rent payments on operating leases as investing or
financing activities. FASB ASC subparagraph 230-10-45-16(c)
indicates that cash inflows from operating activities include cash
receipts that do not stem from transactions defined as investing or
financing activities. The SEC staff expressed the same views in a
February 7, 2005 letter to the Center for Public Company Audit Firms.
FASB ASC Topic 842, Leases, will change the way tenant improvement
allowances are presented on the balance sheet for operating leases.
Allowances received from a lessor will reduce the initial measurement
of the lessee’s right-of-use asset, as opposed to being recognized as a
separate liability.
Effective Date: For immediate consideration.
Links: None
INVESTMENTS—EQUITY METHOD AND JOINT VENTURES (ASC 323)
ASU 2016-07,
Simplifying the
Transition to the
Equity Method of
Accounting
Applies to: All entities
Summary: ASU 2016-07, which was issued as part of the FASB’s
simplification initiative, eliminates the requirement for an investor to
retroactively apply the equity method when its increase in ownership
interest (or degree of influence) in an investee triggers equity method
accounting.
Effective Date: The ASU is effective for all entities in annual and
interim periods in fiscal years beginning after December 15, 2016. Early
adoption is permitted.
The new guidance will be applied prospectively to changes in
ownership (or influence) after the adoption date.
Links: ASU 2016-07, Defining Issues 16-9, and Podcast
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
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FINANCIAL INSTRUMENTS—CREDIT LOSSES (ASC 326)
ASU 2016-13,
Measurement of
Credit Losses on
Financial
Instruments
[NEW]
Applies to: All entities
Summary: ASU 2016-13 significantly changes how companies
measure and recognize credit impairment for many financial assets. The
new current expected credit loss model will require companies to
immediately recognize an estimate of credit losses expected to occur
over the remaining life of the financial assets that are in the scope of the
standard. The ASU also makes targeted amendments to the current
impairment model for available-for-sale debt securities.
Effective Date:
Public business entities that are SEC filers: Annual and interim
periods in fiscal years beginning after December 15, 2019.
Public business entities that are not SEC filers: Annual and
interim periods in fiscal years beginning after December 15, 2020.
All other entities: Annual periods in fiscal years beginning after
December 15, 2020, and interim periods in fiscal years beginning
after December 15, 2021.
All entities may early adopt the standard for annual and interim periods
in fiscal years beginning after December 15, 2018.
Links: ASU 2016-13, Defining Issues 16-23, Webcast Replay, and
Latest on Financial Instruments
INVENTORY (ASC 330)
ASU 2015-11,
Simplifying the
Measurement of
Inventory
Applies to: All entities
Summary: ASU 2015-11 changes the measurement principle for
inventory from the lower of cost or market to lower of cost and net
realizable value for entities that do not measure inventory using the last-
in, first-out or retail inventory method. The ASU also eliminates the
requirement for these entities to consider replacement cost or net
realizable value less an approximately normal profit margin when
measuring inventory.
Effective Date: The ASU is effective for public business entities for
annual and interim periods in fiscal years beginning after December 15,
2016. It is effective for all other entities for annual periods in fiscal
years beginning after December 15, 2016, and interim periods in fiscal
years beginning after December 15, 2017. The ASU requires
prospective adoption and permits early adoption.
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Links: ASU 2015-11, Defining Issues 15-33, and Podcast
LIABILITIES (ASC 405)
ASU 2016-04,
Recognition of
Breakage for
Certain Prepaid
Stored-Value
Products (a
consensus of the
FASB Emerging
Issues Task
Force)
Applies to: All entities
Summary: ASU 2016-04 provides a narrow scope exception to the
guidance in FASB ASC Subtopic 405-20, Liabilities – Extinguishments
of Liabilities, which allows entities to recognize breakage on prepaid
stored-value products consistent with how breakage is recognized under
the new revenue standard. The exception applies to prepaid stored-value
products in physical or digital form, with stored monetary values that
are redeemable for goods and services, including those that can be
redeemed for cash (e.g., prepaid gift cards issued on a specific payment
network and redeemable at network-accepting merchant locations,
prepaid telecommunication cards, and traveler’s checks).
Effective Date: ASU 2016-04 is effective for public business entities,
certain not-for-profit entities, and certain employee benefit plans in
annual and interim periods in fiscal years beginning after December 15,
2017. For all other entities, the ASU is effective for annual periods in
fiscal years beginning after December 15, 2018, and interim periods in
fiscal years beginning after December 15, 2019. Early adoption is
permitted, including adoption in an interim period.
Entities may adopt the ASU using either a modified retrospective
transition approach, with a cumulative catch-up adjustment to opening
retained earnings in the period of adoption, or a full retrospective
transition method.
Links: ASU 2016-04, Defining Issues 15-53, Webcast Replay, and
Podcast
REVENUE FROM CONTRACTS WITH CUSTOMERS (ASC 606)
ASU 2014-09,
Revenue from
Contracts with
Customers; ASU
2015-14, Deferral
of the Effective
Date; and ASU
2016-11,
Rescission of SEC
Guidance Because
Applies to: All entities
Summary: ASU 2014-09 is the FASB’s new revenue standard resulting
from its joint project with the IASB. The ASU provides a five-step
analysis of transactions to determine when and how revenue is
recognized. The ASU will require many companies to use more
judgment than under current U.S. GAAP.
In August 2015, the FASB issued ASU 2015-14, which defers by one
year the mandatory effective date of its revenue recognition standard,
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International"), a Swiss entity. All rights reserved.
of Accounting
Standards
Updates 2014-09
and 2014-16
Pursuant to Staff
Announcements
at the March 3,
2016 EITF
Meeting
[UPDATED]
and provides entities the option to adopt the standard as of the original
effective date.
In May 2016, the FASB issued ASU 2016-11, which rescinds certain
SEC Observer comments that are codified in FASB ASC Topics 605,
Revenue Recognition, and 932, Extractive Activities—Oil and Gas.
Also in May 2016, KPMG issued:
Revenue: Issues-In Depth (2nd Edition), which was updated for the
latest standard-setting, additional insights, and more extensive
examples.
Illustrative Disclosures – Revenue, which demonstrates how one
fictitious company has navigated the complexities of the revenue
disclosure requirements.
Effective Date: Public business entities are required to adopt ASU
2014-09 in annual and interim periods in fiscal years beginning after
December 15, 2017. All other entities are required to adopt the new
standard in annual periods in fiscal years beginning after December 15,
2018, and interim periods in fiscal years beginning after December 15,
2019. Early application is permitted for all entities, but not before
annual reporting periods beginning after December 15, 2016.
Rescission of the SEC staff guidance is effective on adoption of ASU
2014-09.
Links: ASU 2014-09, ASU 2015-14, ASU 2016-11, and Latest on
Revenue Recognition
ASU 2016-12,
Narrow-Scope
Improvements and
Practical
Expedients
[NEW]
Applies to: All entities
Summary: ASU 2016-12 makes narrow-scope amendments to ASU
2014-09, Revenue from Contracts with Customers, and provides
practical expedients to simplify the transition to the new standard and to
clarify certain aspects of the standard.
Effective Date: ASU 2016-12 is effective on adoption of ASU 2014-09.
Links: ASU 2016-12 and Defining Issues 16-17
ASU 2016-10,
Identifying
Performance
Obligations and
Licensing [NEW]
Applies to: All entities
Summary: ASU 2016-10 amends the guidance in ASU 2014-09,
Revenue from Contracts with Customers, about identifying performance
obligations and accounting for licenses of intellectual property.
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Effective Date: ASU 2016-10 is effective on adoption of ASU 2014-09.
Links: ASU 2016-10 and Defining Issues 16-13
ASU 2016-08,
Principal versus
Agent
Considerations
(Reporting
Revenue Gross
versus Net)
Applies to: All entities
Summary: ASU 2016-08 amends the principal versus agent guidance in
ASU 2014-09, Revenue from Contracts with Customers, and clarifies
that the analysis must focus on whether the entity has control of the
goods or services before they are transferred to the customer.
Effective Date: ASU 2016-08 is effective on adoption of ASU 2014-09.
Links: ASU 2016-08 and Defining Issues 16-10
COMPENSATION—RETIREMENT BENEFITS (ASC 715)
Contingent
Liability
Considerations
Resulting from
Implementing the
Patient
Protection and
Affordable Care
Act
Applies to: All entities
Summary: Beginning in 2016, there is the potential under the Patient
Protection and Affordable Care Act (ACA) for a large employer
(defined as a group of related employers with an aggregate of 50 or
more full-time U.S. employees) to pay two significant, increased
penalties. Companies should consider the requirements of the ACA
when determining whether to accrue for the estimated penalties under
FASB ASC Topic 450, Contingencies.
One penalty is imposed if an employer does not offer minimum
essential healthcare coverage to at least 95% of its full-time employees
and even one full-time employee receives subsidized coverage on a state
or federal exchange. This penalty would be imposed on the total number
of full-time employees, not just those who received subsidized coverage
and not just those who were not offered coverage. This penalty can be
up to $2,160 per full-time employee in 2016.
A second penalty applies if the offered coverage meets the minimum
essential coverage but may not meet the affordability guidelines and an
employee receives subsidized coverage on a state or federal exchange.
This penalty would be imposed on the full-time employees who obtain
subsidized coverage from a state or federal exchange. This penalty can
be up to $3,240 per employee in 2016.
Effective Date: For immediate consideration.
Links: None
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Techniques for
Computing
Service Cost and
Interest Cost
Components of
Net Periodic
Benefit Cost
Applies to: All entities
Summary: Some entities are considering changes in their pension and
other postretirement benefit accounting computations by seeking to
refine the calculation of service cost and/or interest cost to yield more
representationally faithful results. To that end, some actuarial firms have
proposed a new computational technique for determining the service
cost and interest cost components of net periodic benefit cost for defined
benefit pension and OPEB plans. Various terms, including the split
discount rate approach, the spot rate approach, and the yield curve
approach, are being used to describe essentially the same computational
technique.
The traditional approach for determining the service cost and interest
cost components of net periodic benefit cost is to use the single
weighted-average discount rate derived, which represents the internal
rate of return for the calculated benefit obligation. In contrast, a split
discount rate method uses the same information used to determine the
benefit obligation; however, service cost and interest cost are
determined by multiplying the individual spot rates from the exact same
yield curve by each year’s present value of future projected benefits
expected to accrue and benefit payments. The sum of those products is
the resulting service cost and interest cost for the period. In a period in
which the yield curve is upward sloping, the split discount rate approach
will generally result in lower amounts for service and interest cost than
would be calculated using the traditional approach.
The SEC staff has indicated that it will not object if a company uses a
split discount rate method in the form of a spot rate approach to
determine interest cost. Further, the SEC staff will not object to treating
this change from the traditional method under FASB ASC Topic 715,
Compensation—Retirement Benefits, as a change in estimate under
FASB ASC Topic 250, Accounting Changes and Error Corrections, but
did indicate that an issuer cannot revert to the traditional approach. The
SEC staff also indicated that MD&A and note disclosures related to this
change should be robust and transparent.
Public companies currently using a bond matching model who believe
that they have experienced changes in facts and circumstances that
justify a change in the method of calculating the benefit obligation are
encouraged to engage in a dialogue with the SEC staff.
Effective Date: For immediate consideration.
Links: None
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
COMPENSATION—STOCK COMPENSATION (ASC 718)
ASU 2016-09,
Improvements to
Employee Share-
Based Payment
Accounting
Applies to: All entities
Summary: ASU 2016-09 was issued as part of the FASB’s
simplification initiative, and intends to improve the accounting for
share-based payment transactions. The ASU changes several aspects of
the accounting for share-based payment award transactions, including:
(1) Accounting and Cash Flow Classification for Excess Tax Benefits
and Deficiencies, (2) Forfeitures, (3) Tax Withholding Requirements
and Cash Flow Classification, and (4) Practical Expedient – Expected
Term and Intrinsic Value Measurements (nonpublic only).
Effective Date: ASU 2016-09 is effective for public business entities in
annual and interim periods in fiscal years beginning after December 15,
2016. It is effective for all other entities for annual periods in fiscal
years beginning after December 15, 2017, and interim periods in fiscal
years beginning after December 15, 2018.
Early adoption is permitted in any interim or annual period provided
that the entire ASU is adopted. If an entity early adopts the ASU in an
interim period, any adjustments should be reflected as of the beginning
of the fiscal year that includes that interim period.
The transition requirements vary for each amendment in the ASU.
Links: ASU 2016-09, Defining Issues 16-11, and Podcast
INCOME TAXES (ASC 740)
Consolidated
Appropriations
Act, 2016
Applies to: All entities
Summary: The Consolidated Appropriations Act, 2016 was signed into
law on December 18, 2015. This legislation combines and includes the
tax provisions of the Protecting Americans from Tax Hikes Act of 2015
(PATH Act) and the omnibus spending bill. Under the law, certain
provisions in the IRS Code that have expired or that were scheduled to
expire, including the research credit and the exception under Subpart F
for active financing income, were made permanent. Other expired
provisions were extended through 2016 or 2019. Certain energy
provisions were extended and will phase out over a defined schedule.
Entities should review the effect that these tax provisions may have on
their 2016 estimated annual effective income tax rate under FASB ASC
Subtopic 740-270, Income Taxes – Interim Reporting.
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Effective Date: The effects of changes in tax laws, including retroactive
changes, are recognized in the financial statements as part of continuing
operations in the period in which the changes are enacted. As the Act
was signed into law on December 18, 2015, the effects of the new law
on current and deferred tax assets and liabilities would be recognized for
financial reporting purposes as of December 18, 2015 (the fourth quarter
of 2015 for companies with calendar year-ends).
Links: None
ASU 2015-17,
Balance Sheet
Classification of
Deferred Taxes
Applies to: All entities
Summary: ASU 2015-17 requires entities with a classified balance
sheet to present all deferred tax assets and liabilities as noncurrent.
Effective Date: The ASU is effective for public business entities in
annual and interim periods in fiscal years beginning after December 15,
2016. For all other entities, the ASU is effective for annual periods in
fiscal years beginning after December 15, 2017, and interim periods in
fiscal years beginning after December 15, 2018. All entities may early
adopt the ASU at the beginning of an interim or annual period, and may
do so prospectively or retrospectively.
Links: ASU 2015-17, Defining Issues 15-55, and Podcast
BUSINESS COMBINATIONS (ASC 805)
ASU 2014-18,
Accounting for
Identifiable
Intangible Assets
in a Business
Combination (a
consensus of the
Private Company
Council)
Applies to: Private companies
Summary: ASU 2014-18 allows a private company to elect an
accounting alternative to recognize fewer intangible assets in a business
combination. A private company that elects this accounting alternative
no longer would recognize noncompetition agreements and certain
customer-related intangible assets separate from goodwill.
A private company that elects this accounting alternative also must
adopt the private company alternative to amortize goodwill under ASU
2014-02, Accounting for Goodwill. However, a private company that
elects the accounting alternative in ASU 2014-02 is not required to
adopt the amendments in this ASU.
Effective Date: As a result of ASU 2016-03, Effective Date and
Transition Guidance, a private company may adopt, for the first time,
ASU 2014-18 as of the beginning of:
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Its 2015 annual reporting period (or prior annual reporting periods)
as long as those financial statements have not yet been made
available for issuance; or
Any subsequent period.
The guidance is effective prospectively for the first transaction
identified in FASB ASC paragraph 805-20-15-12 after the adoption of
the accounting alternative.
Links: ASU 2014-18, Defining Issues 15-1, and Podcast
CONSOLIDATION (ASC 810)
Applying FASB
ASC Subtopic
810-10 to
Nonregistered
Series Investment
Vehicles
Applies to: Nonregistered series investment vehicles and similar
entities
Summary: KPMG LLP has learned that the staff in the SEC Office of
the Chief Accountant (OCA) discussed with members of the Securities
Industry and Financial Markets Association (SIFMA) how to apply the
requirements of FASB ASC Subtopic 810-10, Consolidation – Overall,
as amended by ASU 2015-02, Amendments to the Consolidation
Analysis, to nonregistered series investment vehicles and similar
entities.
The SEC staff discussed with SIFMA whether equity interests in an
umbrella legal entity that contains nonregistered series investment funds
meet the requirements of FASB ASC subparagraph 810-10-15-14(a) to
be considered at risk when the equity represents an interest in specified
assets rather than a variable interest in the entity under the provisions of
FASB ASC paragraph 810-10-25-55. Umbrella legal entities that
contain nonregistered series investment funds are often domiciled
outside of the United States. This issue is relevant when the individual
series investment funds are not considered to be legal entities.
The SEC staff indicated that it would not object to the conclusion that
equity interests do not qualify to be considered equity at risk when the
equity represents an interest in specified assets rather than a variable
interest in the entity. This generally would mean that the umbrella legal
entity would be considered a VIE, and the individual series investment
funds would be separately evaluated for consolidation as silo VIEs. For
registrants that have previously concluded that equity interests qualify to
be considered equity at risk when the equity represents an interest in
specified assets rather than a variable interest in the entity, KPMG LLP
understands that the SEC staff would not object to the registrant
changing its prior conclusion as part of the adoption of ASU 2015-02.
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
The SEC staff also indicated that it would not be able to determine
whether it would object to a registrant’s conclusion that equity interests
qualify to be considered equity at risk when the equity represents an
interest in specified assets rather than a variable interest in the entity
without considering the registrant's specific facts and circumstances in a
preclearance submission to OCA.
Effective Date: For immediate consideration.
Links: None
SEC Staff Speech
about Applying
ASU 2015-02
Consolidation
Guidance
Applies to: All public entities
Summary: At the 2015 AICPA National Conference on Current SEC
and PCAOB Developments, the staff in the SEC Office of the Chief
Accountant discussed the impact of interests in an entity held by parties
under common control with a decision maker in determining whether
the decision maker’s fee is a variable interest in the entity under FASB
ASU 2015-02, Amendments to the Consolidation Analysis. The SEC
staff view differs from prior practice. In the SEC staff’s view, an
interest in an entity held by a party under common control with a
decision maker generally should not affect the determination of whether
the decision maker’s fee is a variable interest if the decision maker does
not hold an economic interest in the party under common control. Under
this SEC staff interpretation, it is less likely that a decision maker would
be required to consolidate a VIE that it manages.
A reporting enterprise that early adopted the ASU and changes its
previous consolidation conclusions under the ASU to conform to the
SEC staff’s interpretation should treat the change as a change in
accounting principle under FASB ASC Topic 250, Accounting Changes
and Error Corrections.
See Issues In-Depth: 2015 AICPA National Conference on Current SEC
and PCAOB Developments for a more detailed discussion of the SEC
staff speech.
Effective Date: For immediate consideration.
Links: See above.
DERIVATIVES AND HEDGING (ASC 815)
Considering
Common
Embedded Floors
in Cash Flow
Hedges [NEW]
Applies to: All entities
Summary: Many variable-rate loans and debt securities are issued with
a floating benchmark rate that has a floor of zero. Typically, the floor is
added to these instruments to ensure that the lender either (1) receives a
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
minimum amount (usually the initial credit spread) or (2) never has to
pay the borrower an interest coupon. However, if a company hedges the
interest rate risk in that instrument, it is common, and less costly, for the
variable rate cash flows under the terms of the swap not to have a floor.
The embedded floor in the variable-rate loan or debt security is a source
of ineffectiveness if the swap does not have a mirror-image floor, and
should be considered when (1) applying the long-haul method of testing
effectiveness and measuring ineffectiveness or (2) assessing whether the
shortcut method applies. For example, if an entity tests hedge
effectiveness using the hypothetical derivative method, the hypothetical
perfect swap would need to incorporate terms that identically match the
critical terms of the debt instrument. Therefore, the hypothetical perfect
swap would incorporate a floor while the actual derivative hedging
instrument would not. This difference would need to be considered
when testing whether a hedging relationship is highly effective and
when measuring the amount of ineffectiveness to be recognized in the
income statement.
In the past year there has been increasing discussion about the
possibility for certain benchmark interest rates in the United States to
turn negative. While most economists suggest that this scenario remains
unlikely, the mere potential for negative interest rates will still be a
source of ineffectiveness in these circumstances. Specifically, if a
variable-rate loan has a floor of zero and the hedging derivative does not
have a corresponding mirror-image floor, the entity needs to consider
the impact on the assessment of effectiveness and measurement of
ineffectiveness.
Effective Date: For immediate consideration.
Links: None
ASU 2016-06,
Contingent Put
and Call Options
in Debt
Instruments (a
consensus of the
FASB Emerging
Issues Task
Force)
Applies to: All entities
Summary: ASU 2016-06 clarifies that determining whether the
economic characteristics of a put or call are clearly and closely related
to its debt host requires only an assessment of the four-step decision
sequence outlined in FASB ASC paragraph 815-15-25-24. Additionally,
entities are not required to separately assess whether the contingency
itself is clearly and closely related.
Effective Date: ASU 2016-06 is effective for public business entities in
interim and annual periods in fiscal years beginning after December 15,
2016. For all other entities, the ASU is effective for annual periods in
fiscal years beginning after December 15, 2017, and interim periods in
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
fiscal years beginning after December 15, 2018. Early adoption is
permitted in any interim period for which the entity’s financial
statements have not been issued, but would be retroactively applied to
the beginning of the year that includes the interim period.
The ASU requires a modified retrospective transition approach, with a
cumulative catch-up adjustment to opening retained earnings in the
period of adoption. For instruments that are eligible for the fair value
option, an entity has a one-time option to irrevocably elect to measure
the debt instrument affected by the ASU in its entirety at fair value with
changes in fair value recognized in earnings.
Links: ASU 2016-06, Defining Issues 15-53, Webcast Replay, and
Podcast
ASU 2016-05,
Effect of
Derivative
Contract
Novations on
Existing Hedge
Accounting
Relationships (a
consensus of the
FASB Emerging
Issues Task
Force)
Applies to: All entities
Summary: ASU 2016-05 clarifies that a change in one of the parties to
a derivative contract (through novation) that is part of a hedge
accounting relationship does not, by itself, require dedesignation of that
relationship, as long as all other hedge accounting criteria continue to be
met.
Effective Date: ASU 2016-05 is effective for public business entities
for annual and interim periods in fiscal years beginning after December
15, 2016. For all other entities, the ASU is effective for annual periods
in fiscal years beginning after December 15, 2017, and interim periods
in fiscal years beginning after December 15, 2018. Early adoption is
permitted, including adoption in an interim period.
Entities may adopt the ASU using either a prospective or a modified
retrospective transition approach.
Links: ASU 2016-05, Defining Issues 15-53, Webcast Replay, and
Podcast
Accounting
Considerations
Related to Credit
Risk Transfer
Securities Issued
by Fannie Mae
and Freddie Mac
Applies to: Entities that invest in credit risk transfer securities issued by
Fannie Mae and Freddie Mac
Summary: Fannie Mae and Freddie Mac expect to significantly
increase issuances of credit risk transfer securities in 2016. These
securities, which were first issued in 2013, are different from traditional
mortgage backed bonds issued by Fannie Mae and Freddie Mac, which
expose investors to only interest rate risk as the issuer protects investors
from the risk that home buyers will stop making payments on their
loans. In contrast, credit risk transfer securities (marketed as
Connecticut Avenue Securities by Fannie Mae and Structured Agency
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
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Credit Risk by Freddie Mac) expose investors to credit losses on a
reference pool of underlying residential mortgages. These securities are
unguaranteed and unsecured obligations of Fannie Mae and Freddie
Mac.
Entities should be aware that not all securities issued by Fannie Mae and
Freddie Mac contain the same terms and may result in different fair
value estimates and accounting considerations. Since payments on these
securities are linked to an underlying reference pool of mortgages,
investors who do not account for these investments as trading securities
will need to consider whether an embedded credit derivative (i.e., the
investor is exposed to credit risk of an underlying reference pool of
mortgages and not the credit risk of the issuer) needs to be bifurcated
and accounted for separately under FASB ASC Topic 815, Derivatives
and Hedging.
Effective Date: For immediate consideration.
Links: None
Potential Effect of
CME Rule
Change Related
to Variation
Margin
Applies to: Entities that account for trades cleared through the Chicago
Mercantile Exchange
Summary: In February 2015, the Chicago Mercantile Exchange (CME)
filed a notice with the SEC about a rule change that modifies the
treatment of variation margin on cleared trades. Under the rule change,
the payment of variation margin represents the daily settlement of the
outstanding exposure on the derivative contract, rather than posted
collateral. Questions have arisen about the effect of this change on the
accounting and financial reporting for trades cleared through the CME.
An entity posts two types of margin for trades cleared through the CME
(1) a one-off cash initial margin to open a position and (2) cash variation
margin based on price movements over the remaining life of the
derivative contract. Whether the payments or receipts of variation
margin represent collateral or the settlement of the derivative contract
depends on factors such as whether the contractual rights to cash flows
expired and whether the payments or receipts meet the criteria in FASB
ASC paragraph 405-20-40-1 for extinguishment of a liability.
If variation margin is considered to be a settlement of the derivative
contract for accounting purposes, it appears that the payment or receipt
of variation margin would reduce the derivative asset or liability to zero
at the end of each settlement cycle. If the derivative asset or liability has
been reduced to zero, an entity would not analyze the transaction under
FASB ASC Subtopic 210-20, Balance Sheet – Offsetting, to determine
whether it is permitted to offset the accumulated variation margin with
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
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the associated derivative balance. There also could be changes to
amounts disclosed under that ASC Subtopic.
Effective Date: For immediate consideration.
Links: None
FINANCIAL INSTRUMENTS (ASC 825)
ASU 2016-01,
Recognition and
Measurement of
Financial Assets
and Financial
Liabilities
Applies to: All entities
Summary: ASU 2016-01 significantly changes the income statement
impact of equity investments, and the recognition of changes in fair
value of financial liabilities when the fair value option is elected.
Effective Date: The ASU is effective for public business entities for
annual and interim periods in fiscal years beginning after December 15,
2017. All other entities must apply the new requirements for annual
periods in fiscal years beginning after December 15, 2018, and interim
periods in fiscal years beginning after December 15, 2019.
Early adoption is not permitted, except:
All entities may early adopt the provisions related to the recognition
of changes in fair value of financial liabilities when the fair value
option is elected (FASB ASC paragraphs 825-10-45-5 through 45-
7). This includes financial statements of annual or interim periods
that have not yet been issued or, for entities that are not public
business entities, have not yet been made available for issuance.
Entities that are not public business entities may elect to not provide
the disclosures related to fair value of financial instruments in FASB
ASC paragraphs 825-10-50-10 through 50-19. This includes
financial statements of annual or interim periods that have not yet
been made available for issuance.
Entities that are not public business entities may adopt the standard
for interim and annual periods in fiscal years beginning after
December 15, 2017.
Links: ASU 2016-01 and Defining Issues 16-1
FOREIGN CURRENCY MATTERS (ASC 830)
Venezuelan
Government
Moves to Dual
Applies to: Entities with operations in Venezuela
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
System of
Exchange Rates
and Devalues
Currency
Summary: On February 17, 2016, the Venezuelan government
announced that it eliminated the intermediate exchange rate (i.e.,
SICAD) thereby changing the country’s three-tier exchange rate system
(CENCOEX or the official rate, SICAD, and SIMADI) to a dual-rate
system (official rate and SIMADI). The Venezuelan government also
devalued its currency by changing the official rate to approximately 10
bolivars per U.S. dollar from the previous rate of 6.3. The government
also announced that beginning February 18, 2016, the SIMADI
exchange rate will be allowed to float freely beginning at a rate of
approximately 203 bolivars to the U.S. dollar.
Companies with operations in Venezuela should reconsider the
exchange rate(s) they use in 2016 to remeasure their Venezuelan
bolivar-denominated monetary assets and liabilities and related revenues
and expenses, and to assess impairment of nonfinancial assets.
Effective Date: For immediate consideration.
Links: None
INTEREST (ASC 835)
Treatment of
Discounts,
Premiums,
Issuance Costs,
and Penalties
Related to Debt
Due on Demand
[NEW]
Applies to: All entities
Summary: An increasing number of debtors, especially in the oil and
gas industry, have defaulted on their debt or are in violation of a
covenant, which often results in the debt being due on demand by the
creditor. Questions have arisen about the treatment of unamortized debt
discounts, premiums, and issuance costs, and prepayment (default)
penalties related to debt that becomes due on demand.
A debtor that is in default on debt for which the creditor has the
contractual right to demand payment should generally classify the debt
on its balance sheet as a current obligation. If the creditor notified the
debtor of its intent to call the loan, the debtor should recognize
unamortized discount, premium, and issuance costs, and prepayment
penalties during the period from the date of notification to the date on
which the debt is payable on exercise of the call.
In contrast, if the creditor does not demand payment when the debtor
violates a covenant, the debtor should evaluate the facts and
circumstances to determine the appropriate accounting for unamortized
discount, premium, and issuance costs, and prepayment penalties. For
example, if the creditor provides the debtor with a short-term (30-60
day) waiver for the covenant violation, and the parties are working
together to renegotiate the terms of the debt so that the debt would not
25 © 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
be due within a year and a day of the current period end, the waiver and
negotiations may affect the amortization period for the unamortized
discount, premium, and issuance costs, and may affect how prepayment
penalties are recognized.
Effective Date: For immediate consideration.
Links: None
LEASES (ASC 840)
Determining
Whether a
Lighting-as-a-
Service
Arrangement
Contains a Lease
[NEW]
Applies to: All entities
Summary: As a result of technological advances, there are increasing
instances in which assets previously owned and operated by an entity
subsequently become owned and managed by specialist service
providers. One type of arrangement is Lighting-as-a-Service (LaaS),
which involves third-party management of lighting systems in
commercial buildings. If the customer does not purchase the lighting
system under a LaaS arrangement, the arrangement generally takes the
form of a service contract. Therefore, an entity would apply FASB ASC
Topic 840, Leases, to determine whether the service contract contains a
lease, which would be accounted for separately from the LaaS.
There are differing views about how to apply ASC Topic 840 to LaaS
arrangements. Specifically, there are different views about how to apply
FASB ASC subparagraphs 840-10-15-6(a) and (b), which refer to (a)
the purchaser’s ability or right to operate property, plant, and equipment
(PP&E) or direct others to operate PP&E and (b) the purchaser’s ability
to control physical access to the PP&E. Debate about applying these
criteria arises when both the service provider and customer have rights
related to operating and accessing the assets.
KPMG LLP believes that LaaS arrangements generally contain a lease
under ASC Topic 840, as the customer has significant rights related to
operating the system. For example, the customer generally specifies
hours of operation and the level of brightness. The customer also
generally can direct the provider to change these specifications as long
as the changes do not interfere with the provider’s protective rights to
earn revenue, as specified in the contract. Additionally, the firm believes
that the customer controls physical access to the lighting system if it is
located and installed in the customer’s facility.
Effective Date: For immediate consideration.
Links: None
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
LEASES (ASC 842)
ASU 2016-02,
Leases (Topic
842)
Applies to: All entities
Summary: On February 25, 2016, the FASB issued ASU 2016-02,
which ushers in a new era in which lessees will recognize most leases
on-balance sheet. This will increase their reported assets and liabilities –
in some cases very significantly. Lessor accounting remains
substantially similar to current U.S. GAAP.
Various KPMG publications will help stakeholders navigate the changes
required by, and understand some of the business effects of, the new
standard:
Leases: Issues In-Depth discusses the new standard step by step,
explains what the requirements really mean, provides examples,
and gives our own observations about the requirements and
implications.
Defining Issues 16-6 discusses the widespread effects that the
new standard will have on lessees and lessors so that they can
plan for necessary business and process changes.
Summary of Similarities and Differences between New U.S.
GAAP and IFRS compares ASU 2016-02 to its international
counterpart – IFRS 16, Leases. The IASB issued IFRS 16 on
January 13, 2016 and it is effective for annual periods beginning
on or after January 1, 2019.
Executive Accounting Update – Lessees is a four-page
executive-level overview of the new lease accounting standard
from a lessee’s perspective.
Executive Accounting Update – Lessors is a four-page
executive-level overview of the new lease accounting standard
from a lessor’s perspective.
Effective Date: ASU 2016-02 is effective for public business entities,
certain not-for-profit entities, and certain employee benefit plans for
annual and interim periods in fiscal years beginning after December 15,
2018. For all other entities it is effective for annual periods in fiscal
years beginning after December 15, 2019, and interim periods in fiscal
years beginning after December 15, 2020. ASU 2016-02 mandates a
modified retrospective transition method for all entities.
Links: Latest on Leases and Webcast replays: Parts I, II, III, and IV.
TRANSFERS AND SERVICING (ASC 860)
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Transfers of
Financial Assets
[NEW]
Applies to: All entities
Summary: An entity may transfer an ownership interest in an
unconsolidated subsidiary (i.e., an equity method investment) to a third
party. Whether the transferor would evaluate that transfer for
derecognition under ASC Topic 860 depends on (1) the nature of the
unconsolidated subsidiary’s underlying assets and (2) the type of
consideration received (e.g., cash, receivables, or other assets).
ASC Topic 860 provides accounting and reporting for transfers of
financial assets. A financial asset is cash, evidence of an ownership
interest in an entity, or a contract that conveys to one entity a right to
either (1) receive cash or another financial instrument from a second
entity or (2) exchange other financial instruments on potentially
favorable terms with the second entity. ASC Topic 860 provides
examples of transactions that are within its scope, including transfers of
cost method and equity method investments. However, under FASB
ASC subparagraph 860-10-15-4(e), if the underlying assets are real
estate, the transfer of ownership interests that are in substance sales of
real estate would not be in scope. Additionally, a transfer of an
ownership interest in exchange for a different form of interest in the
same underlying assets (e.g., note receivable collateralized solely by the
ownership interest), may affect whether the derecognition criteria of
ASC Topic 860 have been met. Entities may need to apply judgment
when evaluating the nature of the consideration received.
Effective Date: For immediate consideration.
Links: None
Accounting for
Retained
Servicing Rights
When an Entity’s
Contingent Call
Option Is
Exercisable, and
When It Is
Exercised
Applies to: Issuers/servicers of certain Government National Mortgage
Administration mortgage-backed securities
Summary: Issuers/servicers of certain Government National Mortgage
Administration mortgage-backed securities (MBS) have found it
economically advantageous to exercise their option to repurchase
individual mortgage loans that meet certain criteria (e.g., delinquency)
and work out the delinquent loans outside the MBS structure. An entity
that engages in these activities should evaluate the accounting effect on
its retained servicing rights when the contingent call option is
exercisable, and when it exercises the call option.
There is no change in the entity’s accounting for its servicing
asset/liability when individual loans meet the delinquency criteria and
are eligible for repurchase (i.e., when the call option is exercisable).
However, an entity that exercises the call option and repurchases the
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
loans would recombine the servicing asset/liability with the loans to
form one unit of account.
Effective Date: For immediate consideration.
Links: None
EXTRACTIVE ACTIVITIES—OIL AND GAS (ASC 932)
Considerations
Associated with a
Low Commodity
Price
Environment
[UPDATED]
Applies to: Entities in the oil and gas industry and other affected
entities
Summary: Oil prices are starting to rebound, averaging approximately
$50 a barrel as of mid-June 2016, up approximately $32 a barrel from
last winter. While these rising oil prices are welcome news for most
companies in the U.S. energy market and the banks that lend to them,
industry experts predict that the pace of bankruptcies for oil and gas
firms is unlikely to slow in the short term. Oil prices continue to hover
below the break-even point, which the firm understands to be about $55
a barrel, for most energy producers.
Rising but below break-even commodity prices are causing companies
that operate in the oil and gas industry to continue to experience
declines in their expected capital expenditures, estimates of oil and gas
reserves, and fair value of other investments. The price environment
also is causing increased recognition of impairment of certain
properties, suspended well costs, goodwill, and other intangible assets.
The staff of the SEC’s Division of Corporation Finance (DCF)
commented at the 2015 AICPA National Conference on Current SEC
and PCAOB Developments that it will continue to look for effects of
this price environment on estimates of oil and gas reserves, potential
impairment of assets, and disclosures. Specifically, the DCF staff will
look for appropriate disclosure of potential material uncertainties,
significant estimates and assumptions, and boilerplate disclosures that
do not address the unique effects on a company.
Entities that operate in the oil and gas industry, banks that lend to
entities in the industry, entities that invest in the industry, or other
entities that may be affected by the price environment, should continue
to monitor their direct and indirect exposures to energy prices, including
their ability to comply with debt covenants and going concern
evaluations.
Entities that are affected by the price environment should consider
FASB ASC Subtopic 275-10, Risks and Uncertainties – Overall, which
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
requires disclosures in the financial statements about risks and
uncertainties. Several other areas of U.S. GAAP also address required
disclosures about risks, uncertainties, and estimates. Entities should
consider disclosing potential material uncertainties if they have
concluded that they have no impairment or when reporting results that
may not be indicative of future results. Also, companies should consider
disclosing the effect on their estimate of those uncertainties of a range
of potential assumptions that are in turn affected by potential price
fluctuations in the commodity markets.
Effective Date: For immediate consideration.
Links: None
FINANCIAL SERVICES (ASC 940, 942, 944, 946, 948, AND 950)
Mortgage
Banking Entities
and Depository
Institutions
Subject to New
HUD Compliance
Reporting
Requirements
Applies to: Mortgage banking entities and depository institutions
Summary: The U.S. Department of Housing and Urban Development
(HUD) Office of Inspector General communicated in a Transmittal
Letter that Chapter 6 of the Consolidated Audit Guide for Audits of
HUD Programs, “Ginnie Mae [GNMA] Issuers of Mortgage-Backed
Securities Audit Guidance,” was updated to reflect changes in GNMA’s
net worth, liquidity, insurance, and reporting requirements for GNMA-
approved issuers. The updated Chapter 6 supersedes the previous
version.
Effective Date: GNMA’s All Participant Memorandum (APM) 14-16,
New Issuer Net Worth and Liquidity Requirements, which describes the
changes related to net worth and liquidity, is effective for existing
issuers starting December 31, 2015 and for applicants seeking issuer
approval starting January 1, 2015.
APM 15-15, Implementation of Streamlined Investor Reporting, which
addresses reporting requirements, is effective October 1, 2015 for
monthly reporting to HUD of certain amounts.
Entities that are GNMA-approved issuers must apply the new
requirements in the updated Chapter 6 as part of their December 31,
2015 filings with GNMA.
Links: See above
OCC Issues
Semiannual Risk
Applies to: All banks
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Perspective (Fall
2015)
Summary: The Office of the Comptroller of the Currency (OCC)
issued its Semiannual Risk Perspective (Fall 2015), which discusses the
key risks faced by federally chartered banks and savings institutions
(collectively, financial institutions).
The OCC report states that the financial performance of federally
chartered financial institutions strengthened during the first six months
of 2015 compared with the first six months of 2014. Net income rose
7% compared with the prior year period, driven by higher operating
income and lower noninterest expenses. Return on equity increased in
the 2015 period to nearly 10% annualized. Loan growth remained solid
with larger financial institutions seeing growth primarily in commercial
and industrial (C&I) loans and smaller institutions (those with total
assets less than $1 billion) seeing growth largely in residential real
estate and commercial real estate (CRE). However, the increases in
profitability and loan balances may be mitigated by sluggish revenue
growth if economic growth and interest rates remain at low levels.
The OCC report also notes that traditional credit metrics continued to
improve through the first half of 2015. For example, total loans 90 days
or more past due or on nonaccrual declined further, and net charge-off
ratios approached pre-crisis levels. The allowance for loan and lease
losses as a percentage of total loans appears to be stabilizing as the rate
of improvement in credit quality performance metrics begins to flatten.
At the same time, however, the OCC sees signs of increasing credit risk.
Supervisory examinations and industry surveys, including the OCC’s
annual underwriting survey, observed easing underwriting standards and
practices in commercial lending as lenders reach for volume and yield.
Loan portfolios that experienced the most easing in underwriting
standards included indirect auto, credit cards, leveraged lending, C&I,
asset-backed lending, and CRE. Competition was the most prevalent
reason cited by examiners for relaxing pricing and terms, with economic
outlook, ample market liquidity, market strategy, and risk appetite also
contributing to loosened underwriting standards.
The key risk themes discussed by the OCC in the Fall 2015 report
include:
Competitive pressures, the search for revenue growth, and the
ongoing low interest rate environment continue to challenge risk
management and influence risk appetite.
Strategic risk remains high for many financial institutions, as
management searches for sustainable ways to generate target
rates of return or struggle to implement their strategic plans.
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Operational risk is high as financial institutions adapt business
models, transform technology and operating processes, and
respond to increasing cyber threats.
Compliance risk remains high as financial institutions manage
Bank Secrecy Act and anti-money laundering risks, and
implement changes to policies and procedures to comply with
new mortgage lending requirements.
The OCC report also contains information about economic trends and
conditions, banking industry financial and operating statistics, and
regulatory actions.
Effective Date: For immediate consideration.
Links: OCC Semiannual Risk Perspective (Fall 2015)
OCC Issues
September 2015
Bank Accounting
Advisory Series
Applies to: All banks
Summary: The Office of the Comptroller of the Currency (OCC)
issued the September 2015 edition of the Bank Accounting Advisory
Series (BAAS), which addresses several new interpretations:
Determining the effective interest rate and estimating expected
future cash flows when measuring impairment of a troubled debt
restructuring (TDR) based on the present value of expected future
cash flows (Topic 2A, Troubled Debt Restructurings, Questions 27-
28);
Accounting for government-guaranteed mortgage loans at the time
of foreclosure (Topic 2A, Troubled Debt Restructurings, Questions
42-44);
Evaluating whether a modification of a performing loan constitutes a
TDR (Topic 2A, Troubled Debt Restructurings, Question 45);
Classifying and measuring TDRs that have been subsequently
restructured (Topic 2A, Troubled Debt Restructurings, Question 46);
Accounting for the foreclosure of investor-owned one-to-four family
residential real estate properties (Topic 5A, Other Real Estate
Owned, Question 4);
Considering alternatives for recognizing identifiable intangible
assets when the acquirer is not a public business entity (PBE) as
defined in the ASC Master Glossary (Topic 10A, Acquisitions,
Question 1A);
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Considering alternatives for the subsequent measurement of
goodwill when the entity is not a PBE (Topic 10B, Intangible Assets,
Questions 1A and 7A); and
Applying pushdown accounting in periods subsequent to obtaining a
controlling financial interest (Topic 10C, Pushdown Accounting,
Questions 7-8).
The September 2015 edition also updates the OCC’s interpretive
responses to existing questions to reflect the issuance of several FASB
ASUs and other minor technical updates.
Effective Date: For immediate consideration.
Links: OCC Bank Accounting Advisory Series (September 2015)
DEFINED BENEFIT PENSION PLANS, DEFINED CONTRIBUTION PENSION
PLANS, AND HEALTH AND WELFARE BENEFIT PLANS (ASC 960, 962, AND 965)
ASU 2015-12,
(Part I) Fully
Benefit-
Responsive
Investment
Contracts, (Part
II) Plan
Investment
Disclosures, (Part
III) Measurement
Date Practical
Expedient
(consensuses of
the FASB
Emerging Issues
Task Force)
Applies to: Defined benefit pension plans, defined contribution pension
plans, and health and welfare benefit plans
Summary: ASU 2015-12 reduces complexity in employee benefit plan
financial reporting and disclosure requirements. Specifically, the
standard eliminates the requirement for plans to measure fully benefit-
responsive investment contracts (FBRICs) at fair value and simplifies
disclosure and presentation requirements about plan investments.
Additionally, plans with a fiscal year-end that does not coincide with a
calendar month-end may elect to adopt a practical expedient to measure
investments and investment-related activity as of the month-end date
that is closest to their fiscal year-end. The financial statements of plan
sponsors are outside the scope of ASU 2015-12.
Effective Date: The ASU is effective for fiscal years beginning after
December 15, 2015. Early adoption is permitted for financial statements
not yet made available for issuance.
Links: ASU 2015-12, Defining Issues 15-36, and Podcast
GOVERNMENTAL
GASB Statement
No. 82, Pension
Issues, an
amendment of
GASB Statements
Applies to: Governmental entities
Summary: GASB Statement No. 82 addresses (1) presenting payroll-
related measures in required supplementary information, (2) selecting
assumptions and treatment of deviations from guidance in Actuarial
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
No. 67, No. 68,
and No. 73
[NEW]
Standards of Practice for financial reporting purposes, and (3)
classifying payments made by employers to satisfy plan member
contribution requirements.
Effective Date: The GASB Statement is effective for financial reporting
periods beginning after June 15, 2016. Earlier application is encouraged.
Links: GASB Statement 82 and Webcast Replay
GASB Issues
Implementation
Guide No. 2016-1
Applies to: Governmental entities
Summary: The GASB issued Implementation Guide No. 2016-1,
Implementation Guidance Update—2016, which primarily addresses
questions about recently issued GASB standards on fair value and tax
abatement disclosures. The Guide also addresses practice issues related
to other topics that stakeholders brought to the GASB’s attention, and
reinstates and updates certain previously superseded questions and
answers for the effects of newly issued GASB standards about pensions
and other postemployment benefits.
Effective Date: The Guide is effective for reporting periods beginning
after June 15, 2016.
Links: GASB Implementation Guide No. 2016-1
GASB Statement
No. 81,
Irrevocable Split-
Interest
Agreements
Applies to: Governmental entities
Summary: GASB Statement No. 81 provides recognition and
measurement guidance for governments that benefit from irrevocable
split-interest agreements. Under a typical irrevocable split-interest
agreement, a donor transfers assets to a government or a third party,
such as a bank, for the shared benefit of at least two beneficiaries, one of
which is a government. The Statement addresses when these types of
arrangements constitute an asset for accounting and financial reporting
purposes when the resources are administered by a third party. This
Statement also provides expanded guidance for circumstances in which
the government holds the assets.
Effective Date: The Statement is effective for financial reporting
periods beginning after December 15, 2016. Earlier application is
encouraged.
Links: GASB Statement 81 and Webcast Replay
GASB Statement
No. 80, Blending
Requirements for
Applies to: Governmental entities
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Certain
Component Units,
an amendment of
GASB Statement
No. 14
Summary: GASB Statement No. 80 requires blending of a component
unit incorporated as a not-for-profit corporation in which the primary
government is the sole corporate member.
Effective Date: The Statement is effective for reporting periods
beginning after June 15, 2016. Early application is encouraged.
Links: GASB Statement 80 and Webcast Replay
GASB Statement
No. 79, Certain
External
Investment Pools
and Pool
Participants
Applies to: Governmental entities
Summary: GASB Statement No. 79 addresses accounting and financial
reporting for certain external investment pools and their participants by
establishing criteria that an external investment pool would need to meet
to elect to measure all of its investments at amortized cost for financial
reporting purposes. The GASB Statement also establishes additional
note disclosures for external investment pools that qualify to measure
their investments at amortized cost and for governments that participate
in those pools.
Effective Date: The Statement is effective for reporting periods
beginning after June 15, 2015, except for certain requirements related to
portfolio quality, custodial credit risk, and shadow pricing, which are
effective for financial reporting periods beginning after December 15,
2015.
Links: GASB Statement 79 and Webcast Replay
GASB Statement
No. 78, Pensions
Provided through
Certain Multiple-
Employer Defined
Benefit Pension
Plans
Applies to: Governmental entities
Summary: GASB Statement No. 78 amends the scope and applicability
of GASB Statement No. 68, Accounting and Financial Reporting for
Pensions, to exclude certain private or federally sponsored multiple-
employer defined benefit pension plans, e.g., Taft-Hartley plans and
plans with similar characteristics. The Statement requires disclosures in
the notes to the financial statements, including descriptive information
about the plan, benefit terms, and contribution terms, and also requires
presentation of certain supplementary information.
Effective Date: The Statement is effective for financial statements for
periods beginning after December 15, 2015. Earlier application is
permitted.
Links: GASB Statement 78 and Webcast Replay
GASB Statement
No. 77, Tax
Applies to: Governmental entities
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Abatement
Disclosures
Summary: GASB Statement No. 77 requires state and local
governments to disclose information about tax abatement agreements.
The standard addresses tax abatements that result from agreements
entered into by the reporting government, and those initiated by other
governments that reduce the reporting government’s tax revenues.
Effective Date: The standard is effective for financial statements for
periods beginning after December 15, 2015.
Links: GASB Statement 77 and Webcast Replay
GASB Statement
No. 76, The
Hierarchy of
Generally
Accepted
Accounting
Principles for
State and Local
Governments
Applies to: Governmental entities
Summary: GASB Statement No. 76 reduces the GAAP hierarchy for
state and local governments to two categories of authoritative GAAP (1)
GASB Standards and (2) GASB Technical Bulletins, GASB
Implementation Guides, and guidance from the AICPA that is cleared
by the GASB.
Effective Date: The Statement is effective for financial statements for
periods beginning after June 15, 2015.
Links: GASB Statement 76 and Webcast Replay
GASB Statement
No. 75,
Accounting and
Financial
Reporting for
Postemployment
Benefits Other
Than Pensions
Applies to: Governmental entities
Summary: GASB Statement No. 75 replaces GASB Statement No. 45,
and requires governments to report a liability on the face of the financial
statements for other postemployment benefits (OPEB) that they provide.
It also requires more extensive disclosures about OPEB liabilities in the
notes to the financial statements and RSI.
Effective Date: The Statement is effective for financial statements for
periods beginning after June 15, 2017. Early application is encouraged.
Links: GASB Statement 75 and Webcast Replay
GASB Statement
No. 74, Financial
Reporting for
Postemployment
Benefit Plans
Other Than
Pension Plans
Applies to: Governmental entities
Summary: GASB Statement No. 74 replaces GASB Statement No. 43,
and addresses the financial reports of defined benefit OPEB plans that
are administered through a trust or equivalent arrangement.
Effective Date: The Statement is effective for financial statements for
periods beginning after June 15, 2016. Early application is encouraged.
Links: GASB Statement 74 and Webcast Replay
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
GASB Statement
No. 73,
Accounting and
Financial
Reporting for
Pensions and
Related Assets
That Are Not
within the Scope
of GASB
Statement 68, and
Amendments to
Certain Provisions
of GASB
Statements 67 and
68
Applies to: Governmental entities
Summary: GASB Statement No. 73 establishes requirements for
defined benefit pensions that are not within the scope of Statement No.
68, Accounting and Financial Reporting for Pensions, as well as for the
assets accumulated for purposes of providing those pensions. In
addition, it establishes requirements for defined contribution pensions
that are not within the scope of Statement 68. It also amends certain
provisions of Statement No. 67, Financial Reporting for Pension Plans,
and Statement 68 for pension plans and pensions that are within their
respective scopes.
Effective Date: The Statement is effective for financial statements for
periods beginning after June 15, 2015, except for the provisions that
address employers and governmental nonemployer contributing entities
for pensions that are not within the scope of GASB Statement No. 68,
which are effective for financial statements for periods beginning after
June 15, 2016. Early application is encouraged.
Links: GASB Statement 73 and Webcast Replay
GASB Statement
No. 72, Fair
Value
Measurement and
Application
Applies to: Governmental entities
Summary: GASB Statement No. 72 defines fair value; and provides
guidance about measuring fair value, determining which assets and
liabilities should be measured at fair value, and which information about
fair value should be disclosed in the notes to the financial statements.
Effective Date: The Statement is effective for financial statements for
periods beginning after June 15, 2015. Early application is encouraged.
Links: GASB Statement 72 and Webcast replays: Part I and Part II
FASAB
Statement of
Federal Financial
Accounting
Standards 47,
Reporting Entity
Applies to: Federal entities
Summary: The Federal Accounting Standards Advisory Board
(FASAB) issued Statement of Federal Financial Accounting Standards
No. 47, Reporting Entity, which establishes principles for identifying
organizations that preparers of general purpose federal financial reports
(GPFFR) should include within those reports and provides guidance for
determining whether those organizations are considered consolidation
entities or disclosure entities, and what information preparers of GPFFR
should present about those organizations. The statement also provides
guidance about related party relationships.
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Effective Date: The Statement is effective for reporting periods
beginning after September 30, 2017. Earlier implementation is not
permitted.
Links: FASAB Statement 47
INSURANCE
Effective Date of
Principles Based
Reserving [NEW]
Applies to: Insurance entities
Summary: The NAIC adopted a recommendation to the insurance
commissioners of each of the 50 states and 5 territories for Principles
Based Reserving (PBR). For PBR to become effective, the Standard
Valuation Law with substantially similar terms and provisions first had
to be adopted by a minimum of 42 states representing greater than 75%
of direct written premiums. The NAIC announced that 45 states
representing 79.5% of direct written premiums adopted substantially
similar Standard Valuation Laws. Each state may use the NAIC’s
recommendation to fulfill its obligation to determine whether these
requirements were met.
Effective Date: January 1, 2017
Links: None
Oklahoma Third
Party
Administrator
Report [NEW]
Applies to: Insurance entities
Summary: The Oklahoma Insurance Department requires certain
insurers to complete a Third Party Administrator Annual Report
Checklist. Under Title 36 O.S. §1452 of the Oklahoma Administrative
Code, insurers are asked to obtain a signature from an independent
certified public accountant verifying the accountant’s review of certain
premium and claim information included in the Annual Report.
Effective Date: For immediate consideration.
Links: None
NAIC Updates
Publication about
States’
Prescribed
Differences
Applies to: Insurance entities
Summary: The NAIC posted to its Web site the 2016 edition of the
States’ Prescribed Differences from NAIC Statutory Accounting
Principles. This publication identifies differences from NAIC statutory
accounting practices that the laws of each state prescribe, and cites the
respective state statute and/or regulation.
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Effective Date: For immediate consideration.
Links: See above
SEC Comment
Letters to
Insurers
Expected to
Focus on Fair
Value Disclosures
Applies to: Insurance entities
Summary: The AICPA Insurance Expert Panel meets annually with
representatives from the SEC and discusses topics of mutual interest,
including topics most frequently addressed in SEC comment letters and
the expected focus during the review of filings in the next year.
During 2015, the SEC reviewed filings by approximately two-thirds of
the 220 insurance registrants. Some of the insurance-specific themes
seen in prior years were not as common in 2015, including disclosures
about loss reserve development, statutory data and dividend restrictions,
and the effects of the low interest rate environment. In many cases, the
comments about these topics were insurer specific, rather than
comments that affected insurers broadly.
As discussed in KPMG’s Issues In-Depth, 2015 AICPA National
Conference on Current SEC and PCAOB Developments, and reiterated
in the Insurance Expert Panel meeting, the staff in the SEC's Division of
Corporation Finance identified fair value disclosures as an area of focus
in its reviews of insurers’ filings in 2015. In general, the SEC staff
believes that many of the fair value disclosures in SEC filings do not
satisfy the requirements in FASB ASC Topic 820, Fair Value
Measurement.
The SEC staff also stated that insurers should not rely on the outcomes
of previous comment letters. The staff was alluding to the fact that in
2015, some insurers revised their disclosures to include additional detail
to address the SEC’s concerns, and other comment letters were closed
without modification. The SEC staff also cautioned that changes that
registrants made to 2015 fair value disclosures may not be consistent
with the SEC staff’s current views about the disclosure requirements,
and that insurers that did not modify their disclosures as part of last
year’s comment letter process should not assume that their disclosures
are appropriate. Finally, an insurer that did not receive a comment letter
in 2015 should not assume that its disclosures are consistent with the
SEC staff’s views, as the SEC staff did not analyze all insurers’ filings
during last year’s comment letter process.
In view of the expected focus on insurer filings, companies are
encouraged to review the Issues In-Depth and consider the SEC’s views
about compliance with FASB ASC Topic 820, Fair Value
Measurement.
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Effective Date: For immediate consideration.
Links: See above
ASU 2015-09,
Disclosures about
Short Duration
Contracts and
AICPA Technical
Practice Aid on
Required
Supplementary
Information
Applies to: Insurance entities that issue short-duration contracts
Summary: ASU 2015-09 makes targeted improvements to disclosure
requirements for insurance entities that issue short-duration contracts.
The FASB focused on those targeted improvements to provide users
with additional information about short-duration contract insurance
liabilities, including the nature, amount, timing, and uncertainty of
future cash flows related to insurance liabilities, and the effect of those
cash flows on the statement of comprehensive income.
In response to ASU 2015-09, the AICPA released a Technical Question
and Answer (Q&A) in Section 9180.01, Required Supplementary
Information in Historical Prior Periods and Auditor Independence of
the Entity. AU-C section 730, Required Supplementary Information,
defines required supplementary information (RSI) and requires the
auditor of an entity’s basic financial statements to perform specified
procedures on the RSI and report in accordance with that section. ASU
2015-09 added RSI related to disaggregated incurred and paid claims
development tables and claims duration information. The Q&A provides
guidance in cases where the RSI extends to any historical prior period
(back periods) in which the auditor did not perform an engagement that
required independence, as to whether the auditor must be independent
during those back periods to comply with AU-C section 730.
Specifically, the Q&A states that the auditor is not required to be
independent of the entity in those back periods to comply with AU-C
section 730, as long as the auditor’s opinion does not cover RSI.
Effective Date: Public business entities must apply the new
requirements for annual periods in fiscal years beginning after
December 15, 2015, and in interim periods in fiscal years beginning
after December 15, 2016. All other entities must apply the new
requirements in annual periods in fiscal years beginning after December
15, 2016, and interim periods in fiscal years beginning after December
15, 2017. Early adoption is permitted.
Links: ASU 2015-09, TIS Section 9180.01, and Issues & Trends In
Insurance 15-4
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International"), a Swiss entity. All rights reserved.
II. SEC FILING AND DISCLOSURE MATTERS
This section summarizes certain SEC-related matters.
Title Summary
SEC FINAL RULES & GUIDANCE
SEC Adopts Final
Rule for Payments
by Resource
Extraction Issuers
[NEW]
Applied to: Resource extraction issuers
Summary: The SEC adopted a final rule that requires resource
extraction issuers to disclose payments of $100,000 or more to the U.S.
Federal government and foreign governments for the commercial
development of oil, natural gas, or minerals. The rule, which is
mandated by the Dodd-Frank Wall Street Reform and Consumer
Protection Act, requires disclosure at the project level, similar to the
approach adopted in the European Union and Canada.
The resource extraction issuer must publicly file the required disclosure
with the SEC annually on Form SD no later than 150 days after the end
of its fiscal year. The information must be included in an exhibit and
electronically tagged using the eXtensible Business Reporting
Language (XBRL) format.
The final rule includes two targeted exemptions to the reporting
obligations for acquired businesses and exploratory activities. The SEC
also could exercise its existing Exchange Act authority to provide
exemptive relief from the requirements of the rules on a case-by-case
basis.
The rule also allows a resource extraction issuer to use a report
prepared for other disclosure regimes to comply with the rule if the
SEC determines that the requirements that apply to those reports are
substantially similar.
Effective Date: The final rule and form amendments are effective 60
days after publication in the Federal Register. A resource extraction
issuer must comply with the final rule and form for fiscal years ending
on or after September 30, 2018.
Links: Final SEC Rule
SEC Rules Allow
Form 10-K
Summary with
Applied to: All public entities
Summary: As required by the Fixing America’s Surface
Transportation (FAST) Act, the SEC adopted interim final rules that
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Cross-References
[NEW]
amend its rules and Form 10-K to permit a registrant to include in its
Form 10-K a summary, provided that each item addressed in the
summary hyperlinks to the material in the registrant’s Form 10-K or an
exhibit to Form 10-K to which the item relates.
The amendment is principles-based and allows a registrant to decide
which business and financial items in its annual report to summarize, as
long as the information is presented fairly and accurately.
Effective Date: June 9, 2016
Links: Interim Final SEC Rule
Updated C&DIs:
SEC Staff Warns
about Non-GAAP
Financial
Measures [NEW]
Applies to: All public entities
Summary: The SEC staff updated its guidance about how companies
are allowed to use non-GAAP financial measures, and specifically
listed prohibited practices. The new guidance follows comments by the
SEC chair and SEC staff warning that enforcement action will be taken
against companies that do not comply with guidance outlining how a
company must present non-GAAP financial measures.
Additionally, the Center for Audit Quality (CAQ) released a tool,
Questions on Non-GAAP Measures: A Tool for Audit Committees, to
help audit committees assess whether management's presentation of
non-GAAP metrics provides investors with meaningful financial
information. The CAQ based the tool on SEC rules, with input from
these C&DIs.
Effective Date: For immediate consideration.
Links: C&DIs and Defining Issues 16-20
SEC Amendments
Implement JOBS
Act and FAST
Act [NEW]
Applies to: All public entities
Summary: On May 3, 2016, the SEC approved amendments to Section
12(g) of the Exchange Act to reflect new, higher thresholds for
registration, termination of registration, and suspension of reporting
under the Jumpstart Our Business Startups (JOBS) Act and the Fixing
America’s Surface Transportation (FAST) Act. The amendments
establish thresholds for savings and loan holding companies consistent
with those for bank holding companies, revise the definition of held of
record by excluding certain securities held by persons who received
them pursuant to employee compensation plans, and establish a non-
exclusive safe harbor for determining whether securities are held of
record for purposes of registration.
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As a result of the JOBS Act and FAST Act changes, an issuer that is
not a bank, bank holding company, or savings and loan holding
company is required to register a class of equity securities under the
Exchange Act if it has more than $10 million of total assets and the
securities are held of record by either 2,000 persons, or 500 persons
who are not accredited investors. An issuer that is a bank, bank holding
company, or savings and loan holding company is required to register a
class of equity securities if it has more than $10 million of total assets
and the securities are held of record by 2,000 or more persons.
Effective Date: June 9, 2016
Links: SEC Press Release
SEC Releases
Compliance and
Disclosure
Interpretations
Related to SEC
Regulation AB
[NEW]
Applies to: All public entities
Summary: The staff of the SEC’s Division of Corporation Finance
updated its Compliance and Disclosure Interpretations (C&DI) about
SEC Regulation AB to address filing asset-level disclosures on Form
ABS-EE. The SEC staff provided guidance about certain aspects of the
SEC’s final rules on asset-backed securities, including prospectus
information requirements, determining the most recent reporting
period, and certain requirements for reporting performance-related
information.
Effective Date: For immediate consideration.
Links: C&DIs
SEC Adopts
Business Conduct
Standards for
Security-Based
Swap Dealers and
Major Security-
Based Swap
Participants
[NEW]
Applies to: Security-based swap dealers and major security-based
swap participants
Summary: The SEC adopted a final rule, Business Conduct Standards
for Security-Based Swap Dealers and Major Security-Based Swap
Participants, which specifies a comprehensive set of business conduct
standards and chief compliance officer (CCO) requirements for
security-based swap dealers and major security-based swap participants
(security-based swap entities). The rule applies provisions of Title VII
of the Dodd-Frank Wall Street Reform and Consumer Protection Act
by implementing a framework for regulating the over-the-counter
security-based swap markets.
The rule requires security-based swap entities to comply with various
requirements to protect investors by improving transparency,
facilitating informed customer decision-making, and strengthening
standards of professional conduct. For example, security-based swap
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entities are required to disclose material information about the security-
based swap, including material risks, characteristics, incentives, and
conflicts of interest; to communicate with potential counterparties in a
fair and balanced manner based on principles of fair dealing and good
faith; and to adhere to other professional standards of conduct. The rule
also establishes requirements for dealings with special entities,
including municipalities, pension plans, and endowments. The rule
requires security-based swap entities to designate a CCO, and impose
duties and responsibilities on that CCO. Finally, the rule addresses the
cross-border application of these requirements and the potential
availability of substituted compliance.
Effective Date: The rule will be effective July 12, 2016. Section IV.B
of the final rule illustrates the multiple compliance dates that apply to
specific provisions of the rule.
Links: Final SEC Rule
SEC Permits
Crowdfunding;
Related SEC
Guides
[UPDATED]
Applies to: All public entities
Summary: The SEC adopted final rules that permit start-ups and small
companies to offer and sell securities through crowdfunding.
To assist with the adoption of the new rules, the SEC posted to its Web
site Small Entity Compliance Guide for Funding Portal Registration.
The SEC staff also released:
Regulation Crowdfunding: A Small Entity Compliance Guide for
Issuers;
Regulation Crowdfunding: A Small Entity Compliance Guide for
Crowdfunding Intermediaries; and
Compliance and Disclosure Interpretations that clarify issues
related to advertising and promoter compensation.
The crowdfunding rules require an entity to use an intermediary (a
broker-dealer or a funding portal) to conduct crowdfunding offerings.
Sole proprietorships, partnerships, corporations, limited liability
companies, and other organized entities that are not registered as
broker-dealers but that wish to act as intermediaries in crowdfunding
transactions must register with the SEC as funding portals, using the
new SEC Form Funding Portal that became available on January 29,
2016. All registered funding portals are required to become members
of a registered national securities association. The Financial Industry
Regulatory Authority (FINRA) is currently the only registered national
securities association.
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Effective Date: The final rules and forms were effective May 16,
2016, except for certain forms which were effective January 29, 2016.
Links: Final SEC Rule and Defining Issues 15-51
SEC Adopts
Cross-Border
Security-Based
Swap Rules for
Activity in the
United States
Applies to: All public entities
Summary: The SEC adopted a final rule, Security-Based Swap
Transactions Connected with a Non-U.S. Person's Dealing Activity
That Are Arranged, Negotiated, or Executed By Personnel Located in a
U.S. Branch or Office or in a U.S. Branch or Office of an Agent;
Security-Based Swap Dealer De Minimis Exception, that specifies
when certain non-U.S. persons would be required to count a security-
based swap transaction with another non-U.S. person toward the
requirement to register as a security-based swap dealer based on the
dealer’s activity in the United States. The objective of the rule is to
make U.S. and foreign dealers subject to Title VII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act when they engage in
security-based swap dealing activity in the United States.
The rule, together with rules issued in 2014, completes the SEC’s
rulemaking related to identifying transactions that a firm engaged in
security-based swap dealing activity must count toward its dealer de
minimis thresholds.
Effective Date: The rule was effective on April 19, 2016. Compliance
is required the later of February 21, 2017, or the SBS Entity Counting
Date, as defined in Section VII of the Dodd-Frank Act.
Links: Final SEC Rule and SEC Rule Fact Sheet
SEC Amends
Money Market
Fund Rules; Form
Also Revised
Applies to: Money market funds
Summary: The SEC adopted amendments to the rules that govern
money market funds, and made conforming changes to the form that
money market funds use to report information to the SEC each month
about their portfolio holdings.
The amended rules allow a money market fund to invest in a security
only if the fund determines that the security presents minimal credit
risks after analyzing certain prescribed factors. Thus, money market
funds no longer are limited to investing in only securities that have
received one of the two highest short-term credit ratings, or if they are
not rated, securities that are of comparable quality to those highest-
rated securities. Additionally, money market funds no longer will be
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required to invest at least 97% of their assets in securities that have
received the highest short-term credit ratings.
The SEC also adopted amendments that would subject additional
securities to issuer diversification provisions.
Effective Date: The amendments were effective October 26, 2015, and
have a compliance date of October 14, 2016.
Links: Final SEC Rule
SEC Adopts Rule
for Pay Ratio
Disclosure
Applies to: All public entities
Summary: The SEC adopted a final rule that requires registrants to
disclose the ratio of the CEO’s compensation to the median
compensation of employees. The rule, which is mandated by the Dodd-
Frank Wall Street Reform and Consumer Protection Act, seeks to
address concerns about the cost of compliance by permitting flexibility
in how the pay ratio is determined. A registrant may select and
consistently apply a methodology for identifying its median employee
and the employee’s compensation, and must update the determination
every three years.
The disclosure will appear in registration statements, proxy and
information statements, and annual reports that require executive
compensation disclosure. The new rule does not apply to smaller
reporting companies, emerging growth companies, foreign private
issuers, MJDS filers, or registered investment companies
Effective Date: Pay ratio disclosure is required for fiscal years
beginning on or after January 1, 2017.
Links: Final SEC Rule, SEC Press Release, and Defining Issues 15-39
Regulators
Finalize Risk-
Retention Rule for
ABS
Applies to: All public entities
Summary: In 2014, federal regulators issued a final risk-retention rule,
which requires sponsors of securitized financial assets to retain risk in
those financial assets. The rule implements the risk requirements of the
Dodd-Frank Wall Street Reform and Consumer Protection Act, which
encourages sound underwriting practices, and better aligns the interests
of securitizers with investors in public and private transactions. The
final rule generally requires sponsors of asset-backed securities (ABS)
to retain a minimum of 5% of the credit risk of the assets that
collateralize the ABS issuance. The final rule also includes prohibitions
on transferring or hedging the credit risk that the sponsor is required to
retain.
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Effective Date: The final rule was effective February 23, 2015.
Compliance with the rule for asset-backed securities collateralized by
residential mortgages was required beginning December 24, 2015.
Compliance with the rule for all other classes of asset-backed securities
is required beginning December 24, 2016.
Links: SEC Final Rule and Defining Issues 14-50
SEC Adopts
Asset-Backed
Securities Reform
Rules
Applies to: All public entities
Summary: The SEC adopted revisions to rules about the disclosure,
reporting, and offering process for asset-backed securities (ABS) aimed
to enhance transparency, better protect investors, and facilitate capital
formation in the private label securitization market.
The new rules include required loan-level disclosure for ABS backed
by certain asset classes, as described below, in a standardized, tagged
data format (eXtensible Mark-up Language (XML)). The rules also (1)
provide more time for investors to review and consider a securitization
offering, (2) revise the eligibility criteria for using an expedited
offering process known as shelf offerings, and (3) revise registration
and periodic reporting requirements.
The SEC later released technical amendments to these rules to reinstate
language that was inadvertently removed and make other technical
corrections.
Effective Date: The revised rules were effective on November 24,
2014. Issuers must comply with the new rules, forms, and disclosures
for offerings on Form SF-1 and Form SF-3 no later than November 23,
2015. Additionally, any Form 10-D or Form 10-K that is filed after
November 23, 2015 must comply with the new rules and disclosures,
except asset-level disclosures. Offerings of ABS backed by residential
and commercial mortgages, auto loans, auto leases, and debt securities
(including resecuritizations) must comply with the asset-level
disclosure requirements no later than November 23, 2016.
The technical amendment was effective February 6, 2015.
Links: SEC Press Release and Final Rule, SEC Technical Corrections,
and Defining Issues 14-41
OTHER SEC FILING AND DISCLOSURE MATTERS
SEC Allows Inline
XBRL [NEW]
Applies to: All public entities
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Summary: The SEC issued an order that permits but does not require a
company to voluntarily file eXtensible Business Reporting Language
(XBRL) structured financial statement data in a format known as Inline
XBRL through March 2020. Inline XBRL allows a company to embed
XBRL data directly into an HTML document that is part of a filing,
including annual and quarterly reports. Companies currently must
provide XBRL structured data as an exhibit to their filings.
The EDGAR system has been upgraded to accommodate Inline XBRL.
An updated EDGAR Filer Manual provides the technical requirements
needed for filers to begin using Inline XBRL.
Effective Date: For immediate consideration
Links: SEC Order, Updated Edgar Filer Manual, and Defining Issues
16-24
SEC Reporting
Matters Discussed
at March 2016
Center for Audit
Quality SEC
Regulations
Committee
Meeting [NEW]
Applies to: All public entities
Summary: The Center for Audit Quality (CAQ) SEC Regulations
Committee released the highlights of its March 21, 2016 meeting with
the SEC staff at which the Committee discussed reporting matters
including:
Transition questions related to the new leasing standard;
FAST Act filing accommodations;
Conflict minerals;
Financial Reporting Manual (FRM) updates;
Disclosure effectiveness update;
Non-GAAP measures;
Supplemental pro forma MD&A in connection with the new
revenue recognition standard (ASC 606); and
The applicability of General Instruction II.C of Form S-1 or
General Instruction II.E of Form F-1 to pro forma financial
information.
The CAQ SEC Regulations Committee meets periodically with the
SEC staff to discuss emerging technical accounting and reporting
issues related to SEC rules and regulations. The discussions at
meetings do not represent an official position or statement of the views
of the AICPA, the CAQ, or the SEC.
Effective Date: For immediate consideration.
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Links: KPMG Observations on SEC Related Matters and Highlights
of the March 21, 2016 CAQ SEC Regulations Committee Meeting
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PART B
ACCOUNTING MATTERS
The following items include summaries of accounting matters that generally became
effective in previous periods for public entities with calendar year ends but may be
reflected for the first time in financial statements for all other entities. Accordingly, the
following items may represent new matters for public entities with fiscal year ends other
than a calendar year end and for nonpublic entities.
Title Summary and Effective Date
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (ASC 105) AND OTHER
GENERAL ACCOUNTING MATTERS
ASU 2015-10,
Technical
Corrections and
Improvements
Applies to: All entities
Summary: ASU 2015-10 amends a number of Topics in the FASB
Accounting Standards Codification®. The ASU is part of an ongoing
project on the FASB’s agenda to facilitate Codification updates for
non-substantive technical corrections, clarifications, and improvements
that are not expected to have a significant effect on accounting practice
or create a significant administrative cost to most entities. The ASU
applies to all reporting entities within the scope of the affected
accounting guidance.
Effective Date: The amendments that require transition guidance are
effective for all entities for annual and interim periods in fiscal years
beginning after December 15, 2015. Early adoption is permitted,
including adoption in an interim period. All other amendments were
effective on issuance.
Links: ASU 2015-10
PRESENTATION OF FINANCIAL STATEMENTS (ASC 205)
ASU 2014-08,
Reporting
Discontinued
Operations and
Disclosures of
Disposals of
Components of an
Entity
Applies to: All entities
Summary: This ASU changes the criteria for reporting discontinued
operations and requires additional disclosures about discontinued
operations. ASU 2014-08 requires that an entity report as a
discontinued operation only a disposal that represents a strategic shift
in operations that has a major effect on its operations and financial
results.
Effective Date: ASU 2014-08 is effective prospectively for new
disposals (or classifications as held-for-sale) that occur within annual
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and interim periods in fiscal years beginning on or after December 15,
2014, for public business entities and not-for-profit entities that have
issued (or are a conduit obligor for) securities that are traded, listed, or
quoted on an exchange or an over-the-counter market. For other
entities, the ASU is effective for disposals (or classifications as held-
for-sale) that occur within annual periods in fiscal years beginning on
or after December 15, 2014, and interim periods in fiscal years
beginning on or after December 15, 2015.
Early application is permitted, but only for those disposals (or
classifications as held-for-sale) that have not been reported in financial
statements previously issued or available for issuance. Regardless of
whether an entity adopts early or at the required effective date,
retrospective application is not permitted for disposals or classifications
as held-for-sale that already were reported in previously issued
financial statements. Disposals and classifications as held-for-sale that
have occurred before the initial adoption of ASU 2014-08 would
continue to be reported under previous guidance. Accordingly, periods
before the initial application of the ASU would not be adjusted and
disposals and classifications as held-for-sale that occurred before initial
adoption would continue to be reported under previous guidance in
periods after initial adoption. The new ASU applies only to disposals
and classifications as held-for-sale that occur after initial adoption.
Links: ASU 2014-08, FASB In Focus, Defining Issues 14-20, and
Podcast
INCOME STATEMENT (ASC 225)
ASU 2015-01,
Simplifying
Income Statement
Presentation by
Eliminating the
Concept of
Extraordinary
Items
[UPDATED]
Applies to: All entities
Summary: This ASU eliminates the separate presentation of
extraordinary items, net of tax and the related earnings per share, but
does not affect the requirement to disclose material items that are
unusual in nature or infrequently occurring. The ASU aligns U.S.
GAAP more closely with IFRS. Entities will continue to evaluate
whether items are unusual in nature or infrequent in their occurrence
for disclosure purposes and when estimating the annual effective tax
rate for interim reporting purposes.
In May 2016, the AICPA removed from its Technical Questions and
Answers Q&A section 5400, Extraordinary and Unusual Items, to
reflect the issuance of ASU 2015-01.
Effective Date: ASU 2015-01 is effective for annual and interim
periods in fiscal years beginning after December 15, 2015. The ASU
allows prospective or retrospective application. Early adoption is
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permitted if applied from the beginning of the fiscal year of adoption.
The effective date is the same for both public entities and all other
entities.
Links: ASU 2015-01, Defining Issues 15-2, and Podcast
EARNINGS PER SHARE (ASC 260)
ASU 2015-06,
Effects on
Historical
Earnings per Unit
of Master Limited
Partnership
Dropdown
Transactions (a
consensus of the
FASB Emerging
Issues Task Force)
Applies to: Public entities
Summary: ASU 2015-06 requires a master limited partnership (MLP)
to allocate earnings (losses) of a transferred business entirely to the
general partner when computing earnings per unit (EPU) for periods
before the dropdown transaction occurred. The EPU for limited
partners that was previously reported would not change as a result of
the dropdown transaction. The ASU also requires an MLP to disclose
the effects of the dropdown transaction on EPU for the periods before
and after the dropdown transaction occurred.
Effective Date: This ASU is effective for annual and interim periods in
fiscal years beginning after December 15, 2015. The ASU requires
retrospective application and early adoption is permitted.
Links: ASU 2015-06 and Defining Issues 15-10
RECEIVABLES (ASC 310)
ASU 2014-14,
Classification of
Certain
Government-
Guaranteed
Mortgage Loans
upon Foreclosure
(a consensus of
the FASB
Emerging Issues
Task Force)
Applies to: All entities
Summary: This ASU will require creditors to derecognize certain
foreclosed government-guaranteed mortgage loans and to recognize a
separate other receivable that is measured at the amount the creditor
expects to recover from the guarantor, and to treat the guarantee and
the receivable as a single unit of account.
Effective Date: ASU 2014-14 is effective for public business entities
for annual and interim periods in fiscal years beginning after December
15, 2014. For entities other than public business entities, the ASU is
effective for annual periods in fiscal years ending after December 15,
2015, and interim periods in fiscal years beginning after December 15,
2015. An entity can elect a prospective or a modified retrospective
transition method, but must use the same transition method that it
elected under ASU 2014-04, Reclassification of Residential Real Estate
Collateralized Consumer Mortgage Loans upon Foreclosure. Early
adoption, including adoption in an interim period, is permitted if the
entity already adopted ASU 2014-04.
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Links: ASU 2014-14, Defining Issues 14-27, and Podcast
ASU 2014-04,
Reclassification of
Residential Real
Estate
Collateralized
Consumer
Mortgage Loans
upon Foreclosure
(a consensus of
the FASB
Emerging Issues
Task Force)
Applies to: All entities
Summary: ASU 2014-04 clarifies when banks and similar institutions
(creditors) should reclassify mortgage loans collateralized by
residential real estate properties from the loan portfolio to other real
estate owned (OREO). The ASU also requires certain interim and
annual disclosures.
Effective Date: ASU 2014-04 is effective for public business entities
for annual and interim periods in fiscal years beginning after December
15, 2014. For entities other than public business entities, the ASU is
effective for annual periods in fiscal years beginning after December
15, 2014, and interim periods in fiscal years beginning after December
15, 2015. An entity can elect either a modified retrospective or a
prospective transition method, and early adoption is permitted.
Links: ASU 2014-04, Defining Issues 13-49, and Podcast
INVESTMENTS—EQUITY METHOD AND JOINT VENTURES (ASC 323)
ASU 2014-01,
Accounting for
Investments in
Qualified
Affordable
Housing Projects
(a consensus of
the FASB
Emerging Issues
Task Force)
Applies to: All entities
Summary: ASU 2014-01 permits a reporting entity to make an
accounting policy election to account for investments in qualified
affordable housing projects using the proportional amortization method
if certain conditions are met. The amendments are expected to enable
more entities to record the amortization of the cost of the investment in
income tax expense together with the tax credits and other tax benefits
generated from the partnership.
Effective Date: The ASU is effective retrospectively for public
business entities for annual and interim periods in fiscal years
beginning after December 15, 2014. For all entities other than public
business entities, the amendments are effective retrospectively for
annual periods in fiscal years beginning after December 15, 2014, and
interim periods in fiscal years beginning after December 15, 2015.
Early adoption is permitted.
Links: ASU 2014-01, Defining Issues 14-3, and Podcast
INTANGIBLES - GOODWILL AND OTHER (ASC 350)
ASU 2015-05,
Customer’s
Accounting for
Applies to: Entities with cloud computing arrangements
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Fees Paid in a
Cloud Computing
Arrangement
Summary: ASU 2015-05 provides explicit guidance to help companies
evaluate the accounting for fees paid by a customer in a cloud
computing arrangement. The standard clarifies that if a cloud
computing arrangement includes a software license, the customer
should account for the license consistent with its accounting for other
software licenses. If the arrangement does not include a software
license, the customer should account for the arrangement as a service
contract.
Effective Date: The ASU is effective for public business entities for
annual and interim periods in fiscal years beginning after December 15,
2015. For all other entities, the amendments are effective for annual
periods in fiscal years beginning after December 15, 2015, and interim
periods in fiscal years beginning after December 15, 2016. An entity
can elect to adopt the amendments either prospectively for all
arrangements entered into or materially modified after the effective
date, or retrospectively. Early adoption is permitted for all entities.
Links: ASU 2015-05, Defining Issues 15-15, and Podcast
AICPA Technical
Practice Aid
Addresses a Not-
for-Profit Entity
with a For-Profit
Subsidiary and
Adopting ASU
2014-02 about
Goodwill
Applies to: Not-for-profit entities
Summary: The AICPA released a new Technical Question and
Answer in TIS Series 6140, Not-for-Profit Entities, which addresses
whether a not-for-profit entity that consolidates a private, for-profit
subsidiary may adopt ASU 2014-02, Accounting for Goodwill.
Specifically, the Q&A states that the consolidated reporting entity may
not adopt the amortization accounting alternative in ASU 2014-02 in its
consolidated financial statements. However, the for-profit subsidiary
may adopt the accounting alternative in its stand-alone financial
statements.
The question and answer section of the AICPA Technical Practice Aids
is nonauthoritative and based on selected practice matters identified by
the staff of the AICPA’s Technical Hotline and various other bodies
within the AICPA.
Effective Date: For immediate consideration.
Links: TIS Section 6140.26
ASU 2014-02,
Accounting for
Goodwill (a
consensus of the
Private Company
Council)
Applies to: Private companies
Summary: ASU 2014-02 allows a private company to amortize
goodwill on a straight-line basis over 10 years, or less if the company
demonstrates that another useful life is more appropriate. The ASU also
permits a private company to use a simplified goodwill impairment
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
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model. The alternative may be used by all entities except public
business entities, not-for-profit entities, and employee benefit plans
within the scope of FASB ASC Topics 960 through 965, Plan
Accounting.
Effective Date: As a result of ASU 2016-03, Effective Date and
Transition Guidance, a private company may adopt, for the first time,
ASU 2014-02 as of the beginning of:
Its 2015 annual reporting period (or prior period annual reporting
periods) as long as those financial statements have not yet been
made available for issuance; or
Any subsequent period.
The guidance is effective prospectively for new goodwill recognized
after the adoption of the accounting alternative. For existing goodwill,
the guidance is effective as of the beginning of the first fiscal year in
which the accounting alternative is adopted.
Links: ASU 2014-02, Defining Issues 13-52 and Podcast
COMPENSATION-RETIREMENT BENEFITS (ASC 715)
ASU 2015-04,
Practical
Expedient for the
Measurement Date
of an Employer’s
Defined Benefit
Obligation and
Plan Assets
Applies to: All entities
Summary: ASU 2015-04 permits an entity with a fiscal year-end that
does not fall on a month-end to measure defined benefit plan
obligations and assets as of the month-end that is closest to the entity’s
fiscal year-end, and apply that methodology consistently from year to
year. The ASU also requires an entity to adjust the measurement of
defined benefit plan obligations and assets to reflect contributions or
significant events that occur between the month-end date used to
measure defined benefit plan obligations and assets and the entity’s
fiscal year-end.
Effective Date: The ASU is effective for public business entities for
financial statements issued for annual and interim periods in fiscal
years beginning after December 15, 2015. For all other entities, the
amendments are effective for financial statements issued for annual
periods in fiscal years beginning after December 15, 2016, and interim
periods in fiscal years beginning after December 15, 2017. The ASU
requires prospective application and permits earlier application for all
entities.
Links: ASU 2015-04 and Defining Issues 15-17
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
COMPENSATION—STOCK COMPENSATION (ASC 718)
ASU 2014-12,
Accounting for
Share-Based
Payments When
the Terms of an
Award Provide
That a
Performance
Target Could Be
Achieved after the
Requisite Service
Period
Applies to: All entities
Summary: ASU 2014-12 requires a reporting entity to treat a
performance target that affects vesting and that could be achieved after
the requisite service period as a performance condition. A reporting
entity should apply FASB ASC Topic 718, Compensation—Stock
Compensation, to awards with performance conditions that affect
vesting.
Effective Date: For all entities, ASU 2014-12 is effective for annual
and interim periods in fiscal years beginning after December 15, 2015.
Early adoption is permitted. ASU 2014-12 may be adopted either
prospectively for share-based payment awards granted or modified on
or after the effective date, or retrospectively, using a modified
retrospective approach. The modified retrospective approach would
apply to share-based payment awards outstanding as of the beginning
of the earliest annual period presented in the financial statements on
adoption, and to all new or modified awards thereafter.
Links: ASU 2014-12 and Defining Issues 14-15
INCOME TAXES (ASC 740)
ASU 2013-11,
Presentation of an
Unrecognized Tax
Benefit When a
Net Operating
Loss
Carryforward, a
Similar Tax Loss,
or a Tax Credit
Carryforward
Exists (a
consensus of the
FASB Emerging
Issues Task Force)
Applies to: All entities
Summary: This ASU requires an entity to present an unrecognized tax
benefit as a reduction of a deferred tax asset for a net operating loss
(NOL) carryforward, or similar tax loss or tax credit carryforward,
rather than as a liability when (1) the uncertain tax position would
reduce the NOL or other carryforward under the tax law of the
applicable jurisdiction and (2) the entity intends to use the deferred tax
asset for that purpose. The ASU does not require new recurring
disclosures.
Effective Date: The ASU is effective prospectively for annual and
interim periods in fiscal years beginning after December 15, 2013 and
December 15, 2014, for public and nonpublic entities, respectively.
Early adoption and retrospective application are permitted.
Links: ASU 2013-11, Defining Issues 13-29, and Podcast
BUSINESS COMBINATIONS (ASC 805)
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
ASU 2015-16,
Simplifying the
Accounting for
Measurement-
Period
Adjustments
Applies to: All entities
Summary: ASU 2015-16 eliminates the requirement for an acquirer to
retrospectively adjust the financial statements for measurement-period
adjustments that occur in periods after a business combination is
consummated.
Effective Date: The ASU is effective for public business entities for
annual and interim periods in fiscal years beginning after December 15,
2015. For all other entities, the ASU is effective for annual periods in
fiscal years beginning after December 15, 2016, and interim periods in
fiscal years beginning after December 15, 2017. Early adoption is
permitted.
Links: ASU 2015-16, Defining Issues 15-43, and Podcast
CONSOLIDATION (ASC 810)
ASU 2015-02,
Amendments to the
Consolidation
Analysis
Applies to: All entities
Summary: ASU 2015-02 changes the way reporting enterprises
evaluate whether (a) they should consolidate limited partnerships and
similar entities, (b) fees paid to a decision maker or service provider are
variable interests in a variable interest entity (VIE), and (c) variable
interests in a VIE held by related parties of the reporting enterprise
require the reporting enterprise to consolidate the VIE. The ASU
eliminates the ASU 2010-10 deferral of the ASU 2009-17 VIE
consolidation requirements for certain investment companies and
similar entities. In addition, the ASU excludes from the U.S. GAAP
consolidation requirements money market funds that are required to
comply with Rule 2a-7 of the Investment Company Act of 1940 or that
operate under requirements similar to those in Rule 2a-7. The ASU also
significantly changes how to evaluate voting rights for entities that are
not similar to limited partnerships when determining whether the entity
is a VIE, which may affect entities for which the decision making
rights are conveyed though a contractual arrangement.
Effective Date: The ASU is effective for public business entities for
annual and interim periods in fiscal years beginning after December 15,
2015. For all other entities, the ASU is effective for annual periods in
fiscal years beginning after December 15, 2016, and for interim periods
in fiscal years beginning after December 15, 2017. Early adoption is
allowed, including early adoption in an interim period. A reporting
enterprise may apply a modified retrospective approach or full
retrospective application.
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Links: ASU 2015-02, Defining Issues 15-6, and Webcast Replay
ASU 2014-13,
Measuring the
Financial Assets
and the Financial
Liabilities of a
Consolidated
Collateralized
Financing Entity
(a consensus of
the FASB
Emerging Issues
Task Force)
Applies to: All entities
Summary: This ASU will allow an alternative fair value measurement
approach for consolidated collateralized financing entities (CFEs) to
eliminate a practice issue that results from differences in the fair value
of a CFE’s financial assets and the fair value of its financial liabilities
even when the financial liabilities have recourse to only the financial
assets. The approach would permit the parent company of a
consolidated CFE to measure the CFE’s financial assets and financial
liabilities based on the more observable of the fair value of the financial
assets and the fair value of the financial liabilities.
Effective Date: ASU 2014-13 is effective for public business entities
for annual and interim periods in fiscal years beginning after December
15, 2015. For entities other than public business entities, the ASU is
effective for annual periods in fiscal years ending after December 15,
2016, and interim periods in fiscal years beginning after December 15,
2016. An entity can elect either a retrospective or a modified
retrospective transition method, and early adoption is permitted as of
the beginning of an annual period.
Links: ASU 2014-13, Defining Issues 14-27, and Podcast
ASU 2014-07,
Applying Variable
Interest Entities
Guidance to
Common Control
Leasing
Arrangements (a
consensus of the
Private Company
Council)
Applies to: Private companies
Summary: This ASU, under certain conditions, allows a private
company not to apply variable interest entity consolidation guidance to
common control leasing arrangements. If it elects this accounting
alternative, a private company must apply the alternative to all
applicable leasing arrangements. The alternative may be used by all
entities except public business entities, not-for-profit entities, and
employee benefit plans within the scope of FASB ASC Topics 960
through 965, Plan Accounting.
Effective Date: As a result of ASU 2016-03, Effective Date and
Transition Guidance, a private company may adopt, for the first time,
ASU 2014-07 as of the beginning of:
Its 2015 annual reporting period (or prior period annual reporting
periods) as long as those financial statements have not yet been
made available for issuance; or
Any subsequent period.
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
A private company is required to apply the new guidance
retrospectively as of the beginning of the first fiscal year in which the
accounting alternative is elected and to all periods presented.
Links: ASU 2014-07 and Defining Issues 14-18
DERIVATIVES AND HEDGING (ASC 815)
ASU 2014-16,
Determining
Whether the Host
Contract in a
Hybrid Financial
Instrument Issued
in the Form of a
Share Is More
Akin to Debt or
Equity (a
consensus of the
FASB Emerging
Issues Task Force)
and ASU 2016-11,
Rescission of SEC
Guidance Because
of Accounting
Standards Updates
2014-09 and 2014-
16 Pursuant to
Staff
Announcements at
the March 3, 2016
EITF Meeting
[UPDATED]
Applies to: All entities
Summary: ASU 2014-16 will require an entity to determine the nature
of the host contract by considering the economic characteristics and
risks of the entire hybrid financial instrument, including the embedded
derivative feature that is being evaluated for separate accounting from
the host contract, when evaluating whether the host contract is more
akin to debt or equity.
In May 2016, the FASB issued ASU 2016-11, which rescinds SEC
Staff Announcement, “Determining the Nature of a Host Contract
Related to a Hybrid Instrument Issued in the Form of a Share Under
Topic 815,” which is codified in FASB ASC Topic 815, Derivatives
and Hedging.
Effective Date: ASU 2014-16 is effective for public business entities
for annul and interim periods in fiscal years beginning after December
15, 2015. For entities other than public business entities, the ASU is
effective for annual periods in fiscal years beginning after December
15, 2015, and interim periods in fiscal years beginning after December
15, 2016.
The effects of initially adopting ASU 2014-16 should be applied on a
modified retrospective basis to existing hybrid financial instruments
issued in the form of a share as of the beginning of the fiscal year for
which the amendments are effective. Retrospective application to all
relevant prior periods is permitted. Early adoption, including adoption
in an interim period, is permitted.
Rescission of the SEC staff guidance is effective on adoption of ASU
2014-16.
Links: ASU 2014-16, ASU 2016-11, Defining Issues 14-44, and
Podcast
ASU 2014-03,
Accounting for
Applies to: Private companies
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Certain Receive-
Variable, Pay-
Fixed Interest Rate
Swaps—Simplified
Hedge Accounting
Approach (a
consensus of the
Private Company
Council)
Summary: ASU 2014-03 allows a private company to use a simplified
hedge accounting approach to account for interest rate swaps that are
entered into to economically convert variable-rate interest payments to
fixed-rate payments. The alternative may be used by all entities except
public business entities, not-for-profit entities, employee benefit plans
within the scope of FASB ASC Topics 960 through 965, and financial
institutions.
KPMG LLP updated Sections 6 and 9 of the Derivatives and Hedging
Accounting Handbook to reflect the requirements of ASU 2014-03.
Effective Date: As a result of ASU 2016-03, Effective Date and
Transition Guidance, a private company may adopt, for the first time,
ASU 2014-03 as of the beginning of:
Its 2015 annual reporting period (or prior period annual reporting
periods) as long as those financial statements have not yet been
made available for issuance; or
Any subsequent period.
A private company is required to apply the new guidance using either a
modified retrospective or a full retrospective transition approach as of
the beginning of the first fiscal year in which the accounting alternative
is elected.
Links: ASU 2014-03, Defining Issues 13-52, and Podcast
FAIR VALUE MEASUREMENT (ASC 820)
ASU 2015-07,
Disclosures for
Investments in
Certain Entities
That Calculate Net
Asset Value per
Share (or Its
Equivalent) (a
consensus of the
FASB Emerging
Issues Task Force)
[UPDATED]
Applies to: All entities
Summary: ASU 2015-07 eliminates the requirement to categorize
investments in the fair value hierarchy if their fair value is measured at
net asset value (NAV) per share (or its equivalent) using the practical
expedient in FASB ASC Topic 820, Fair Value Measurement.
Reporting entities must provide sufficient information to enable users
to reconcile total investments in the fair value hierarchy and total
investments measured at fair value in the statement of financial
position. Additionally, the scope of current disclosure requirements for
investments eligible to be measured at NAV will be limited to
investments to which the practical expedient is applied.
In May 2016, the AICPA revised Q&A sections 2220.24 through
2220.26 of its Technical Questions and Answers: Assets – Long-Term
Investments, to reflect the issuance of ASU 2015-07.
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Effective Date: The ASU is effective for public business entities for
annual and interim periods in fiscal years beginning after December 15,
2015. It is effective for all other entities for annual and interim periods
in fiscal years beginning after December 15, 2016. The ASU requires
retrospective application. Early adoption is permitted for all entities.
Links: ASU 2015-07, Defining Issues 15-20, and Podcast
FOREIGN CURRENCY MATTERS (ASC 830)
ASU 2013-05,
Parent’s
Accounting for the
Cumulative
Translation
Adjustment upon
Derecognition of
Certain
Subsidiaries or
Groups of Assets
within a Foreign
Entity or of an
Investment in a
Foreign Entity (a
consensus of the
FASB Emerging
Issues Task Force)
Applies to: All entities
Summary: This ASU addresses the accounting for the cumulative
translation adjustment when a parent either sells a part or all of its
investment in a foreign entity or no longer holds a controlling financial
interest in a subsidiary or group of assets that is a nonprofit activity or a
business within a foreign entity.
Effective Date: For public entities, the ASU is effective prospectively
for annual and interim periods in fiscal years beginning after December
15, 2013. For nonpublic entities, the ASU is effective for annual
periods in fiscal years beginning after December 15, 2014, and interim
periods in fiscal years beginning after December 15, 2015. Early
adoption is permitted.
Links: ASU 2013-05 and Podcast
INTEREST (ASC 835)
ASU 2015-03,
Simplifying the
Presentation of
Debt Issuance
Costs and ASU
2015-15,
Presentation and
Subsequent
Measurement of
Debt Issuance
Costs Associated
with Line-of-
Credit
Arrangements –
Amendments to
Applies to: All entities
Summary: ASU 2015-03 requires entities to present debt issuance
costs related to a recognized debt liability on the balance sheet as a
direct deduction from the debt liability, similar to the presentation of
debt discounts. Entities no longer will record the cost of issuing debt as
a separate asset, except when the cost is incurred before receipt of the
funding from the associated debt liability. This change will align the
presentation of debt issuance costs under U.S. GAAP more closely with
the presentation under comparable IFRS.
ASU 2015-03 does not address debt issuance costs related to line-of-
credit arrangements. The SEC staff announced at the June 18, 2015
Emerging Issues Task Force Meeting that it would not object to an
entity deferring and presenting debt issuance costs as an asset and
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
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SEC Paragraphs
Pursuant to Staff
Announcement at
June 18, 2015
EITF Meeting
subsequently amortizing deferred debt issuance costs ratably over the
term of a line-of-credit arrangement, regardless of whether there are
outstanding borrowings under that line-of-credit arrangement. ASU
2015-15 incorporates into the SEC paragraphs in the FASB Accounting
Standards Codification® the SEC staff guidance from the
announcement.
Effective Date: ASU 2015-03 and ASU 2015-05 are effective for
public business entities for annual and interim periods in fiscal years
beginning after December 15, 2015. It is effective for all other entities
for annual periods in fiscal years beginning after December 15, 2015,
and interim periods in fiscal years beginning after December 15, 2016.
Early adoption is permitted for financial statements that have not been
previously issued.
Links: ASU 2015-03, ASU 2015-15, Defining Issues 15-14, and
Podcast
Potential Income
Statement Effect
of Applying New
Debt Issuance
Guidance to
Foreign Currency
Denominated
Debt
Applies to: Entities with foreign currency denominated debt
Summary: ASU 2015-03, Simplifying the Presentation of Debt
Issuance Costs requires an entity to present debt issuance costs related
to a recognized debt liability on the balance sheet as a direct deduction
from the face amount of debt (similar to a debt discount), rather than as
a deferred charge (i.e., an asset). There is diversity in practice related to
whether entities consider debt issuance costs to be a monetary or
nonmonetary asset under FASB ASC Topic 830, Foreign Currency
Matters. Entities that consider debt issuance costs to be a monetary
asset remeasure it each period (as required under ASC Topic 830)
using current exchange rates and record a corresponding foreign
currency transaction gain (loss) in earnings. Entities that consider debt
issuance costs to be a nonmonetary asset remeasure it each period using
historical exchange rates, which results in no transaction gain (loss)
recorded in earnings.
Entities that did not previously remeasure debt issuance costs
associated with foreign currency denominated debt at current exchange
rates will be required to do so on adoption of the ASU.
Effective Date: ASU 2015-03 is effective for public entities for annual
and interim periods in fiscal years beginning after December 15, 2015.
All other entities are required to apply the ASU for annual periods in
fiscal years beginning after December 15, 2015, and interim periods in
fiscal years beginning after December 15, 2016.
Links: ASU 2015-03
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
SERVICE CONCESSION ARRANGEMENTS (ASC 853)
ASU 2014-05,
Service
Concession
Arrangements (a
consensus of the
FASB Emerging
Issues Task Force)
Applies to: All entities
Summary: ASU 2014-05 specifies that an operating entity should not
account for a service concession arrangement that meets specified
criteria that it enters into with a public-sector entity as a lease under
FASB ASC Topic 840, Leases. Rather, an operating entity should refer
to other GAAP, as applicable, to account for various aspects of a
service concession arrangement. The ASU also specifies that the
operating entity should not recognize the infrastructure used in a
service concession arrangement as its own property, plant, and
equipment.
Effective Date: ASU 2014-05 is effective for public business entities
for annual and interim periods in fiscal years beginning after December
15, 2014. For entities other than public business entities, the ASU is
effective for annual periods in fiscal years beginning after December
15, 2014, and interim periods in fiscal years beginning after December
15, 2015. Entities must use a modified retrospective transition method,
and early adoption is permitted.
Links: ASU 2014-05 and Defining Issues 13-49
TRANSFERS AND SERVICING (ASC 860)
ASU 2014-11,
Repurchase-to-
Maturity
Transactions,
Repurchase
Financings, and
Disclosures
Applies to: All entities
Summary: ASU 2014-11 aligns the accounting for repurchase-to-
maturity transactions and repurchase financing arrangements with the
accounting for other typical repurchase agreements (i.e., these
transactions will be accounted for as secured borrowings). The ASU
also requires additional disclosures about repurchase agreements and
similar transactions.
Effective Date: For public business entities, the accounting changes
and certain disclosure requirements are effective for annual and interim
periods in fiscal years beginning after December 15, 2014. Other
disclosure requirements are effective for annual periods in fiscal years
beginning after December 15, 2014, and interim periods in fiscal years
beginning after March 15, 2015. Early application is prohibited.
For entities other than public business entities, the ASU is effective for
annual periods in fiscal years beginning after December 15, 2014, and
interim periods in fiscal years beginning after December 15, 2015. An
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network of independent member firms affiliated with KPMG International Cooperative ("KPMG
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entity that is not a public business entity may elect to apply the
requirements for interim periods beginning after December 15, 2014.
Links: ASU 2014-11, FASB In Focus, and Defining Issues 14-31
DEVELOPMENT STAGE ENTITIES (ASC 915)
ASU 2014-10,
Elimination of
Certain Financial
Reporting
Requirements,
Including an
Amendment to
Variable Interest
Entities Guidance
in Topic 810,
Consolidation
Applies to: All entities
Summary: ASU 2014-10 eliminates all incremental financial reporting
requirements for development stage entities by removing FASB ASC
Topic 915, Development Stage Entities, from the FASB Accounting
Standards Codification®. The ASU clarified that the guidance in FASB
ASC Topic 275, Risks and Uncertainties, is applicable to entities that
have not yet commenced operations. Accordingly, upon adopting the
ASU and eliminating development stage information, entities should
re-evaluate their disclosures under ASC Topic 275. The ASU also
removes from the Codification the development stage entity exception
for determining whether an entity is a variable interest entity under
FASB ASC Topic 810, Consolidation.
Effective Date: For public business entities, the presentation and
disclosure changes are effective for annual and interim periods in fiscal
years beginning after December 15, 2014. For entities other than public
business entities, the presentation and disclosure changes are effective
for annual periods in fiscal years beginning after December 15, 2014,
and interim periods in fiscal years beginning after December 15, 2015.
For public business entities, the changes to ASC Topic 810 are
effective for annual and interim periods in fiscal years beginning after
December 15, 2015. For entities other than public business entities, the
changes to ASC Topic 810 are effective for annual periods in fiscal
years beginning after December 15, 2016, and interim periods in fiscal
years beginning after December 15, 2017.
Early adoption is permitted for annual and interim periods for which
financial statements have not been previously issued or made available
for issuance.
Links: ASU 2014-10, FASB In Focus, and Defining Issues 14-30
64 © 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
The descriptive and summary statements in this newsletter are not intended to be a substitute
for the texts of the FASB Codification, FASB pronouncements, EITF consensuses, SEC staff
announcements, or any other potential or actual accounting literature or SEC regulations.
Companies applying GAAP or filing with the SEC should apply the texts of the relevant
laws, regulations, and accounting requirements, consider their particular circumstances, and
consult their accounting and legal advisors.
This is a publication of KPMG LLP's Department of Professional Practice
212-909-5600
Contributing author:
Robin E. Van Voorhies