quarterly review (06/2016) - kpmg institutes · quarterly review june 2016 ©2016 kpmg ... applying...

65
Summary The 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 and Disclosure Matters 40 Part B Quarterly Review for Public Entities with Fiscal Year Ends Other Than a Calendar Year End and Nonpublic Entities 49 Quarterly Review June 2016 ©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. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity Part A

Upload: phunghuong

Post on 13-Aug-2018

214 views

Category:

Documents


0 download

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

©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. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity

Part A

1 © 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.

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

2 © 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.

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

3 © 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.

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

4 © 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.

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

5 © 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.

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

6 © 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.

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

7 © 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.

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)

8 © 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.

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

9 © 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.

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

10 © 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.

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

11 © 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.

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.

12 © 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.

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,

13 © 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.

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.

14 © 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.

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

15 © 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.

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

16 © 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.

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.

17 © 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.

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:

18 © 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.

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.

19 © 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 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

20 © 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.

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

21 © 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.

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

22 © 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.

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

23 © 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 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

24 © 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.

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

26 © 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.

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)

27 © 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.

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

28 © 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.

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

29 © 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.

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

30 © 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.

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.

31 © 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.

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);

32 © 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.

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

33 © 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.

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

34 © 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.

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

35 © 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.

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

36 © 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.

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.

37 © 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.

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.

38 © 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.

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.

39 © 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.

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

40 © 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.

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

41 © 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.

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.

42 © 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.

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

43 © 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.

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.

44 © 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.

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

45 © 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.

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.

46 © 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.

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

47 © 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.

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.

48 © 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.

Links: KPMG Observations on SEC Related Matters and Highlights

of the March 21, 2016 CAQ SEC Regulations Committee Meeting

49 © 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.

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

50 © 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.

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

51 © 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.

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.

52 © 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.

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

53 © 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.

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

54 © 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.

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

55 © 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.

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)

56 © 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.

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.

57 © 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.

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.

58 © 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.

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

59 © 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.

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.

60 © 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.

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

61 © 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.

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

62 © 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.

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

63 © 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.

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