Annual Accounting and Auditing Workshop. Kurt Oestriecher
exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment. Apply on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.
The exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary. Apply on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.
The exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. Apply on a prospective basis.
The following provisions were added:
An entity is required to recognize a franchise or similar tax that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax. Apply on either a retrospective basis for all periods presented or a modified retrospective basis as of the beginning of the fiscal year of adoption.
An entity is required to evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction. Apply on a prospective basis.
Specifies that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements. However, an entity may elect to do so for a legal entity that is both not subject to tax and disregarded by the taxing authority. This election is on an entity-by-entity basis. Apply on a retrospective basis for all periods presented.
An entity is required to reflect the effect of an enacted change in tax laws or rates in the annual effected tax rate computation in the interim period that includes the enactment date. Apply on a prospective basis.
Minor codification changes in:Employee stock ownership plansInvestments in qualified affordable housing projects under the equity method
What is the effective date of this ASU?
For public business entities:
For fiscal years beginning after December 15, 2020
For interim periods within fiscal years beginning after December 15, 2020
For all other entities:
For fiscal years beginning after December 15, 2021
For interim periods within fiscal years beginning after December 15, 2022
Early adoption is permitted, including within an interim period. All amendments must be adopted within the same period.
Summary
The volume of standards issued by the FASB not involving Revenue Recognition, Leases, and Financial Instruments has been on the steady decline. The Board’s focus on the simplification initiative has led to the issuance of several standards that ease financial reporting burdens. Not-for-profit entities should pay special attention to standards that address the specific financial reporting issues related to that segment.
Chapter 2 FASB Accounting Standards Updates — Narrow Issues
Learning objective
Identify recently issued FASB Accounting Standards Updates (ASUs) that cover narrow issues.
This chapter presents ASUs that are very specific in nature, many of which originated with the Emerging Issues Task Force (EITF). These ASUs typically deal with very specific transactions or industry-specific issues.
The ASUs covered in this chapter are those that have effective dates in 2018 or later. Therefore, several ASUs issued in prior years are included in this chapter. Effective dates for public business entities are frequently different than those for other entities.
FASB ASU No. 2017-06, Plan Accounting: Defined Benefit Plans (Topic 960), Defined Contribution Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of the Emerging Issues Task Force)
Why was this ASU issued?
This update was issued to improve the usefulness of the information reported to users of employee benefit plan financial statements and to provide clarity to preparers and auditors. It relates primarily to the reporting by an employee benefit plan for its interest in a master trust. A master trust is a trust for which a regulated institution serves as a trustee or custodian and in which assets of more than one plan sponsored by a single employer or a by a group of employers under common control are held.
Many stakeholders found the master trust disclosure requirements in GAAP to be limited and incomplete, particularly relating to disclosures of the plan’s interest in the master trust. Most preparers relied on the AICPA Audit and Accounting Guide Employee Benefit Plans for guidance. The amendments in this update require more detailed disclosures of the plan’s interest in the master trust.
In addition, stakeholders noted that disclosures for both the defined benefit pension plan financial statement and the health and welfare benefit plan financial statements were redundant. This update removed that redundancy.
Who is affected by this ASU?
The amendments in this update apply to reporting entities within the scope of FASB ASC 960, 962, or 965, Plan Accounting.
What are the main provisions of this ASU?
All plans must present investments in master trusts in a single line item in the statement of net assets available for benefits.
The requirement to disclose the percentage interest in master trusts with divided interests is eliminated and all plans must now disclose the dollar amount of their interest in each of the general types of investments. This supplements the existing requirement to disclose the master trust’s balances in each general type of investment.
All plans must disclose the following:
The master trust’s other asset and liability balances
The dollar amount of the plan’s interest in each of those balances
This update also removes the requirement for disclosures related to the 401(h) account for health and welfare benefit plans. Instead, the plans will disclose the name of the defined benefit plans in which those investment disclosures are provided.
When will this ASU be effective?
The amendments in this update are effective for fiscal years beginning after December 15, 2018.
Early application is permitted.
The amendments should be applied retrospectively to each period for which financial statements are presented.
FASB ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities
Why was this ASU issued?
This update was issued to amend the amortization period for certain purchased callable debt securities held at a premium. Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. Therefore, upon the exercise of a call on a callable debt