Quarterly financial reporting update

Transcription

1 Quarterly financial reporting update March 2017 Please disable popup blocking software before viewing this webcast Original Publication Date: March 30, 2017 CPE Credit is not available for viewing archived programs

2 CPE Reminders Use Q&A to ask questions during the webcast. To receive CPE, you must be active for the entire webcast and respond to at least 75% of the polls. You will have 90 seconds to answer each poll. CPE is not offered for audio-only attendees or replay viewing. Group participation will not receive CPE. You must be logged in individually to receive CPE credit. Upon conclusion of the program, please complete the final evaluation and your CPE certificate will be available if you have met the minimum CPE requirements. Turn off all pop-up blockers to download your CPE certificate. Grant Thornton LLP. All rights reserved. 2

3 For a Better Webcast Experience Use a wired internet connection from your local office and turn off your computer's Wi-Fi signal. For optimal viewing speed, close all other applications, including Outlook. Most technical issues (e.g., buffering, silenced audio) can be resolved by refreshing your feed using the F5 key. Technical help is available via the Q&A button, by calling or contacting GTWebcast@Level3.com Click the Resources button to download the presentation materials. Grant Thornton LLP. All rights reserved. 3

4 Presenters Lynne Triplett Partner Accounting Principles Rahul Gupta Partner Accounting Principles Rohit Elhance Partner SEC Regulatory Matters Dan Voogt Experienced Manager Audit Methodology & Standards Susan Mercier Senior Manager Accounting Principles Grant Thornton LLP. All rights reserved. 4

5 Learning objectives Describe the current status of standardsetting projects Recognize the potential impact of recently issued standards on your company Identify recent news and events that may affect financial reporting Grant Thornton LLP. All rights reserved. 5

6 Agenda Recently issued guidance/rules Recently proposed guidance Practice issues Grant Thornton LLP. All rights reserved. 6

7 Recently issued guidance / rules Grant Thornton LLP. All rights reserved. 7

8 New ASUs from FASB ASU Title Clarifying the Definition of a Business Clarifying When a NFP Entity That Is a General Partner or a Limited Partner Should Consolidate a For-Profit Limited Partnership or Similar Entity Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings Simplifying the Test for Goodwill Impairment Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets Employee Benefit Plan Master Trust Reporting [EITF Consensus] Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost Grant Thornton LLP. All rights reserved. 8

9 ASU : Definition of a business A business is an "integrated set of activities and assets" that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other Neconomic benefits directly to investors or other owners, members, or participants. The integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create an output Grant Thornton LLP. All rights reserved. 9

10 ASU : Definition of a business Is substantially all of the of the FV of gross assets acquired concentrated in a single identifiable asset or group of similar identifiable assets? YES Not a business The "screen" NO Further evaluate to determine whether the set includes an input and a substantive process Grant Thornton LLP. All rights reserved. 10

11 ASU : Definition of a business Evaluating a set not caught by the screen To be considered a business, the set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create an output Does the set have outputs? NO Business if it includes an organized workforce and an input that the workforce could develop/convert into output YES Business if any of the following are present: Organized workforce or a contract that provides access to organized workforce Acquired process(es) that has a significant contribution to produce output and Cannot be replaced without significant cost and effort or Are unique or scarce Grant Thornton LLP. All rights reserved. 11

12 Acquisition of Real Estate Example 6, Case A, Scenario 1 from guidance ABC acquires, renovates, leases, sells, and manages real estate properties. ABC acquires a portfolio of 10 single-family homes that each have in-place leases. The only elements included in the acquired set are the 10 single-family homes and the 10 in-place leases. Each singlefamily home includes the land, building, and property improvements. Each home has a different floor plan, square footage, lot, and interior design. No employees or other assets are acquired. Is substantially all of the FV of gross assets acquired concentrated in a single identifiable asset or group of similar identifiable assets? YES Not a business Grant Thornton LLP. All rights reserved. 12

13 Acquisition of Real Estate Example 6, Case A, Scenario 2 from guidance Assume the same facts as in Scenario 1 except that ABC also acquires an office park with six 10-story office buildings leased to maximum occupancy of which all have significant fair value. ABC also acquires the vendor contracts for outsourced cleaning, security, and maintenance. Seller's employees that perform leasing (sales, underwriting, and so forth), tenant management, financing, and other strategic management processes are not included in the set. ABC plans to replace the property management and employees with its own internal resources. Is substantially all of the of the FV of gross assets acquired concentrated in a single identifiable asset or group of similar identifiable assets? The "screen" NO Does the set have outputs? YES Grant Thornton LLP. All rights reserved. 13

14 Acquisition of Real Estate Example 6, Case A, Scenario 2 from guidance continued (a) (b) (c) (d) Criterion Employees that form an organized workforce that has the necessary skills, knowledge, or experience to perform an acquired process that when applied to an acquired input(s) is critical to the ability to continue producing outputs An acquired contract that provides access to an organized workforce that has the necessary skills, knowledge, or experience to perform an acquired process that when applied to an acquired input(s) is critical to the ability to continue producing outputs The acquired process significantly contributes to the ability to continue producing outputs and cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs The acquired process significantly contributes to the ability to continue producing outputs and is considered unique or scarce Met? No No No No Grant Thornton LLP. All rights reserved. 14

15 ASU : Definition of a business Effective dates and transition Public business entities All other entities Transition Annual periods, including interim periods within those annual periods, beginning after December 15, 2017 Annual periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019 Prospective Early application Permitted for transactions that have not been reported in financial statements issued or made available for issuance Grant Thornton LLP. All rights reserved. 15

16 ASU : Simplifying the test for goodwill impairment Today's guidance for goodwill impairment: Optional: Perform qualitative assessment Fail or bypass Step 1: Compare reporting unit's fair value (FV) to carrying amount (CA) CA > FV Pass FV > CA Step 2: Determine the implied FV of goodwill and compare it to CA of goodwill to measure the impairment loss, if any Grant Thornton LLP. All rights reserved. 16

17 ASU : Simplifying the test for goodwill impairment ASU : Optional: Perform qualitative assessment Fail or bypass Step 1: Compare reporting unit's fair value (FV) to carrying amount (CA) CA > FV Pass FV > CA Recognize an impairment loss equal to the amount CA exceeds FV, not to exceed the CA of goodwill in the reporting unit Grant Thornton LLP. All rights reserved. 17

18 ASU : Simplifying the test for goodwill impairment Part of the simplification initiative Apply prospectively to all existing goodwill Does not change the timing of goodwill impairment Does not change the unit of account Grant Thornton LLP. All rights reserved. 18

19 Tax deductible goodwill Carrying Amount > Fair Value Recognize impairment loss Increase carrying amount of reporting unit Decrease book value of goodwill Increase deferred tax asset Grant Thornton LLP. All rights reserved. 19

20 Tax deductible goodwill If recognizing a goodwill impairment loss changes deferred taxes And results in the carrying amount of the reporting unit immediately exceeding its fair value upon recognition of the loss Then the entity will calculate the impairment loss and associated deferred tax effect using simultaneous equation: Deferred Tax Asset = Tax Rate [1-Tax Rate] Preliminary Impairment Grant Thornton LLP. All rights reserved. 20

21 ASU : Simplifying the test for goodwill impairment Annual and any interim tests performed for periods beginning after SEC filers Other public business entities All other entities December 15, 2019 December 15, 2020 December 15, 2021 Early adoption is permitted for annual and interim tests with a measurement date after January 1, 2017 Grant Thornton LLP. All rights reserved. 21

22 ASU : Clarifying the Scope of ASC Transfer to a customer 606 Conveyance of oil & gas mineral rights Transfer of a business/nfp Non-monetary transaction 845 Transfer of a financial asset 860 Transfer between common control entities Sale & leaseback (842-40) Residual standard Grant Thornton LLP. All rights reserved. 22

23 ASU : Clarifying the Scope of ASC Nonfinancial assets YES NO In-substance nonfinancial assets NO Ownership interest in a subsidiary or VIE that 1) Is not a business or NFP activity 2) Contains only nonfinancial assets and/or in substance nonfinancial assets NO YES YES Grant Thornton LLP. All rights reserved. 23

24 ASU : Clarifying the Scope of ASC In-substance nonfinancial asset A financial asset included in a contract or a legal entity in which substantially all the fair value is concentrated in nonfinancial assets. Grant Thornton LLP. All rights reserved. 24

25 ASU : Clarifying the Scope of ASC Recognition Does the entity "control" the legal entity that holds nonfinancial assets and/or in-substance nonfinancial assets (for e.g. counterparty, legal entity formed by counterparty, subsidiary that held the assets)? NO YES Do not derecognize assets Equity transaction (Apply ) Does the "contract" meet the criteria in ? YES Derecognize each nonfinancial asset & in-substance nonfinancial asset when "control" of that asset is transferred NO Do not derecognize assets Grant Thornton LLP. All rights reserved. 25

26 ASU : Clarifying the Scope of ASC Measurement Gain/loss Amount of "purchase consideration" allocated in accordance with Topic 606 to each distinct nonfinancial & in-substance nonfinancial asset Carrying amount of that asset Purchase consideration Transaction price Carrying amount of liabilities assumed by the counterparty Grant Thornton LLP. All rights reserved. 26

27 ASU : Clarifying the Scope of ASC Transition and effective date Public business entities All other entities Early adoption ASC 606 Annual reporting periods beginning after December 15, 2017, including interim periods within Annual reporting periods beginning after December 15, 2018, interim reporting periods beginning after December 15, 2019 Permitted for annual reporting periods beginning after December 15, 2016, including interim periods within Amendments must be applied at the same time as ASU , Revenue from Contracts with Customers Transition approaches Retrospective Applied to each period presented in the financial statements Modified retrospective Cumulative effect adjustment to retained earnings ASC 805 Must adopt ASU , Definition of a Business, along with this ASU Grant Thornton LLP. All rights reserved. 27

28 SAS No. 132: The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern The auditor's objectives and related conclusions Significant changes Financial support by third parties or the entity's owner-manager Auditor's reports Effective for audits of private company financial statements for periods ending on or after December 15, 2017 Grant Thornton LLP. All rights reserved. 28

29 SEC rulemaking update Rescinded by law Disclosure of Payments by Resource Extraction Issuers Under reconsideration Pay Ratio Disclosure Conflict Minerals Grant Thornton LLP. All rights reserved. 29

30 Recently proposed guidance Grant Thornton LLP. All rights reserved. 30

31 SEC proposed rule: Inline XBRL XBRL tag data embedded in HTML document; separate exhibit not required Phased in over three years Part of issuer's disclosure controls and procedures Auditors not required to perform any procedures on XBRL information Grant Thornton LLP. All rights reserved. 31

32 Proposed ASUs Project Comments due Changes to the Disclosure Requirements for Inventory 3/13/17 Simplifying the Classification of Debt 5/5/17 Improvements to Nonemployee Share-Based Payment Accounting 6/5/17 Grant Thornton LLP. All rights reserved. 32

33 Simplifying classification of debt Debt classification principle Current GAAP Proposal Noncurrent if either: Debt is contractually due to be settled more than one year after balance sheet date Entity has a contractual right to defer settlement of debt for at least one year after balance sheet date Short-term debt refinanced after balance sheet date Debt with subjective acceleration clauses Noncurrent Assess probability Current Noncurrent until triggered Grant Thornton LLP. All rights reserved. 33

34 Simplifying classification of debt Debt classification principle Noncurrent if either: Debt is contractually due to be settled more than one year after balance sheet date Entity has a contractual right to defer settlement of debt for at least one year after balance sheet date Exception to the principle Noncurrent if covenant violation is waived after balance sheet date, AND Principal would have been met absent covenant violation Waiver does not result in extinguishment or troubled debt restructuring Any other covenants not probable of violation within 12 months from balance sheet date Grant Thornton LLP. All rights reserved. 34

35 Practice issues Grant Thornton LLP. All rights reserved. 35

36 Grant date Are there terms or conditions that allow for clawback objective? No Grant date: The date at which an employer and an employee reach a mutual understanding of the key terms and conditions of a sharebased payment award May not demonstrate agreement on the key terms and conditions (meaning no grant date) Grant Thornton LLP. All rights reserved. 36

37 Accounting policies ASC : Neither of the following is considered to be a change in accounting principle: a. Initial adoption of an accounting principle in recognition of events or transactions occurring for the first time or that were previously immaterial b. Adoption of modification of an accounting principle necessitated by transactions or events that are clearly different in substance from those previously occurring Staff views: Judgment required to determine whether transactions or events are clearly different in substance Clearly document nature of transactions or events Grant Thornton LLP. All rights reserved. 37

38 Measurement period adjustments Acquisition date End of measurement period Date acquirer receives info it was seeking or learns more information not obtainable 1 year or less Measurement period adjustments do not require retrospective adjustment to financial statements [ASU ] Accounting errors (if material) require retrospective adjustment to financial statements [ASC 250] Grant Thornton LLP. All rights reserved. 38

39 Questions? Grant Thornton LLP. All rights reserved. 39

40 Presenters Lynne Triplett Partner Accounting Principles Rahul Gupta Partner Accounting Principles Rohit Elhance Partner SEC Regulatory Matters Dan Voogt Experienced Manager Audit Methodology & Standards Susan Mercier Senior Manager Accounting Principles Grant Thornton LLP. All rights reserved. 40

41 Disclaimer This Grant Thornton LLP presentation is not a comprehensive analysis of the subject matters covered and may include proposed guidance that is subject to change before it is issued in final form. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this presentation. The views and interpretations expressed in the presentation are those of the presenters and the presentation is not intended to provide accounting or other advice or guidance with respect to the matters covered. For additional information on matters covered in this presentation, contact your Grant Thornton, LLP adviser. Grant Thornton LLP. All rights reserved. 41

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