7 Relevant FASB Updates Taking Effect in 2016 – November 17, 2016 by Marie Brilmyer

There has been a lot of FASB activity related to the issuance of new standards, many of which go into effect beginning in 2016. Below is a summary of relevant new guidance to be aware of:

1. Stock compensation (ASU 2014-12)

  • Relates to stock awards that have both a performance target and a period-of-service requirement.

  • Recognize compensation when it becomes feasible that the performance target will be achieved and when the required service has been completed.

  • Recognize the rest of the estimated compensation cost over the remaining required service period.

2. Going concern (ASU 2014-15)

  • Requires management to now evaluate each reporting period if there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are available to be issued.

  • Previous guidance resided in audit standards, implying that the onus was on the auditor to make the assessment.

3. Business combinations (ASU 2014-18)

  • Do not separately identify customer-related intangible assets not capable of being sold or licensed independently from other assets of a business (such as customer lists) and non-compete agreements.

  • Instead, include them with goodwill.

  • If you elect to adopt this standard, then you must ASU 2014-03 to amortize goodwill (but not vice-versa).

4. Extraordinary and unusual items (ASU 2015-01)

  • Eliminates the concept of extraordinary items from US GAAP, which were items both unusual and infrequent.

  • Now, if an unusual material and/or infrequent event, report as a separate component of income from continuing operations and/or disclose.

5. Debt issuance costs (ASU 2015-03)

  • Deduct from carrying value of the financial liability (no longer record as a separate asset; similar to a debt discount).

  • Record amortization to interest expense.

  • Does not address presentation or subsequent measurement of debt issuance costs related to line of credit arrangements.

    • ASU 2015-15: SEC has no objection to such costs being recorded as an asset and amortized over the term of the arrangement.

  • Apply retrospectively.

6. Pension plan accounting (ASU 2015-12)

  • Fully benefit-responsive investment contracts are now presented at contract value.

  • Do not disaggregate investments, (such as self-directed brokerage accounts), for financial statement disclosure purposes.

7. PCC alternatives (ASU 2016-03)

  • Provides a one-time option to elect an existing Private Company Council (PCC) alternative.

  • For some, effective dates were removed and no initial preferability assessment required for others.

Be aware that there are other standards effective in 2016 that may be applicable to your company. Full standards can be obtained at www.fasb.org.

2017 and Beyond

Many other standards are effective starting in 2017 and after. Affected areas include those surrounding revenue recognition, consolidation, defined benefit plan obligation, net asset value, inventory, deferred taxes, leases, equity method investments, not-for-profit entities, and cash flows.
 
While many of these new standards may sound far off, it’s never too early to start thinking about standards not yet effective and what they may mean to you and your planning.
 
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.