Quarterly Accounting Update – Q4 2016

January 9, 2017

Welcome to the Fourth Quarter issue of our Quarterly Accounting Update. Each quarter, we will provide you with up-to-date information for consideration in your financial reporting and disclosures. Our goal is for you to have current, relevant information available prior to finalizing your financial reporting deliverables. This update is organized as follows:

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Selected Highlights

This section includes an executive summary of selected items and hot topics covered in this update.

FASB Update

This section includes an overview of selected Accounting Standards Updates (ASUs) issued during the period.

Regulatory Update

This section includes an overview of selected updates, releases, rules and actions during the period that might impact financial information, operations and/or governance.

Other Developments

This section includes an overview of other developments, actions and projects of the FASB, PCC, EITF and/or other rulemaking organizations.

On the Horizon

This section includes an overview of selected projects and exposure drafts of the FASB.

Appendices

  • A – Important Implementation Dates
  • B – Illustrative Disclosures for Recently Issued Accounting Pronouncements
  • C – North Carolina Tax Rate Disclosure Example

Quarterly Accounting Update: Selected Highlights

FASB Amends Consolidation Guidance on Related Parties Under Common Control

In October, the FASB amended the guidance in U.S. GAAP on related parties that are under common control. Specifically, the new ASU requires that a single decision maker consider indirect interests held by related parties under common control on a proportionate basis in a manner consistent with its evaluation of indirect interests held through other related parties.

Find out more about this new standard in the FASB Update section.

SEC Reminds Registrants to be Diligent in Adoption of New Standards

In September, the SEC staff reminded registrants about best practices to follow in the periods leading up to the adoption of standards on revenue, leases and credit losses. The staff’s comments, which reiterated themes it has addressed over the past year, focused on internal controls over financial reporting, auditor independence and disclosures related to implementation activities.

Read more about these issues in the Regulatory Update section.

Proposed Standard for Classification of Debt

The current debt classification guidance in U.S. GAAP consists of an assortment of fact-specific rules and exceptions, the application of which varies depending on multiple factors. The FASB’s tentative approach would replace the current fact-specific guidance with a unified principle for determining the classification of debt as either current or noncurrent.

More information on this proposal can be found in the On the Horizon section.

*Join us on Wednesday, January 11, for a one-hour webcast designed to provide insight into recent discussions, actions and pronouncements from the FASB and other accounting regulatory bodies. More information and registration at: http://www.elliottdavis.com/events*

Quarterly Accounting Update: FASB Update

The following selected Accounting Standards Updates (ASUs) were issued by the Financial Accounting Standards Board (FASB) during the fourth quarter. A complete list of all ASUs issued or effective in 2016 is included in Appendix A.

FASB Simplifies Tax Accounting for Intra-Entity Asset Transfers

Affects: All entities

On October 24, 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, as part of the FASB’s simplification initiative aimed at reducing complexity in accounting standards. Under current U.S. GAAP, the tax effects of intra-entity asset transfers (e.g., intercompany sales) are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The new guidance eliminates the exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. Two common examples of assets included in the scope of this ASU are intellectual property and property, plant and equipment. However, the new guidance does not apply to intra-entity transfers of inventory. The income tax consequences from the sale of inventory from one member of a consolidated entity to another will continue to be deferred until the inventory is sold to a third party.

Effective Dates

For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. That is, earlier adoption should be in the first interim period if an entity issues interim financial statements.

The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

FASB Issues New Guidance on Consolidation

Affects: All entities

On October 26, 2016, the FASB issued ASU 2016-17, Interests Held through Related Parties That Are under Common Control. The purpose of this ASU is to amend the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The primary beneficiary of a VIE is the reporting entity that has a controlling financial interest in a VIE and, therefore, consolidates the VIE. A reporting entity has an indirect interest in a VIE if it has a direct interest in a related party that, in turn, has a direct interest in the VIE. The new guidance amends ASU 2015-02, Amendments to the Consolidation Analysis, issued in February 2015.

Under the new ASU, if a decision maker is required to evaluate whether it is the primary beneficiary of a VIE, it will need to consider only its proportionate indirect interest in the VIE held through a common control party. Currently, ASU 2015-02 requires the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. Under ASU 2015-02, a decision maker applies the proportionate approach only in those instances when it holds an indirect interest in a VIE through a related party that is not under common control. The amendment eliminates this distinction.

Effective Dates

The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

Entities that have not yet adopted the amendments in ASU 2015-02 are required to adopt the amendments in this ASU at the same time they adopt the amendments in ASU 2015-02 and should apply the same transition method elected for the application of ASU 2015-02.

Entities that already have adopted the amendments in ASU 2015-02 are required to apply the amendments in this ASU retrospectively to all relevant prior periods beginning with the fiscal year in which the amendments in ASU 2015-02 initially were applied.

FASB Clarifies Reporting of Restricted Cash

Affects: All entities

On November 17, 2016, the FASB issued ASU 2016-18, Restricted Cash, to clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. According to the ASU, an entity should include amounts that are deemed to be restricted cash and restricted cash equivalents in its cash and cash-equivalent balances in the statement of cash flows. The ASU does not define the terms “restricted cash” and “restricted cash equivalents” but states that an entity should continue to provide appropriate disclosures about its accounting policies pertaining to restricted cash.

Other requirements in the ASU include the following:

  • A reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash and restricted cash equivalents.
  • Changes in restricted cash and restricted cash equivalents that result from transfers between cash, cash equivalents and restricted cash and restricted cash equivalents should not be presented as cash flow activities in the statement of cash flows.
  • An entity with a material balance of amounts generally described as restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions.

Effective Dates

The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

FASB Issues Technical Corrections for Revenue Standard

Affects: All entities

On December 21, 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, to make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014. The ASU contains 13 changes to ASU 2014-09, Revenue From Contracts With Customers, most of which are minor. The areas for correction are as follows:

  • Loan Guarantee Fees
  • Contract Costs—Impairment Testing
  • Contract Costs—Interaction of Impairment Testing with Guidance in Other Topics
  • Provisions for Losses on Construction-Type and Production-Type Contracts
  • Scope of Topic 606 (excludes contracts within the scope of Topic 944)
  • Disclosure of Remaining Performance Obligations
  • Disclosure of Prior-Period Performance Obligations
  • Contract Modifications Example
  • Contract Asset versus Receivable
  • Refund Liability
  • Advertising Costs
  • Fixed-Odds Wagering Contracts in the Casino Industry
  • Cost Capitalization for Advisors to Private Funds and Public Funds

Effective Dates

The effective date and transition requirements for the amendments in ASU 2016-20 are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year.

Quarterly Accounting Update: Regulatory Update

Changes Ahead for SEC Leadership

In addition to the November announcement of the appointment of Wesley Bricker as Chief Accountant, current Securities and Exchange Commission (SEC) Chair Mary Jo White will step down in January when Donald Trump becomes president. As a result, the incoming administration will name a new chair and two other appointees to fill vacancies on the Commission. The waterfall effect could also impact the Public Company Accounting Oversight Board (PCAOB). PCAOB Chairman James Doty’s first term ended in October 2015 and is eligible for reappointment to a second five-year term. However, SEC Chair White has avoided making a decision and instead left it to her successor, who will be a Trump appointee.

SEC Focused on Disclosures about New Standards

The staff of the SEC is continuing to push public companies to go into detail about their transition to standards recently issued by the FASB. Of particular importance are ASU 2014-09, Revenue from Contracts with Customers; ASU 2016-02, Leases; and ASU 2016-13, Measurement of Credit Losses on Financial Instruments. SEC Chief Accountant, Wesley Bricker, has stated that the regulator’s staff will encourage companies to keep investors informed about the effect the new standards will have.

At the September meeting of the Emerging Issues Task Force (EITF), the SEC observer made an announcement related to the application of Staff Accounting Bulletin (SAB) 74. Consistent with SAB 74, registrants should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact that the standard will have on the financial statements of the registrant when adopted. In this regard, the SEC staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies that the registrant expects to apply, if determined, and a comparison to the registrant’s current accounting policies. Also, a registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed.

In other words, disclosures stating “management is evaluating, and we don’t yet know the anticipated effect,” are not sufficient. Companies will need to push further and provide qualitative information about the status of their work in developing the anticipated financial effect. That might mean providing directional information about the anticipated effect, even if they haven’t measured the precise amount. That might also include information about the status of their work and any anticipated accounting policy decisions that they’re making.

SEC Pushes Slow Starters on the Revenue Standard

SEC officials are concerned that an estimated 22 percent of companies still have not started implementing the landmark revenue recognition standard (ASU 2014-09) even though there is little more than a year remaining before it becomes effective. The concerns are compounded by the extensive amount of work required and many obstacles encountered by the companies that started implementing the standard not long after it was issued. Leading companies have been focused on implementation for some time, evaluating their customer contracts, the revenue they generated and how the contracts affect their revenue totals. Some of the difficulty facing all companies, both the well- prepared businesses and the slow starters, can be traced to the complex disclosure rules in ASU 2014-09 and the extensive amount of judgment required of management. Companies also have to be mindful that it is their responsibility to manage the implementation process and stay within the limits set by the Sarbanes-Oxley Act of 2002 for non-audit services from auditors.

PCAOB on Course to Approve Changes to the Auditor’s Report Model

The PCAOB has gone through three draft rulemaking releases over a span of several years for a rule that is expected to represent a major change in the content of the auditor’s report and require auditors to provide more information about their examination of a public company’s financial statements. In May, the PCAOB re-proposed its standard on auditors’ reports. Like the original proposal, the re-proposal was intended to significantly enhance the auditor’s reporting model while increasing the amount of other information included in auditors’ reports. The re-proposal:

  • Included a new required section of the auditor’s report describing critical audit matters (CAMs)
  • Narrowed the definition of CAMs
  • Excluded the following from the requirements related to CAMs: broker-dealers; investment companies other than business development companies; and employee stock purchase, savings, and similar plans
  • Called for the addition of new elements to the auditor’s report, including statements about the requirement of auditor independence and auditor tenure

If the PCAOB votes to finalize the rule, it would then have to be approved by the SEC before it goes into effect. However, some critics believe that it may be best for the incoming SEC chair and commissioners to weigh in on the rule before the PCAOB agrees to finalize it.

Quarterly Accounting Update: Other Developments

North Carolina Tax Reform Law Impacts Deferred Tax Assets and Liabilities

On July 23, 2013, North Carolina Governor Pat McCrory signed a major tax reform bill into law that lowered the North Carolina corporate income tax rate among other things. Specifically, the corporate income tax rate was reduced from 6.9% to 6% in 2014, to 5% in 2015, and to 4% in 2016. The rate will be further reduced to 3% for post-2016 tax years if specified revenue growth targets are reached.

On August 4, 2016, the North Carolina Department of Revenue issued a notice confirming that the targeted amount of $20,975,000,000 of net General Fund tax collections for fiscal year 2015-2016 was exceeded and the corporate income tax rate will be reduced from 4 percent to 3 percent for tax years beginning on or after January 1, 2017.

These collection targets that trigger additional rate decreases must be considered in determining the amount of deferred tax assets/liabilities. For accounting purposes, when it is considered to be more likely than not the tax rate changes will be implemented, the enacted changes in tax laws and rates that become effective for a particular future year(s) are to be considered in determining the tax rate to apply to temporary differences reversing in that year(s). The effect on deferred tax assets and liabilities from an enacted change in tax laws or rates is recognized in income from continuing operations in the period of enactment (date tax legislation signed into law) regardless of whether the tax legislation is retroactive or prospective.

The excerpt of the rate reduction trigger criteria from the final enacted legislation can be accessed at: http://www.ncleg.net/EnactedLegislation/Statutes/PDF/BySection/Chapter_105/GS_105-130.3C.pdf

See Appendix C for an illustrative note disclosure for the North Carolina tax rate change.

GASB Issues New Guidance on Asset Retirement Obligations

On December 7, 2016, the Governmental Accounting Standards Board (GASB) issued guidance for state and local governments addressing liabilities known as “asset retirement obligations.” An asset retirement obligation (ARO) is a legally enforceable liability associated with the retirement of a tangible capital asset. GASB Statement 83, Certain Asset Retirement Obligations, establishes guidance for determining the timing and pattern of recognition for liabilities and corresponding deferred outflow of resources related to AROs.

Initial Recognition

A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in Statement 83. That guidance requires that recognition occur when the liability is both incurred and reasonably estimable. The determination of when the liability is incurred should be based on the occurrence of external laws, regulations, contracts or court judgments, together with the occurrence of an internal event that obligates a government to perform asset retirement activities. Laws and regulations may require governments to take specific actions to retire certain tangible capital assets at the end of the useful lives of those capital assets, such as decommissioning nuclear reactors and dismantling and removing sewage treatment plants. Other obligations to retire tangible capital assets may arise from contracts or court judgments. Internal obligating events include the occurrence of contamination, placing into operation a tangible capital asset that is required to be retired, abandoning a tangible capital asset before it is placed into operation, or acquiring a tangible capital asset that has an existing ARO.

Statement 83 requires the measurement of an ARO to be based on the best estimate of the current value of outlays expected to be incurred. The best estimate should include probability weighting of all potential outcomes, when such information is available or can be obtained at reasonable cost. If probability weighting is not feasible at reasonable cost, the most likely amount should be used. A deferred outflow of resources associated with an ARO should be measured at the amount of the corresponding liability upon initial measurement.

Subsequent Measurement

Statement 83 requires the current value of a government’s AROs to be adjusted for the effects of general inflation or deflation at least annually. In addition, it requires a government to evaluate all relevant factors at least annually to determine whether the effects of one or more of the factors are expected to significantly change the estimated asset retirement outlays. A government should remeasure an ARO only when the result of the evaluation indicates there is a significant change in the estimated outlays. The deferred outflows of resources should be reduced and recognized as outflows of resources (e.g., as an expense) in a systematic and rational manner over the estimated useful life of the tangible capital asset.

Disclosures

In some cases, governments are legally required to provide funding or other financial assurance for their performance of asset retirement activities. Statement 83 requires disclosure of how those funding and assurance requirements are being met by a government, as well as the amount of any assets restricted for payment of the government’s AROs, if not separately displayed in the financial statements.

Statement 83 also requires disclosure of information about the nature of a government’s AROs, the methods and assumptions used for the estimates of the liabilities and the estimated remaining useful life of the associated tangible capital assets. If an ARO (or portions thereof) has been incurred by a government but is not yet recognized because it is not reasonably estimable, the government is required to disclose that fact and the reasons therefor.

Effective Date and Transition

The requirements of Statement 83 are effective for reporting periods beginning after June 15, 2018. Earlier application is encouraged.

Non-SEC Registrant Disclosures about New Standards

As discussed in the Regulatory Update section, SEC Staff Accounting Bulletin 74 provides the SEC staff view that a registrant should evaluate ASUs not yet adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted. SAB 74 does not apply to non-SEC registrants and, thus, no similar requirement exists for a non-SEC registrant to disclose the impact of recently issued ASUs that are not effective. While not explicitly required for private companies, we often advise these entities to consider making these disclosures. To assist in that respect, in each issue of our Quarterly Accounting Update, we provide illustrative disclosures for recently issued accounting pronouncements (see Appendix B).

Further, with the recent issuance of ASUs for revenue recognition, leases and credit losses, the magnitude of these changes would appear to justify broad disclosure of the impacts of changes and how management intends to implement the new standards as well as significant implementation issues. The following illustrative disclosures indicate that the entity does not know the impact of these changes and have effective dates for entities that are not public entities. These disclosures should become more robust and tailored as the effective dates become closer.

In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The ASU’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. This new guidance will be effective for the Company for the year ending December 31, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on the financial statements.

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases. The ASU requires all leases with lease terms more than 12 months to be capitalized as a right-of-use asset and lease liability on the balance sheet at the date of lease commencement. Leases will be classified as either finance leases or operating leases. This distinction will be relevant for the pattern of expense recognition in the income statement. This ASU will be effective for the Company for the year ending December 31, 2020. The Company is currently in the process of evaluating the impact of adoption of this ASU on the financial statements.

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments. The ASU requires a financial asset (including trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the income statement will reflect the measurement of credit losses for newly-recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. This ASU will be effective for the Company for the year ending December 31, 2021. The Company is currently in the process of evaluating the impact of adoption of this ASU on the financial statements.

Not-for-Profit Standard to Get a Minor Correction

The FASB agreed to publish a limited amendment to the not-for-profit (NFP) accounting standard it issued in August (ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities). The change deletes five words from the standard that ended up in the final ASU because of an editing mistake. As written, the standard requires NFPs to reconcile the beginning and ending balance of their endowments, in total and by net asset class, including “amounts appropriated for expenditure that contain no purpose restrictions.” The last five words—“that contain no purpose restrictions”—were never intended to be in the standard. By removing the phrase, the FASB believes it clarifies the minimum requirements for the reconciliation that an NFP is required to disclose if it has endowment funds.

ASU 2016-14 is effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. It is the first significant update to NFP accounting in more than two decades.

AICPA Releases Updated Accounting and Audit Guide for Revenue Recognition

On December 21, 2016, the AICPA released Audit and Accounting Guide (AAG): Revenue Recognition, to help accountants and auditors apply the FASB’s landmark revenue standard, ASU 2014-09, Revenue From Contracts With Customers. The guide addresses issues including the internal controls for revenue and the risk of fraud. The guide is based on the work of the 16 industry task forces that worked under the AICPA’s Financial Reporting Executive Committee (FinREC) since the FASB released ASU 2014-09 in May 2014. It also reflects the guidance the FASB released in ASU 2016-08, Revenue From Contracts With Customers (Topic 606): Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net), ASU 2016-10, Revenue From Contracts With Customers (Topic 606): Identifying Performance Obligations and Licensing, and ASU 2016-12, Revenue From Contracts With Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.

AICPA Working on Sustainability Guide

The AICPA’s Auditing Standards Board (ASB) plans to release an Audit and Accounting Guide on sustainability reporting in the first half of 2017. The upcoming guide is based on work an ASB task force had done on a proposed Standard for Attestation Engagements (SSAE) for sustainability reporting. But in May, the board decided to issue a guide instead of a formal standard. In developing the guide, the ASB will rely on work from some sustainability reporting groups such as the Sustainability Accounting Standards Board (SASB), GRI, formerly the Global Reporting Initiative, and CDP, which was previously called the Carbon Disclosure Project. The criteria and reporting guidelines these groups have developed provide some groundwork that the ASB can use in its guide.

Investor interest in sustainability reporting has increased in recent years in the U.S. and overseas. U.S. standard-setters and regulators have been slow to address the issue, but there has been somewhat more activity overseas, particularly in Europe. When the SEC published a preliminary rulemaking document called a concept release in Release No. 33-10064, Business and Financial Disclosure Required by Regulation S-K, in April, it asked several questions about sustainability reporting among its requests for comments about ways to improve the information that public companies disclose to investors.

Investors have responded enthusiastically, and a large number of the comments said the market regulator should require public companies to provide sustainability information. More investors want to know how climate change, for example, will affect the value of their shares, although many business lobbying organizations, such as the U.S. Chamber of Commerce, have told the SEC that they do not see the information as relevant to investment decisions.

The New Going Concern Self-Assessment – Now Effective

In 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, that provides guidance on management’s responsibility in evaluating whether there is substantial doubt about an organization’s ability to continue as a going concern and about related note disclosures. Although the presumption that an organization will continue to operate as a going concern is fundamental to the preparation of financial statements, there was no guidance in U.S. GAAP related to the concept. Due to the lack of guidance in U.S. GAAP and the differing views about when there is substantial doubt about an organization’s ability to continue as a going concern, there was diversity in whether, when and how an organization discloses the relevant information in its notes. As a result, the FASB issued this guidance to require management evaluation and potential financial statement disclosures.

OBSERVATION: Be sure to document this evaluation, including what factors, conditions, and events were considered and the potential impact these items may have on your organization.

The Self-Assessment

In connection with preparing financial statements, you will need to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about your organization’s ability to continue as a going concern within one year after the date that the financial statements are issued.

That evaluation should be based on relevant information that is known and reasonably knowable[1] at the date that the financial statements are issued and would include assessment of factors such as:

  • Current financial condition, including available liquid funds and available access to credit;
  • Obligations due or anticipated within one year;
  • The funds necessary to maintain operations considering its current financial condition, obligations, and other expected cash flows;
  • Other adverse conditions or events such as:
    • Recurring operating losses, working capital deficiencies or negative cash flows
    • Defaults on loans or similar agreements, denial of usual trade credit from suppliers or a need to restructure debt to avoid default
    • External matters, such as legal proceedings, legislation or similar matters that might jeopardize the organization’s ability to operate; loss of a key franchise, license or patent; loss of a principal customer or supplier; or an uninsured or underinsured catastrophe such as a hurricane, tornado, earthquake or flood.

OBSERVATION: In many cases, a detailed analysis is probably not necessary. This would be the case where your organization has a history of profitable operations, ready access to financial resources and no significant near-term obligations in excess of available liquid funds. On the other hand, when potentially negative events or conditions exist, a more detailed analysis may be required, including development of forecasts and projections.

Substantial doubt would exist when relevant conditions and events, considered in the aggregate, indicate that it’s probable that your organization will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued.

If, after performing the evaluation, you do not identify any conditions or events that indicate it’s probable your organization would be unable to meet its obligations as they become due within one year after the date that the financial statements are issued, no further action or disclosures would be necessary. Just be sure to document the evaluation and your conclusion.

Based on the self-assessment, if you do identify conditions or events that raise substantial doubt about your organization’s ability to continue as a going concern, you will need to consider whether any plans you have developed will alleviate the substantial doubt. You will need to consider (1) whether it’s probable that the plans can be effectively implemented and, if so, (2) whether it’s probable that the plans will mitigate the conditions or events that raise substantial doubt.

If the substantial doubt is alleviated as a result of consideration of your plans, the following would need to be disclosed in the notes to the financial statements:

  • Conditions or events that raised substantial doubt (before consideration of your plans).
  • Your evaluation of the significance of those conditions or events in relation to your organization’s ability to meet its obligations.
  • Your plans that alleviated the substantial doubt.

If substantial doubt is not alleviated after consideration of your plans, the following would need to be disclosed in the notes to the financial statements:

  • A statement that there is substantial doubt about the organization’s ability to continue as a going concern within one year after the date that the financial statements are issued.
  • Conditions or events that raise substantial doubt.
  • Your evaluation of the significance of those conditions or events in relation to your organization’s ability to meet its obligations.
  • Your plans intended to mitigate the conditions or events that raise the substantial doubt.

The first self-assessments will be made for the annual period ending after December 15, 2016 (calendar year-end 2016), and for annual periods and interim periods thereafter.

*For a more detailed discussion of ASU 2014-15, see our Accounting Alert, Coming Soon to Your Financial Statements: The Going Concern Self-Assessment*

Quarterly Accounting Update: On the Horizon

The following selected FASB exposure drafts and projects are outstanding as of December 31, 2016.

Balance Sheet Classification of Debt

The purpose of this project is to reduce cost and complexity by replacing the fact-pattern specific guidance in U.S. GAAP with a principle to classify debt as current or noncurrent based on the contractual terms of a debt arrangement and an entity’s current compliance with debt covenants.

On October 19, 2016, the FASB affirmed its plan to move forward with a proposed ASU. Under the FASB’s tentative approach, an entity would classify a debt arrangement as noncurrent if either (1) the liability is contractually due to be settled more than 12 months after the balance sheet date or (2) the entity has a contractual right to defer settlement of the liability for at least 12 months after the balance sheet date. As an exception to the classification principle, an entity would not classify debt as current solely because of a debt covenant violation if it has received a covenant waiver after the balance sheet date but before the financial statements are issued. Entities would be required to present separately on the balance sheet the portion of debt that is classified as noncurrent as a result of the waiver exception. Subjective acceleration clauses (SACs) and covenants within long-term obligations would affect the classification of the debt only when triggered or violated, in which case disclosure of the SAC or covenant would be required. The tentative approach would apply prospectively to all debt that exists as of the effective date. Early adoption would be permitted.

Nonemployee Share-Based Payment Accounting Improvements

The purpose of this project is to reduce cost and complexity and improve the accounting for nonemployee share-based payment awards issued by public and private companies.

At its May 4, 2016, meeting, the FASB tentatively decided to expand the scope of ASC 718, Compensation—Stock Compensation, to include all share-based payment arrangements related to acquiring goods and services from nonemployees. At its June 15, 2016, meeting, the FASB made tentative decisions about transition methods for applying the proposed guidance and disclosures, and on November 30, 2016, tentatively decided to require the use of the contractual term (rather than the expected term) as an input for measuring nonemployee share-based payment transactions. The FASB expects to issue the proposed ASU in the first quarter of 2017.

Financial Instruments – Hedging Activities

The FASB’s financial instruments project, which has three primary areas, are being individually addressed: (1) recognition and measurement, (2) impairment and (3) hedging. On January 5, 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, to address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. On June 16, 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This standard introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.

The final part of the project, related to hedge accounting, was exposed for public comment in September 2016. Many companies use derivative financial instruments to hedge their exposure to certain risks. Today, hedge accounting is an elective approach that minimizes the accounting volatility created when derivatives, otherwise accounted for at fair value through net income, are used to hedge revenue or expenses that are not yet reported (e.g., forecasted sales or purchases) or to hedge assets or liabilities that are not measured at fair value through net income (e.g., inventory or debt). Qualifying criteria must be met in order to apply hedge accounting. The proposed ASU, Targeted Improvements to Accounting for Hedging Activities, contains proposals for improving how the economic results of an entity’s risk management activities are portrayed by:

  • Expanding the use of component hedging for both nonfinancial and financial risks
  • Refining the measurement techniques for hedged items in fair value hedges of benchmark interest rate risk
  • Eliminating the separate measurement and reporting of hedge ineffectiveness
  • Requiring for cash flow and net investment hedges that all changes in fair value of the hedging instrument included in the hedging relationship be deferred in other comprehensive income and released to the income statement in the period(s) when the hedged item affects earnings
  • Requiring that changes in the fair value of hedging instruments be recorded in the same income statement line item as the earnings effect of the hedged item
  • Requiring enhanced disclosures to highlight the effect of hedge accounting on individual income statement line items

In addition, the proposal simplifies the application of hedge accounting by:

  • Providing more time for the completion of initial quantitative assessments of hedge effectiveness
  • Allowing subsequent assessments of hedge effectiveness to be performed on a qualitative basis when an initial quantitative test is required
  • Clarifying the application of the critical terms match method for a group of forecasted transactions
  • Allowing an entity that elects the shortcut method to continue hedge accounting by using a “long-haul” method to assess hedge effectiveness if use of the shortcut method was not or no longer is appropriate after hedge inception

The FASB will determine an effective date for the ASU after redeliberating all comments received during the comment period and from the public round table meetings. Early application of the proposed amendments would be permitted at the beginning of any fiscal year before the effective date.

Disclosure Framework

The objective of this project is to improve the effectiveness of disclosures in notes to financial statements by clearly communicating the information that is most important to users of each entity’s financial statements. Although reducing the volume of the notes to financial statements is not the primary focus, the FASB hopes that a sharper focus on important information will result in reduced volume in most cases. In March 2014, the FASB issued an Exposure Draft, Conceptual Framework for Financial Reporting: Chapter 8 Notes to Financial Statements, intended to improve its process for evaluating existing and future disclosure requirements in notes to financial statements. Specifically, it addresses the FASB’s process for identifying relevant information and the limits on information that should be included in notes to financial statements. If approved, it would become part of the FASB’s Conceptual Framework, which provides the foundation for making standard-setting decisions.

In September 2015, the FASB issued two proposals—one about the use of materiality by reporting entities, Assessing Whether Disclosures Are Material, and the other amending the Conceptual Framework’s definition of materiality, Conceptual Framework for Financial Reporting Chapter 3: Qualitative Characteristics of Useful Financial Information. These two proposals were issued to help entities decide what information should be included in their footnotes without bogging them down with extra details.

The main provisions would draw attention to the role materiality plays in making decisions about disclosures. More specifically, the proposed ASU explains that: (a) materiality would be applied to quantitative and qualitative disclosures individually and in the aggregate in the context of the financial statements as a whole; therefore, some, all or none of the requirements in a disclosure Section may be material; (b) materiality would be identified as a legal concept; and (c) omitting a disclosure of immaterial information would not be an accounting error.

Clarifying the Definition of a Business

The purpose of this project is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.

On November 23, 2015, the FASB issued a proposed ASU to help entities evaluate whether to account for transactions as acquisitions (or disposals) of assets or as businesses. Under the proposal, to be considered a business, a set [of assets and activities] must include, at a minimum, an input and a substantive process that together contribute to the ability to create outputs.

On August 24, 2016, and October 10, 2016, the Board affirmed several of its prior decisions and decided to make certain clarifications. For public business entities, the guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those periods. For all other entities, the guidance will be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.

On November 9, 2016, the Board decided to permit an entity to apply the amendments early for transactions occurring before the issuance date of the final ASU, provided that interim or annual financial statements for the reporting period during which the transactions occurred have not been issued or made available for issuance.

Sales of Nonfinancial Assets

On June 6, 2016, the FASB issued a proposed ASU that would amend the guidance on nonfinancial assets in ASC 610, Other Income. The proposed amendments include:

  • Clarifying the scope of ASC 610-20 to indicate that it applies to the derecognition of all nonfinancial assets and in substance nonfinancial assets unless other specific guidance applies.
  • Stipulating that a distinct nonfinancial asset would be the unit of account for applying the nonfinancial asset derecognition guidance.
  • Providing guidance on accounting for partial sales of nonfinancial assets.

On October 10, 2016, the FASB discussed comments received on the proposed ASU and made tentative decisions related to the scope, transition method and effective date. For public entities, the amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, the amendments will be effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The FASB expects to issue a final ASU in the first quarter of 2017.

Accounting for Interest Income Associated with the Purchase of Callable Debt Securities

When a debt security or loan is purchased at a premium, the premium is typically amortized to the maturity date despite the possibility that the borrower may prepay the debt instrument earlier than the maturity date. The FASB has received feedback that this interest income model may result in the recognition of too much interest income before the borrower prepays the debt instrument, and the possibility of a delayed recognition of a loss for the unamortized premium. At its meeting on March 18, 2015, the FASB voted to add a project to its agenda to require disclosures about interest income on purchased debt securities and loans. The FASB subsequently voted to amend the scope of the project to include amortization period considerations. At the July 27, 2016 meeting, the FASB voted to remove interest income disclosures on purchased debt securities and loans from the scope of the project and place the that topic in pre-agenda research. The scope of the project was amended to only include amortization period considerations. On September 22, 2016, the FASB issued a proposed ASU that would shorten the amortization period for investments in callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date.

Accounting for Goodwill Impairment

On May 12, 2016, the FASB proposed eliminating Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation to measure impairment loss. Under the proposal, goodwill impairment loss would instead be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value. All other goodwill impairment guidance would remain unchanged. The proposal would apply to all entities except for private companies that have adopted the Private Company Council goodwill accounting alternative (ASU 2014-02). Under the proposal, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss would be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit. An entity would still have the option to perform a qualitative assessment before proceeding to the quantitative goodwill impairment test. Further, the proposal would not change the timing of goodwill impairment (i.e., annual or more frequently if there are triggering events) or the unit of account to which the test is applied (i.e., reporting units).

The FASB is considering whether to make additional changes to the subsequent accounting for goodwill in a related project, Subsequent Accounting for Goodwill for Public Business Entities and Not-for-Profit Entities.

AICPA Issues Proposed Cybersecurity Guidance

On September 19, 2016, the AICPA issued two proposals dealing with accountants’ handling of cybersecurity. Proposed Description Criteria for Management’s Description of an Entity’s Cybersecurity Risk Management Program represents proposed guidance for companies when designing and describing their cybersecurity risk management programs and for accounting firms when they report on management’s description of its cybersecurity. The second, Proposed Revision of Trust Services Criteria for Security, Availability, Processing Integrity, Confidentiality, and Privacy, includes revisions to Trust Services Principles (TSP) Section 100, “Trust Services Principles and Criteria for Security, Availability, Processing Integrity, Confidentiality, and Privacy.” The revisions are intended for accounting firms that provide advisory or attestation services to evaluate the controls for an entity’s cyber risk management. The controls are also referred to as the Service Organization Control (SOC) 2 controls that deal with a business’s internal controls for nonfinancial information.

EITF Agenda Items

At its November 2016 meeting, the FASB’s Emerging Issues Task Force (EITF) reached a final consensus on Issue 16-B, which includes a series of issues primarily related to the presentation and disclosure requirements for employee benefit plan master trusts. In addition, the SEC Observer made an announcement to update the language in a previous SEC staff announcement related to the tax benefits associated with investments in qualified affordable housing projects.

Final Consensus

Issue 16-B: Employee Benefit Plan Master Trust Reporting — The EITF reached a final consensus on a series of issues primarily related to Employee Benefit Plan Master Trust Reporting under the following guidance:

  • ASC 960: Plan Accounting–Defined Benefit Pension Plans
  • ASC 962: Plan Accounting–Defined Contribution Pension Plans
  • ASC 965: Plan Accounting–Health and Welfare Benefit Plans

The final consensus is intended to reduce diversity in how employee benefit plans report investments held in master trusts in plan financial statements. If ratified by the FASB, the guidance will be effective for fiscal years beginning after December 15, 2018, and require retrospective application. Early adoption will be permitted.

SEC Staff Announcement

The SEC Observer announced that, due to the changes resulting from ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects, the reference to the “effective yield method” in ASC 323-740-S99-2 would be replaced with a reference to the “proportional amortization method.” ASC 323-740-S99-2 relates to the accounting for tax benefits resulting from investments in affordable housing projects.

PCC Activities

The Private Company Council (PCC) met on December 13, 2016, and discussed the following issues:

  • Financial instruments—hedge accounting. Several PCC members expressed support for the FASB’s proposed amendments to simplify hedge accounting. The PCC requested that the FASB consider whether to provide an exception that would allow private companies flexibility in completing the hedge documentation and effectiveness testing requirements given their limited accounting resources.
  • Consolidation reorganization and improvements. Many PCC members continue to recommend that private companies under common control be exempted from applying Variable Interest Entity (VIE) guidance in ASC 810, Consolidation. The PCC also held a roundtable meeting on December 16, 2016 to further address the topic.
  • The Private Company Decision Making Framework (Guide). The PCC had a discussion to determine whether the Guide should be reviewed for potential improvements. Further discussion will be held at a future meeting.

The PCC also discussed the following projects and provided input to the FASB:

  • Invitation to Comment, Agenda Consultation, focusing on intangible assets.
  • Definition of a public business entity.

APPENDIX A

Important Implementation Dates

The following table contains significant implementation dates and deadlines for FASB/EITF/PCC and GASB standards.

FASB/EITF/PCC Implementation Dates

Pronouncement Affects Effective Date and Transition
ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers All entities. See the Effective Date and Transition of ASU 2014-09, below.
ASU 2016-19, Technical Corrections and Improvements All entities. Effective upon issuance (December 14, 2016) for amendments that do not have transition guidance. Amendments that are subject to transition guidance: effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted.
ASU 2016-18, Restricted Cash (a consensus of the FASB Emerging Issues Task Force) All entities. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

The amendments should be applied using a retrospective transition method to each period presented.

ASU 2016-17, Interests Held through Related Parties That Are under Common Control All entities. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

Entities that have not yet adopted the amendments in ASU 2015-02 are required to adopt the amendments at the same time they adopt the amendments in ASU 2015-02 and should apply the same transition method elected for the application of ASU 2015-02.

Entities that already have adopted the amendments in ASU 2015-02 are required to apply the amendments retrospectively to all relevant prior periods beginning with the fiscal year in which the amendments in ASU 2015-02 initially were applied.

ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory All entities. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. That is, earlier adoption should be in the first interim period if an entity issues interim financial statements.

The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) All entities. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period.

The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable.

ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities All not-for-profit entities. The amendments are effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. Application to interim financial statements is permitted but not required in the initial year of application. Early application of the amendments is permitted.
ASU 2016-13, Measurement of Credit Losses on Financial Instruments All entities that hold financial assets and net investment in leases that are not accounted for at fair value through net income. For public business entities (PBE) that are Securities and Exchange Commission (SEC) filers, the new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (for a calendar-year entity, it would be effective January 1, 2020).

For PBEs that are not SEC filers, the new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

For all other organizations, the new standard is effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021.

Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

ASU 2016-12, Narrow-Scope Improvements and Practical Expedients All entities See the Effective Date and Transition of ASU 2014-09, below.
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 (SEC Update) None. None.
ASU 2016-10, Identifying Performance Obligations and Licensing All entities See the Effective Date and Transition of ASU 2014-09, below.
ASU 2016-09, Improvements to Employee Share-Based Payment Accounting All entities that issue share-based payment awards to their employees. For public business entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.

For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.

Early adoption is permitted for any organization in any interim or annual period.

ASU 2016-08, Principal versus Agent Considerations

(Reporting Revenue Gross versus Net)

All entities. See the Effective Date and Transition of ASU 2014-09, below.
ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting Entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted.
ASU 2016-06, Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force) Entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. For public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years.

For entities other than public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.

An entity should apply the amendments on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

ASU 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the Emerging Issues Task Force) Entities for which there is a change in the counterparty to a derivative instrument that has been designated as a hedging instrument. For public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years.

For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.

An entity has an option to apply the amendments on either a prospective basis or a modified retrospective basis.

Early adoption is permitted, including adoption in an interim period.

ASU 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products (a consensus of the Emerging Issues Task Force) Entities that offer certain prepaid stored-value products. For public business entities, NFPs that have issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an OTC market, or an employee benefit plan that files financial statements with the SEC, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.

For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.

The amendments should be applied either using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective or retrospectively to each period presented.

Earlier application is permitted, including adoption in an interim period.

ASU 2016-03, Effective Date and Transition Guidance (a consensus of the Private Company Council) All entities except public business entities, as defined in the Master Glossary of the FASB Accounting Standards Codification, not-for-profit entities, and employee benefit plans. The amendments are effective immediately.
ASU 2016-02, Leases All lessee and lessor entities. For public business entities, NFPs that have issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an OTC market, or an employee benefit plan that files financial statements with the SEC, the amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Early application of the amendments is permitted for all entities.

ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities Entities that hold financial assets or owe financial liabilities. For public companies the amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

For private companies, not-for-profit organizations, and employee benefit plans, the standard becomes effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019.

ASU 2015-17, Balance Sheet Classification of Deferred Taxes Entities that have deferred tax assets and/or deferred tax liabilities. For public business entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.

For all other entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.

ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments Entities that have reported provisional amounts for items in a business combination for which the accounting is incomplete. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. All other entities are required to apply the new requirements for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.

All entities are required to apply the amendments prospectively to adjustments to provisional amounts that occur after the effective date, with earlier application permitted for financial statements that have not been issued.

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 SEC Registrants. Effective upon issuance (August 16, 2015).
ASU 2015-14, Revenue From Contracts With Customers (ASC 606): Deferral of the Effective Date All entities. See the Effective Date and Transition of ASU 2014-09, below.
ASU 2015-13, Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts Within Nodal Energy Markets—a consensus of the FASB Emerging Issues Task Force Entities that enter into contracts for the purchase or sale of electricity on a forward basis. The amendments were effective upon issuance (August 10, 2015) and should be applied prospectively. Therefore, an entity will have the ability to designate on or after the date of issuance any qualifying contracts as normal purchases or normal sales.
ASU 2015-12, (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient Defined Contribution Pension Plans, Defined Benefit Pension Plans, and Health and Welfare Benefit Plans The amendments in all three are effective for fiscal years beginning after December 15, 2015; early adoption is permitted. An entity should apply the amendments in parts I and II retrospectively to all financial statements presented, while the amendments in part III should be applied prospectively.
ASU 2015-11, Simplifying the Measurement of Inventory Entities that have inventory. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period.
ASU 2015-10, Technical Corrections and Improvements All entities. Effective upon issuance (June 12, 2015) for amendments that do not have transition guidance. Amendments that are subject to transition guidance: effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015.
ASU 2015-09, Disclosures about Short-Duration Contracts Insurance entities that issue short-duration contracts as defined in FASB ASC 944, Financial Services—Insurance. For public business entities, the amendments are effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. For all other entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within annual periods beginning after December 15, 2017.
ASU 2015-08, Pushdown Accounting—Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115  (SEC Update) None. None.
ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) Entities that elect to use the NAV practical expedient. For public business entities the amendments are effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Earlier application is permitted.
ASU 2015-06, Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions Master limited partnerships. Effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Earlier application is permitted.
ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement All entities. For public business entities, the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. For all other entities, the amendments will be effective for annual periods beginning after December 15, 2015, and interim periods in annual periods beginning after December 15, 2016. Early adoption is permitted for all entities.
ASU 2015-04, Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets All entities. The amendments are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Earlier application is permitted.
ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs All entities. For public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early adoption is permitted for financial statements that have not been previously issued.
ASU 2015-02, Amendments to the Consolidation Analysis All entities. Effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

A reporting entity may apply the amendments using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively.

ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items All entities. Effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities.
ASU 2014-18, Accounting for Identifiable Intangible Assets in a Business Combination—a consensus of the Private Company Council All entities except public business entities, as defined in the Master Glossary of the FASB Accounting Standards Codification, not-for-profit entities, and employee benefit plans. Effective prospectively to the first in-scope transaction after the adoption of the accounting alternative.
ASU 2014-17, Pushdown Accounting All entities. Effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be treated as a change in accounting principle.
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 to Equity All entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share. Effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

Entities should apply the guidance on a modified retrospective basis (cumulative-effect retained earnings adjustment as of the beginning of the year of adoption) to existing hybrid instruments issued in the form of a share as of the beginning of the fiscal year for which this ASU is effective. Retrospective application is permitted to all relevant prior periods.

ASU 2014-15, Disclosure of Uncertainties About and an Entity’s Ability to Continue as a Going Concern All entities. Effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.
ASU 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure Creditors that hold government-guaranteed mortgage loans, including those guaranteed by the FHA and the VA. Effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. For all other entities, the amendments are effective for annual periods ending after December 15, 2015, and interim periods beginning after December 15, 2015.

An entity should adopt the amendments using either a prospective transition method or a modified retrospective transition method. For prospective transition, an entity should apply the amendments to foreclosures that occur after the date of adoption. For modified retrospective transition, an entity should apply the amendments by means of a cumulative-effect adjustment (through a reclassification to a separate other receivable) as of the beginning of the annual period of adoption. Prior periods should not be adjusted. However, a reporting entity must apply the same method of transition as elected under ASU 2014-04. Early adoption, including adoption in an interim period, is permitted if the entity already has adopted ASU 2014-04.

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 Entities that issue share-based payments when the terms of an award stipulate that a performance target could be achieved after an employee completes the requisite service period. Effective for all entities for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted.

Entities may apply the amendments either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date.

ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures Entities that enter into repurchase agreements, securities lending transactions, and repo-to-maturity transactions. Effective for public business entities for the first interim or annual period beginning after December 15, 2014. For all other entities, the accounting changes are effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. An entity is required to present changes in accounting for transactions outstanding on the effective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Earlier application for a public business entity is prohibited; however, all other entities may elect to apply the requirements for interim periods beginning after December 15, 2014.

For public business entities, the disclosure for certain transactions accounted for as a sale is required to be presented for interim and annual periods beginning after December 15, 2014, and the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. For all other entities, both new disclosures are required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015.

ASU 2014-10, Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation All entities. Except for the amendments to ASC 810, the guidance is effective for public business entities for reporting periods (including interim periods) beginning after December 15, 2014. For other entities, the amendments are effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. The amendments to ASC 810 are effective one year later for public business entities and two years later for other entities. The guidance should be applied retrospectively, except for the clarification to ASC 275, which applied prospectively.

Early adoption of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued.

ASU 2014-09, Revenue from Contracts with Customers All entities. For public business entities, certain not-for-profit entities, and certain employee benefit plans, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early application is permitted only as of annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016.

For all other entities, the ASU is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the ASU early as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in the ASU early as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in the ASU.

An entity should apply the guidance either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying guidance at the date of initial application.

ASU 2014-08, Reporting Discontinued Operations and Disclosures of Dispos­als of Components of an Entity All entities. Effective for public business entities (and not-for-profit entities that issue securities or are conduit bond obligors) in annual periods beginning on or after December 15, 2014, and interim periods within those annual periods. For all other entities, the guidance is effective in annual periods beginning on or after December 15, 2014, and interim periods beginning on or after December 15, 2015. The guidance is applied prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date.

All entities may early adopt the guidance for new disposals (or new classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance.

ASU 2014-07, Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements—a consensus of the Private Company Council All entities except public business entities, as defined in the Master Glossary of the FASB Accounting Standards Codification, not-for-profit entities, and employee benefit plans. Upon adoption of the accounting alternative, the guidance is applied retrospectively as of the beginning of the first fiscal year in which the accounting alternative is elected and to all periods presented.
ASU 2014-03, Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach—a consensus of the Private Company Council All entities except public business entities, as defined in the Master Glossary of the FASB Accounting Standards Codification, not-for-profit entities, employee benefit plans, and financial institutions. Upon adoption of the simplified hedge accounting approach, that is applied as of the beginning of the first fiscal year in which the approach is elected. Private companies have the option of applying the amendments in this ASU by using either a modified retrospective approach or a full retrospective approach.
ASU 2014-02, Accounting for Goodwill—a consensus of the Private Company Council All entities except public business entities, as defined in the Master Glossary of the FASB Accounting Standards Codification, not-for-profit entities, and employee benefit plans. Upon adoption of the accounting alternative, the guidance is effective prospectively for new goodwill recognized after the adoption of that guidance. For existing goodwill, the guidance is effective as of the beginning of the first fiscal year in which the accounting alternative is adopted.
ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects—a consensus of the FASB Emerging Issues Task Force For reporting entities that meet the conditions, and that elect to use the proportional-amortization method, to account for investments in qualified affordable housing projects, all amendments in this ASU apply. For reporting entities that do not meet the conditions or that do not elect the proportional-amortization method, only the disclosure-related amendments in this ASU apply. Effective for public business entities for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. For all entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2014, and interim periods within annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The amendments in this ASU should be applied retrospectively to all periods presented.

GASB Implementation Dates

Pronouncement Affects Effective Date and Transition
Statement 83, Certain Asset Retirement Obligations Governmental entities. Effective for reporting periods beginning after June 15, 2018. Earlier application is encouraged.
Statement 82, Pension Issues Governmental entities. Effective for reporting periods beginning after June 15, 2016, except for the requirements for the selection of assumptions in a circumstance in which an employer’s pension liability is measured as of a date other than the employer’s most recent fiscal year-end. In that circumstance, the requirements for the selection of assumptions are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017. Earlier application is encouraged.
Statement 81, Irrevocable Split-Interest Agreements Governmental entities. Effective for financial statements for periods beginning after December 15, 2016, and should be applied retroactively. Earlier application is encouraged.
Statement 80, Blending Requirements for Certain Component Units—an amendment of GASB Statement No. 14 Governmental entities. Effective for reporting periods beginning after June 15, 2016. Earlier application is encouraged.
Statement 79, Certain External Investment Pools and Pool Participants Governmental entities. Effective for reporting periods beginning after June 15, 2015, except for certain provisions on portfolio quality, custodial credit risk, and shadow pricing. Those provisions are effective for reporting periods beginning after December 15, 2015. Earlier application is encouraged.
Statement 78, Pensions Provided Through Certain Multiple-Employer Defined Benefit Pension Plans Governmental entities. Effective for reporting periods beginning after December 15, 2015. Earlier application is encouraged.
Statement 77, Tax Abatement Disclosures Governmental entities. Effective for reporting periods beginning after December 15, 2015. Earlier application is encouraged.
Statement 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments Governmental entities. Effective for reporting periods beginning after June 15, 2015. Earlier application is encouraged.
Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions Governmental entities. Effective for fiscal years beginning after June 15, 2017. Early adoption is encouraged.
Statement 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans Governmental entities. Effective for financial statements for periods beginning after June 15, 2016. Early adoption is encouraged.
Statement 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 Governmental entities. Effective for fiscal years beginning after June 15, 2015—except those provisions that address employers and governmental nonemployer contributing entities for pensions that are not within the scope of Statement 68, which are effective for financial statements for fiscal years beginning after June 15, 2016. Early adoption is encouraged.
Statement 72, Fair Value Measurement and Application Governmental entities. Effective for financial statements for periods beginning after June 15, 2015. Early adoption is encouraged.
Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date Governmental entities Effective for fiscal years beginning after June 15, 2014.
Statement 68, Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27 Governmental entities Effective for financial statements for fiscal years beginning after June 15, 2014. Early application is encouraged.

 

APPENDIX B

Illustrative Disclosures for Recently Issued Accounting Pronouncements For the Quarter Ended December 31, 2016

The illustrative disclosures below are presented in plain English.  Please review each disclosure for its applicability to your organization and the need for disclosure in your organization’s financial statements.

ASU 2014-01 ― Applicable to companies that have investments in qualified affordable housing projects:

In January 2014, the FASB amended the Equity Method and Joint Ventures topic of the Accounting Standards Codification. The amendments provide criteria that must be met in order to apply a proportional amortization method to Low-Income Housing Tax Credit investments and provide guidance on the method used to amortize the investment, the impairment approach, and the eligibility criteria for entities that have other arrangements (e.g., loans) with the limited liability entity. The amendments [were/will be] effective for the Company for new investments in qualified affordable housing projects for [interim and annual periods beginning after December 15, 2014-public companies][ annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015-private companies]. [For existing investments in qualified affordable housing projects, the Company will apply the proportional amortization method retrospectively.] [The Company intends to continue using the effective yield method for existing investments in qualified affordable housing projects.] [These amendments did not][The Company does not expect these amendments to] have a material effect on its financial statements.

ASU 2014-02 ― Applicable to private companies that elect to amortize goodwill:

In January 2014, the FASB amended the Intangibles – Goodwill and Other topic of the Accounting Standards Codification. Under the amended guidance, a nonpublic entity may elect to amortize goodwill on a straight-line basis over a period of ten years or over a shorter period if the company demonstrates that another useful life is more appropriate. Goodwill would be subject to impairment testing only upon the occurrence of a triggering event. The amendments were effective for the Company for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015, with early adoption permitted. The alternative is applied on a prospective basis, with amortization of existing goodwill commencing at the beginning of the period of adoption. These amendments did not have a material effect on the Company’s financial statements.

ASU 2014-03 ― Applicable to private companies, other than financial institutions, that elect to use the simplified hedge accounting approach:

In January 2014, the FASB amended the Derivatives and Hedging topic of the Accounting Standards Codification. Under the amended guidance, a nonpublic entity may elect to use a simplified hedge accounting approach for its receive-variable, pay-fixed interest rate swaps. Under this approach, the income statement charge for interest expense will be similar to the amount that would result if the company had directly entered into a fixed-rate borrowing instead of a variable-rate borrowing and an interest rate swap. Furthermore, the simplified hedge accounting approach al­lows the swap to be measured at its settlement value, which measures the swap without non-performance risk, instead of fair value.  The amendments were effective for the Company for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015, with early adoption permitted. The Company applied the simplified hedge accounting approach [retrospectively] [using a modified retrospective approach]. These amendments did not have a material effect on the Company’s financial statements.

ASU 2014-07 ― Applicable to private companies that elect to not apply VIE guidance:

In March 2014, the FASB amended the Consolidation topic of the Accounting Standards Codification. Under the amended guidance, a nonpublic entity has the option to exempt itself from applying the VIE consolidation model to a qualifying common control leasing arrangement. The amendments were effective for the Company for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015, with early adoption permitted. The Company applied a full retrospective approach in which financial statements for each individual prior period presented and the opening balances of the earliest period presented were adjusted to reflect the period-specific effects of applying the amendments.

ASU 2014-08 ― Applicable to companies that have new disposals and new classifications of disposal groups as held for sale:

In April 2014, the FASB issued guidance to change the criteria for reporting a discontinued operation. Under the new guidance, a disposal of part of an organization that has a major effect on its operations and financial results is a discontinued operation. The amendments were effective for the Company for [annual periods, and interim periods within those annual period beginning after December 15, 2014-public companies and not-for-profit entities that issue securities or are conduit bond obligors] [annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015-all other entities], with early implementation of the guidance permitted. These amendments did not have a material effect on the Company’s financial statements.

ASU 2014-09 ― Applicable to all:

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. This guidance also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The guidance will be effective for the Company for [reporting periods beginning after December 15, 2017-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019-all other entities]. The Company will apply the guidance using a [full retrospective approach] [modified retrospective approach]. The Company is currently in the process of evaluating the impact of adoption of this guidance on the financial statements.

ASU 2014-10 ― Applicable to development stage entities:

In June 2014, the FASB issued guidance which eliminates the concept of a development stage entity. Accordingly, the incremental reporting requirements for a development stage entity, including inception-to-date information, will no longer apply.  The amendments were effective for the Company for [reporting periods beginning after December 15, 2014, except for certain consolidation requirements which are effective one year later-public business entities] [annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015, except for certain consolidation requirements which are effective two years later-all other entities], with early implementation of the amendments permitted. The Company applied the guidance using a retrospective approach, except for certain disclosure requirements which will be applied prospectively. These amendments did not have a material effect on its financial statements.

ASU 2014-11 ― Applicable to companies with repurchase agreements:

In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments were effective for the Company for [the first interim or annual period beginning after December 15, 2014-public business entities] [annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015-all other entities]. The Company applied the guidance by making a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. These amendments did not have a material effect on the Company’s financial statements.

ASU 2014-12 ― Applicable to companies with stock compensation tied to performance targets:

In June 2014, the FASB issued guidance which clarifies that performance targets associated with stock compensation should be treated as a performance condition and should not be reflected in the grant date fair value of the stock award. The amendments will be effective for the Company for fiscal years that begin after December 15, 2015. The Company will apply the guidance to [all stock awards granted or modified after the amendments are effective] [stock awards with performance targets that are outstanding at the start of the first fiscal year in the financial statements and to all stock awards that are granted or modified after the effective date]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2014-15 ― Applicable to all:

In August 2014, the FASB issued guidance that is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements, management will need to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the organization’s ability to continue as a going concern within one year after the date that the financial statements are issued. The amendments will be effective for the Company for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2014-16 ― Applicable to companies with hybrid financial instruments:

In November 2014, the FASB issued guidance for determining whether embedded features need to be accounted for separately from their host shares. The new guidance requires companies to consider all terms and features, including the embedded feature(s) being evaluated for separate recognition, when determining whether a host contract is more akin to debt or equity; no single term or feature should be considered determinative regarding the nature of the host contract. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016-all other entities], with early adoption, including adoption in an interim period, permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2014-17 ― Applicable to companies that elect to apply pushdown accounting:

In November 2014, the FASB issued guidance that gives acquired entities the option to apply pushdown accounting in their separate financial statements when an acquirer obtains control of them. Pushdown accounting is the practice of adjusting an acquired company’s separate financial statements to reflect the new basis of accounting established by the buyer for the acquired company. The new guidance provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The amendments were effective upon issuance. The Company will apply pushdown accounting as of the most recent change-in-control event.

ASU 2014-18 ― Applicable to private companies that elect to not recognize certain intangible assets in a business combination:

In December 2014, the FASB amended the Business Combinations topic of the Accounting Standards Codification. Under the amended guidance, a nonpublic entity may elect to not recognize separately from goodwill (1) customer-related intangible assets that are not capable of being sold or licensed independently from the other assets of the business and (2) noncompetition agreements. This alternative generally will result in recognizing fewer intangible assets in a business combination and, correspondingly, more goodwill. The alternative is applied on a prospective basis. In addition, when this alternative is elected, the Company also is required to adopt the alternative accounting related to goodwill which requires that goodwill be amortized on a straight-line basis over a period of ten years or over a shorter period if the Company demonstrates that another useful life is more appropriate. The amendments will be effective for the Company upon the occurrence of the first transaction within the scope of this accounting alternative in fiscal years beginning after December 15, 2015, and the effective date of adoption depends on the timing of that first in-scope transaction. If the first in-scope transaction occurs in the first fiscal year beginning after December 15, 2015, the elective adoption will be effective for that fiscal year’s annual financial reporting and all interim and annual periods thereafter. If the first in-scope transaction occurs in fiscal years beginning after December 15, 2016, the elective adoption will be effective in the interim period that includes the date of that first in-scope transaction and subsequent interim and annual periods thereafter. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-01 ― Applicable to all:

In January 2015, the FASB issued guidance to eliminate from U.S. GAAP the concept of an extraordinary item, which is an event or transaction that is both (1) unusual in nature and (2) infrequently occurring. Under the new guidance, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company will apply the guidance [prospectively] [retrospectively to all prior periods presented in the financial statements]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-02 ― Applicable to all:

In February 2015, the FASB issued guidance which amends the consolidation requirements and significantly changes the consolidation analysis required under U.S. GAAP. Although the amendments are expected to result in the deconsolidation of many entities, the Company will need to reevaluate all its previous consolidation conclusions. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted (including during an interim period), provided that the guidance is applied as of the beginning of the annual period containing the adoption date. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-03 ― Applicable to entities with debt issuance costs:

In April 2015, the FASB issued guidance which changes the presentation of debt issuance costs. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016-all other entities], with early adoption permitted for financial statements that have not been previously issued. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-04 ― Applicable to entities with defined benefit pension plans:

In April 2015, the FASB issued guidance which provides a practical expedient that permits the Company to measure defined benefit plan assets and obligations using the month-end that is closest to the Company’s fiscal year-end. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-05 ― Applicable to entities with cloud computing arrangements:

In April 2015, the FASB issued guidance which provides guidance to customers about whether a cloud computing arrangement includes a software license. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016-all other entities], with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-06 ― Applicable to master limited partnerships:

In April 2015, the FASB issued guidance which provides guidance to master limited partnerships that receive net assets through a dropdown transaction on the allocation of the earnings (losses) of the transferred business before the date of the dropdown transaction. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-07 ― Applicable to entities that elect to use the net asset value practical expedient:

In May 2015, the FASB issued guidance which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016-all other entities], with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-09 ― Applicable to insurance entities that issue short-duration contracts:

In May 2015, the FASB issued guidance which requires insurance entities to disclose for annual reporting periods certain information about the liability for unpaid claims and claim adjustment expenses. The amendments will be effective for [fiscal years beginning after December 15, 2015 and interim periods beginning after December 15, 2016-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-10 ― Applicable to all:

In June 2015, the FASB issued amendments to clarify the Accounting Standards Codification (ASC), correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments were effective upon issuance (June 12, 2015) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-11 ― Applicable to entities that have inventory:

In July 2015, the FASB issued amendments to the Inventory topic of the Accounting Standards Codification to require inventory other than inventory measured at LIFO or retail methods to be measured at the lower of cost and net realizable value. Other than the change in the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory, there are no other substantive changes to the guidance on measurement of inventory. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-12 ― Applicable to defined benefit pension plans, defined contribution pension plans, and health and welfare benefit plans:

In July 2015, the FASB issued amendments to (1) require a pension plan to use contract value as the only measure for fully benefit-responsive investment contracts, (2) simplify and increase the effectiveness of the investment disclosure requirements for employee benefit plans, and (3) provide benefit plans with a measurement-date practical expedient. The amendments will be effective for fiscal years beginning after December 15, 2015, with early adoption permitted. The Entity does not expect these amendments to have a material effect on its financial statements.

ASU 2015-13 ― Applicable to entities that purchase or sell electricity:

In August 2015, the FASB issued amendments to the Derivatives and Hedging topic of the Accounting Standards Codification to clarify the application of the normal purchases and normal sales scope exception to purchases or sales of electricity on a forward basis that are transmitted through, or delivered to a location within, a nodal energy market. The amendments were effective upon issuance and are applied prospectively. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-14 ― Applicable to all:

In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for [reporting periods beginning after December 15, 2017-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019-all other entities]. The Company will apply the guidance using a [full retrospective approach] [modified retrospective approach]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-15 ― Applicable to SEC Registrants:

In August 2015, the FASB issued amendments to the Interest topic of the Accounting Standards Codification to clarify the SEC staff’s position on presenting and measuring debt issuance costs incurred in connection with line-of-credit arrangements. The amendments were effective upon issuance. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-16 ― Applicable to all entities that have reported provisional amounts for items in a business combination for which the accounting is incomplete:

In September 2015, the FASB amended the Business Combinations topic of the Accounting Standards Codification to simplify the accounting for adjustments made to provisional amounts recognized in a business combination by eliminating the requirement to retrospectively account for those adjustments. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permitted for financial statements that have not been issued. All entities are required to apply the amendments prospectively to adjustments to provisional amounts that occur after the effective date.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2015-17 ― Applicable to entities that have deferred tax assets and/or deferred tax liabilities:

In November 2015, the FASB amended the Income Taxes topic of the Accounting Standards Codification to simplify the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments will be effective for [financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.-public business entities] [financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.-all other entities], with early adoption permitted as of the beginning of an interim or annual reporting period. The Company will apply the guidance [prospectively] [retrospectively].  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-01 ― Applicable to entities that hold financial assets or owe financial liabilities:

In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for [fiscal years beginning after December 15, 2017, includ­ing interim periods within those fiscal years.-public companies] [fis­cal years beginning after Decem­ber 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities, including not-for-profit or­ganizations and employee benefit plans] The Company will apply the guidance by means of a cu­mulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily deter­minable fair values will be applied prospectively to equity in­vestments that exist as of the date of adoption of the amendments.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-02 ― Applicable to lessee and lessor entities:

In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification to require all leases with lease terms over 12 months to be capitalized as a right-of-use asset and lease liability on the balance sheet at the date of lease commencement. Leases will be classified as either finance leases or operating leases. This distinction will be relevant for the pattern of expense recognition in the income statement. The amendments will be effective for [fiscal years beginning after December 15, 2018, includ­ing interim periods within those fiscal years.-public companies] [fis­cal years beginning after Decem­ber 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.-all other entities] Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of this guidance on the financial statements.

ASU 2016-03 ― Applicable to private companies:

In March 2016, the FASB amended several topics of the Accounting Standards Codification to make the guidance in all private company accounting alternatives effective immediately by removing their effective dates. The amendments also include transition provisions that provide that private companies are able to forgo a preferability assessment the first time they elect the private company accounting alternatives. The amendments were effective immediately.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-04 ― Applicable to entities that offer certain prepaid stored-value products:

In March 2016, the FASB amended the Liabilities topic of the Accounting Standards Codification to address the current and potential future diversity in practice related to the derecognition of a prepaid stored-value product liability. The amendments will be effective for [financial statements issued for fiscal years beginning after December 15, 2017, includ­ing interim periods within those fiscal years.-public companies] [financial statements issued for fis­cal years beginning after Decem­ber 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities] Early adoption is permitted. The Company will apply the guidance [using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective] [retrospectively] to each period presented.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-05 ― Applicable to entities for which there is a change in the counterparty to a derivative instrument that has been designated as a hedging instrument:

In March 2016, the FASB amended the Derivatives and Hedging topic of the Accounting Standards Codification to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The amendments will be effective for [financial statements issued for fiscal years beginning after December 15, 2016, includ­ing interim periods within those fiscal years.-public companies] [financial statements issued for fis­cal years beginning after Decem­ber 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.-all other entities] Early adoption is permitted. The Company will apply the guidance [using a modified retrospective transition] [prospectively] to each period presented.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-06 ― Applicable to entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options:

In March 2016, the FASB amended the Derivatives and Hedging topic of the Accounting Standards Codification to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendments will be effective for [financial statements issued for fiscal years beginning after December 15, 2016, includ­ing interim periods within those fiscal years.-public companies] [financial statements issued for fis­cal years beginning after Decem­ber 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.-all other entities] Early adoption is permitted. The Company will apply the guidance using a modified retrospective transition  to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-07 ― Applicable to entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence:

In March 2016, the FASB amended the Investments—Equity Method and Joint Ventures topic of the Accounting Standards Codification to eliminate the requirement to retroactively adopt the equity method of accounting. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company will apply the guidance prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method.  The Company does not expect these amendments to have a material effect on its financial statements

ASU 2016-08 ― Applicable to all:

In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2017-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019-all other entities]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-09 ― Applicable to all:

In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows.  Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value.  The amendments will be effective for the Company for [annual periods beginning after December 15, 2016 and interim periods within those annual periodspublic business entities] [annual periods beginning after December 15, 2017, and interim periods within annual reporting periods beginning after December 15, 2018all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-10 ― Applicable to all:

In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2017-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019-all other entities]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-12 ― Applicable to all:

In May 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2017-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019-all other entities]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-13 ― Applicable to entities that hold financial assets and net investment in leases that are not accounted for at fair value through net income:

In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The guidance requires a financial asset (including trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the income statement will reflect the measurement of credit losses for newly-recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2019-SEC filers] [reporting periods beginning after December 15, 2020-public business entities that are not SEC filers] [annual periods beginning after December 15, 2020, and interim periods within annual reporting periods beginning after December 15, 2021-all other entities]. Early adoption is permitted for all organizations for periods beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of adoption of this guidance on the financial statements.

ASU 2016-14 ― Applicable to all not-for-profit entities:

In August 2016, the FASB issued guidance to make targeted improvements to the not-for-profit financial reporting model, including changes in how a not-for-profit organization classifies its net assets, as well as the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows. The amendments will be effective for the Organization for fiscal years beginning after December 15, 2017 and interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted. The Organization is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

ASU 2016-15 ― Applicable to all:

In August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. – public business entities] [fis­cal years beginning after Decem­ber 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. – all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-16 ― Applicable to all:

In October 2016, the FASB amended the Income Taxes topic of the Accounting Standards Codification to modify the accounting for intra-entity transfers of assets other than inventory. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. – public business entities] [fis­cal years beginning after Decem­ber 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. – all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-17 ― Applicable to all:

In October 2016, the FASB amended the Consolidation topic of the Accounting Standards Codification to revise the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2016 including interim periods within those fiscal years. – public business entities] [fis­cal years beginning after Decem­ber 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. – all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-18 ― Applicable to all:

In November 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. – public business entities] [fis­cal years beginning after Decem­ber 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. – all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-19 ― Applicable to all:

In December 2016, the FASB issued amendments to clarify the Accounting Standards Codification (ASC), correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments were effective upon issuance (December 14, 2016) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-20 ― Applicable to all:

In December 2016, the FASB issued technical corrections and improvements to the Revenue from Contracts with Customers Topic.  These corrections make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014.  The effective date and transition requirements for the technical corrections will be effective for the Company for [reporting periods beginning after December 15, 2017-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019-all other entities]. The Company will apply the guidance using a [full retrospective approach] [modified retrospective approach]. The Company does not expect these amendments to have a material effect on its financial statements.

Applicable to all:

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

APPENDIX C

North Carolina Tax Rate Disclosure Example

As noted in the Other Developments section of this Update, for entities subject to North Carolina income tax, the North Carolina Tax Reform Law will impact the determination of recorded deferred tax assets and liabilities. The illustrative disclosure below is an example for organizations subject to North Carolina income tax. This disclosure (or something similar) should be included in the notes if the adjustments recorded or to be recorded would be considered material to the financial statements.

Tax Rate Change Disclosure

On July 23, 2013, North Carolina Governor Pat McCrory signed a major tax reform bill into law that lowered the North Carolina corporate income tax rate among other things. Specifically, the corporate income tax rate was reduced from 6.9% to 6%, to 5% in 2015, and to 4% in 2016. The rate will be further reduced to 3% for post-2016 tax years provided that specified revenue growth targets are reached.

On August 4, 2016, the North Carolina Department of Revenue issued a notice confirming that the targeted amount of $20,975,000,000 of net General Fund tax collections for fiscal year 2015-2016 was exceeded and the corporate income tax rate will be reduced from 4 percent to 3 percent for tax years beginning on or after January 1, 2017. As of December 31, 2016, the Company estimates the rate reduction trigger will result in a $____ reduction in deferred income taxes. The Company has recorded the impact of this legislation as a reduction in deferred income taxes as of December 31, 2016.

[1] “Reasonably knowable” means you should make a reasonable effort to identify conditions and events not readily known, but those you are able to identify without undue cost and effort.