2019 Third Quarter Accounting Update

Welcome to the Third 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:

Click here for PDF

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.

LEASE Accounting Implementation

This section includes additional guidance on preparing for implementation of the new lease accounting standard.

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

Quarterly Accounting Update: Selected Highlights

Leases—Are You Ready?

The new lease accounting standard places substantially all leases on the balance sheet while largely retaining current income statement treatments and lease classification. New processes and procedures will be necessary including segregating lease and non-lease components and identifying contracts subject to the new guidance.

Find out more in the Lease Accounting Implementation section.

House Bill Would Pare Back Quarterly Reporting Requirements

A House Republican has reintroduced a measure to dramatically scale back the SEC’s quarterly reporting rules. H.R. 4076 would allow publicly traded companies to disclose quarterly financial information in a simplified manner, such as through a press release or by a shortened form, instead of on a Form 10-Q.

More information can be found in the Regulatory Update section.

Second Staff Document Issued on Credit Loss Rules

The FASB on July 17, 2019, released its second staff Q&A document, Developing an Estimate of Expected Credit Losses on Financial Assets, to address 16 questions related to ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

Learn more in the Other Developments section.

FASB Proposes Deferral of Effective Dates for CECL, Leases and Hedging

The FASB has issued a proposal to defer the effective dates for CECL, Leases and Hedging for private and smaller public companies. The FASB’s tentative approach will defer the effective dates for each of these standards, if not already effective, in order to provide more implementation time for smaller companies which have limited resources to dedicate to the implementation of these standards.

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

Join us on Wednesday, October 9th, for a one-hour webcast designed to provide insight into recent discussions, actions and pronouncements from the FASB and other accounting regulatory bodies. Find more information and register at: http://www.elliottdavis.com/events

Quarterly Accounting Update: FASB Update

Other than one Accounting Standards Update (ASU) that made some minor changes to the Accounting Standards Codification (ASC), the Financial Accounting Standards Board (FASB) did not issue any significant guidance during the third quarter. A complete list of all ASUs issued or effective in 2019 is included in Appendix A.

Quarterly Accounting Update: Lease Accounting Implementation

On February 25, 2016, the FASB issued ASU 2016-02, Leases, (the new lease standard) culminating a decade long project. The new standard creates ASC 842, Leases, in the FASB Accounting Standards Codification and will supersede ASC 840, Leases.

The new lease accounting guidance was effective for public entities for fiscal years beginning after December 15, 2018. For nonpublic entities, the standard is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Elliott Davis Observation:  In August, the FASB issued a proposed ASU that would grant private companies, not-for-profit organizations, and certain small public companies additional time to implement ASC 842. Under the proposal, ASC 842 would be deferred one year from 2020 to 2021 (calendar-year-end). ASC 842 is already in effect for public companies and therefore no date changes can be made for those companies.

The major difference between the existing guidance on accounting for leases and the new standard is that operating leases will now be recorded in the balance sheet as assets and liabilities. Current U.S. GAAP requires only capital (to be known now as finance) leases to be recognized in the balance sheet and amounts related to operating leases largely are reflected in the financial statements as rent expense in the income statement and in disclosures to the financial statements. With all leases over 12 months in lease term being recognized on the balance sheet, the determination of what is a lease will take on much greater significance.  Since neither operating leases nor services were recognized on the balance sheet previously, the determination of what is a lease did not usually have significant financial reporting consequence.

Determining the Lease Term

As indicated in FASB ASC 842-10-30-1, the lease term is the noncancelable period of the lease, together with all of the following:

  • Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option
  • Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option
  • Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor

The lease term begins at the commencement date and includes any rent-free periods provided to the lessee by the lessor. The commencement date is the date on which a lessor makes the assets being leased available for use by a lessee. Lease commencement date may differ from lease inception date, which is the date of the lease agreement or commitment.

Noncancelable Lease Period

The noncancelable lease period is identified in the lease contract and is the enforceable period of the contract. A contract must create enforceable rights and obligations between two or more parties. A lease contract is no longer enforceable when both the lessee and the lessor each have the right to terminate the lease without permission from the other party with no more than an insignificant penalty.

Elliott Davis Observation: A contract does not need to be in writing. Whether the agreed-upon terms are written, oral, or otherwise indicated (for example, by electronic assent), a contract exists if the agreement creates rights and obligations that are enforceable against the parties. Determining whether a contractual right or obligation is enforceable is a question to be considered within the context of the relevant legal framework  (or  equivalent framework). The same is true when determining the enforceable period of the lease contract. The factors that determine enforceability may differ between jurisdictions (e.g., states). In many cases, the enforceability of a contract and the enforceable period of the contract will not present a problem. However, in some cases, the enforceability of a contract or the enforceable period of a contract may be unclear. Such issues are matters of law and legal counsel may be necessary to make appropriate determinations.

Periods Reasonably Certain to Extend

Leases often grant the lessee a right to extend a lease beyond the initial noncancelable period or to terminate a lease before the end of the lease period. Leases also may grant the lessor an option to extend (or not to terminate) the lease. Those options should also be factored into the determination of the lease term.

Lessee Options to Extend or Terminate the Lease

The lease term should only include optional periods to extend the lease if the lessee is reasonably certain to exercise that option. At the commencement date, an entity assesses whether the lessee is reasonably certain to exercise or not to exercise an option by considering all economic factors relevant to that assessment (i.e., factors that create an economic incentive for the lessee). Such factors (not all-inclusive) may be:

  • Contract-based
    • Contractual terms and conditions for the optional periods compared with current market rates, such as:
      • The amount of lease payments in any optional period
      • The amount of any variable lease payments or other contingent payments, such as payments under termination penalties and residual value guarantees
      • The terms and conditions of any options that are exercisable after initial optional periods
      • Costs associated with returning the underlying asset in a contractually specified condition or to a contractually specified location
    • Negotiation costs
  • Asset-based
    • Significant leasehold improvements that are expected to have significant economic value for the lessee when the option to extend or terminate the lease or to purchase the underlying asset becomes exercisable
    • Relocation costs
    • Costs of identifying another underlying asset suitable for the lessee’s operations
  • Market-based
    • Market rental rates
    • Relevant laws and regulations
  • Entity-based
    • The importance of that underlying asset to the lessee’s operations, considering, for example, whether the underlying asset is a specialized asset and the location of the underlying asset.

The existence of any one factor does not necessarily signify that a lessee is reasonably certain to exercise or not to exercise an option, as all factors should be considered together.

Definition of Reasonably Certain. The term “reasonably certain” is a high threshold. In practice, the term is similar in meaning to “probable”, which is defined as that which can reasonably be expected or believed on the basis of available evidence or logic but is neither certain nor proved. Existing U.S. generally accepted accounting standards (U.S. GAAP), including legacy U.S. GAAP related to lease accounting, use the term “reasonably assured.” The FASB views reasonably certain and reasonably assured as synonyms that should be applied in the same way. The FASB decided to use the term “reasonably certain” rather than “reasonably assured” to remain converged in this respect with IFRS.

Termination Penalties. When assessing whether an option to terminate a lease is reasonably certain of being exercised, the lessee should consider the significance of the termination penalty in absolute terms and in relation to the remaining lease payments after the date the termination option becomes exercisable. The other economic factors discussed above would be considered as well.

Lessor Options to Extend (or Not to Terminate) the Lease

The lease term should include periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor. Whether the lessor is likely to exercise the option is not a relevant consideration. In other words, if an option to extend the lease is controlled by the lessor, the determination of the lease term assumes the lessor will exercise the option to extend the lease. Similarly, if only the lessor has the option to terminate the lease, the determination of the lease term should assume that such an option will not be exercised.

Fiscal Funding Clauses

A fiscal funding clause is a provision by which the lease is cancelable if the legislature or other funding authority does not appropriate the funds necessary for the governmental unit to fulfill its obligations under the lease agreement. The existence of a fiscal funding clause in a lease agreement requires an assessment of the likelihood of lease cancellation through exercise of the fiscal funding clause. If it is more than remote that the fiscal funding clause will be exercised, the lease term should include only those periods for which funding is reasonably certain.

Short-Term Leases

A short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. As an accounting policy, a lessee may elect not to recognize right-of-use assets and lease liabilities that arise from short-term leases. Instead, a lessee may recognize the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred. The accounting policy election for short-term leases should be made by class of underlying asset to which the right of use relates. The FASB included the short-term lease accounting policy election in FABS ASC 842 to help reduce the cost and complexity of complying with the new lease accounting guidance. Nevertheless, FASB ASC 842 requires lessees to make certain disclosures about short-term leases.

Month-to-Month, Evergreen, Rolling, and Similar Leases

It is not uncommon for entities to enter into very short-term leases such as month-to-month or week-to-week leases, as well as rolling and evergreen leases. Such leases are subject to the requirements of FASB ASC 842 like other leases, as long as the lease contracts create enforceable rights and obligations between two or more parties. The lease term should be determined based on the requirements of paragraphs 1-4 of FASB ASC 842-10-30, as described above in this report. As such, whether it is reasonably certain that renewal or termination options will be exercised by the lessee will need to be assessed, as well as the existence of similar options controlled by the lessor. Note that many month-to-month leases contain “mutual” renewal options. See the discussion above related to these options.

Assessing whether a lessee is reasonably certain to exercise a renewal option on short-term leases may be challenging at times and require significant judgment. Looking at the economic incentives that the lessee has to exercise the option will be important. A very short noncancelable lease term may indicate a stronger economic incentive for the lessee to exercise renewal options.

Some lease contracts do not contain a lease term. Such leases may be day-to-day with the lessee paying a fee for each day the underlying asset is used. These leases would still be subject to the requirements of determining the lease term under FASB ASC 842. The noncancelable lease period may be determined to be one day and renewal options for each subsequent day would be assessed as to whether they are reasonably certain of being exercised. Given the extremely short lease term, the lessee may have strong economic incentives to continue the lease and exercise renewal options.

Related Party Leases Impact on Lease Term

FASB ASC 842 introduces a significant change from current U.S. GAAP by requiring that the recognition and measurement for all leases should be applied by lessees and lessors that are related parties on the basis of legally enforceable terms and conditions of the contract (rather than looking at substance over form). In the separate financial statements of the related parties, the classification and accounting for the leases should be the same as for leases between unrelated parties.

The new requirement to account for leases between related parties based on the legally enforceable terms and conditions of the contract may introduce challenges in determining the lease term of related party leases. In many related party arrangements, little documentation exists and the arrangements often are not in writing. Moreover, the related parties frequently are under common control. Determining whether the lease contract in those situations creates enforceable rights and obligations and whether the contract contains an enforceable lease term is problematic. Legal counsel may be necessary to make such determinations. As under current U.S. GAAP, entities should comply with the disclosure requirements of FASB ASC 850, Related Party Disclosures.

Elliott Davis Observation: Keep in mind that a lease contract is no longer enforceable when both the lessee and the lessor each have the right to terminate the lease without permission from the other party with no more than an insignificant penalty. In such arrangements, neither party has enforceable rights or obligations. Also, some entities may be inclined to set shorter lease terms, especially with related party leases where more flexibility in setting lease terms exists. Those entities are reminded about the effect that setting a shorter lease term will have on the amortization period of leasehold improvements. FASB ASC 842-20-35-12 indicates that leasehold improvements should be amortized over the shorter of the useful life of those leasehold improvements and the remaining lease term, unless the lease transfers ownership of the underlying asset to the lessee or the lessee is reasonably certain to exercise an option to purchase the underlying asset, in which case, the lessee should amortize the leasehold improvements to the end of their useful life. Therefore, setting a shorter lease term will often result in a shorter amortization period for leasehold improvements.

Need Help? If you have questions or need more information related to the new lease accounting standard, please contact your Elliott Davis advis

Quarterly Accounting Update: Regulatory Update

Amendment Excludes Community Banks From Volcker Rule

The SEC and banking agencies on July 9, 2019, published a joint final rule that excludes community banks from the Volcker Rule, which restricts proprietary trading. The Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which became law in May 2018, mandated the exemption for small banks.

Release No. BHCA-6, Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds, becomes effective upon publication in the Federal Register, which normally occurs a few weeks after a rulemaking document is posted on the agencies’ website.

The commission issued the final rule with the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Commodity Futures Trading Commission (CFTC), and the Federal Deposit Insurance Corporation (FDIC). Bank-affiliated broker-dealers, investment advisers, financial swap dealers, and major financial swap participants are under the SEC’s purview.

The final rule is based on a joint proposal that the agencies issued in December last year in response to Sections 203 and 204 of the EGRRCPA. The SEC’s proposal is in Release No. BHCA-5, Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds. Section 619 of the Dodd-Frank Act added a new Section 13 to the Bank Holding Company (BHC) Act of 1956, commonly known as the Volcker Rule. Sec. 619 of PL111-203.

In December 2013, the five regulatory agencies issued the final Volcker Rule in Release No. BHCA-1, Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds.

In Release No. BHCA-6, the agencies exclude community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets from the Volcker Rule. This is unchanged from the proposal.

In addition, the final rule also lets a hedge fund or private equity fund share the name or variation of the same name with an investment adviser, which was banned in Section 13 of the BHC Act. This restriction is lifted if the investment adviser is not an insured depository institution or treated as a bank holding company.

The SEC estimates that there are 114 bank-affiliated broker-dealers with aggregate assets of about $101 billion and aggregate holdings of about $16 billion that would fall under the Volcker Rule exemption, according to Release No. BHCA-6. The commission also estimates that, at most, 296 bank-affiliated investment advisers will no longer be subject to Section 13 of the BHC Act.

Among other things, the proposed amendments to the Volcker Rule would establish new requirements based on a bank’s trading activities to reduce compliance burdens for small- and mid-sized banking entities.

Bill to Extend Relief From Sarbanes-Oxley Auditor Attestation Introduced in House

A bipartisan bill introduced in the House of Representatives would give certain small public companies a longer break from the auditor attestation requirements of the Sarbanes-Oxley Act. H.R. 3886, the Fostering Innovation Act, was a core part of the so-called “JOBS Act 3.0” package that passed the House in 2018. A bipartisan group of senators introduced the Senate version of the bill, S. 452, in February.

The 2012 law created a new class of issuer, known as an emerging growth company (EGC), and granted those companies a host of disclosure and auditing benefits, including an exemption from Section 404(b), widely considered one of the most expensive and burdensome Sarbanes-Oxley provisions, especially for smaller, low-revenue issuers. Section 404(b) requires an outside auditor to review and report on management’s assessment of internal controls over financial reporting (ICFR).

Today, that exemption vanishes when a company ages out of EGC status, which can last for as long as about five years following an initial public offering (IPO). The Fostering Innovation Act would maintain that exemption for an additional five years for EGCs with less than $50 million in revenue and less than $700 million in public float.

The longer exemption is especially appealing to biotech companies, who often go public to raise funds for drug development and have little in the way of revenues until they bring a product to market.

Proponents of maintaining Section 404(b) as it stands today argue the Sarbanes-Oxley requirements have led to improvements in the quality of financial reporting, and have fought efforts to expand exemptions to the Sarbanes-Oxley provision.

Several conditions can trigger the loss of EGC status. If a company surpasses $1 billion in annual revenue or reaches the five-year anniversary of its IPO date, it will no longer qualify as an EGC after the end of the fiscal year in which it reached that milestone. A company will also shed its EGC designation if it issues more than $1 billion in non-convertible debt over a three year period, or reaches a public float of $700 million.

SEC Chairman Supports Effort to Exempt More Companies from Auditor Attestation of Internal Financial Controls

In public remarks, top SEC officials recently promoted a planned rule to exempt more public companies from the requirement that their external auditors attest to management’s evaluation of internal controls over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002.

While emphasizing that it is important to have high-quality financial statements and audits, SEC Chairman Jay Clayton pointed to the experience with Section 404(b) for well over a decade and at least one-half decade with the JOBS Act that gave emerging growth companies (EGCs) an exemption from the requirement.

Companies have been lobbying for several years for a break because they say that such auditor attestation is very expensive with little benefit to investors. Biotech companies have especially argued that instead of spending hundreds of thousands of dollars to get the attestation, they could use that money to hire more scientists to develop life-saving drugs. And the current SEC, which is receptive to business complaints, in May issued a proposal in Release No. 34-85814, Amendments to the Accelerated Filer and Larger Accelerated Filer Definitions. The release is intended to exempt more classes of companies from Section 404(b), and it was issued as part of wider efforts to scale back regulations that are deemed burdensome. Clayton believes that reducing compliance costs will encourage more companies to stay and go public.

The proposed rules are intended to benefit low revenue companies even if the funds raised in the public stock markets are not small. The proposal would revise the accelerated filer and large accelerated filer definitions. Currently, accelerated filers are companies that have a public float of $75 million to $700 million. Large accelerated filers have more than $700 million in public float. Today, only nonaccelerated filers with less than $75 million in public float are exempted from Section 404(b). Public float is the value of a company’s common stock that is publicly traded.

In particular, the proposal will exclude companies from the definitions of accelerated and large accelerated filers if they are smaller reporting companies (SRCs) and have annual revenues of less than $100 million in their most recent fiscal year. SRCs have a public float of less than $250 million. A company with no public float or with a public float of less than $700 million also qualifies as an SRC if it had annual revenues of less than $100 million during its most recently completed fiscal year. Previously companies could provide scaled disclosure if they had no public float and less than $50 million in annual revenues.

The small company advisory panel at the meeting voted to support the proposal. However, the committee said that it wants the SEC to study whether the $100 million revenue threshold should be raised to exempt even more companies.

House Bill Would Pare Back Quarterly Reporting Requirements

A House Republican has reintroduced a measure to dramatically scale back the SEC’s quarterly reporting rules. H.R. 4076, the Modernizing Disclosures for Investors Act, hews closely to the original version Rep. Ann Wagner introduced last year, which was more far-reaching than the watered-downed iteration of the bill that eventually passed the House. H.R. 4076 would allow publicly traded companies to disclose quarterly financial information in a simplified manner, such as through a press release or by a shortened form, instead of on a Form 10-Q.

The bill requires the SEC to issue rules for simplified filings that include a quarterly income statement, a balance sheet as of the last day of the quarter, and a statement of operations. The quarterly filings would also need to include a statement of any material changes in financial condition or results of operations since the company’s most recent financial statements.

The House Financial Services Committee’s Capital Markets subcommittee debated the measure in late May 2018, where witnesses representing industry groups praised the proposed changes. Proponents of the measure said it would cut down on an expensive and redundant filing, and argued that investors have already digested a company’s quarterly financial results through 8-K notices and financial press releases before the formal 10-Q is released.

Wagner later compromised and put forth an amended version of the bill that would require the SEC, within 180 days after enactment, to provide a cost-benefit report to Congress on of the use of Form 10-Q for emerging growth companies (EGCs) and other issuers, as well as on the costs and benefits of alternative formats for quarterly reporting. The compromise measure later passed the house as part of the JOBS Act 3.0 legislative package, which was mostly ignored by the Senate.

The bill’s reintroduction on July 25, 2019, comes as the SEC is, even without a congressional mandate, reviewing its quarterly reporting regime. The commission in December 2018 put out a request for comment on the timing of required disclosures, which came months after a tweet by President Donald Trump urging the U.S. to scrap quarterly reporting in favor of a twice-per-year system. The SEC issued that request in Release No 33-10588, Request for Comment on Earnings Releases and Quarterly Reports.

SEC Adopts New Rule to Allow All Issuers to “Test-the-Waters”

On September 26, the SEC announced that it has voted to adopt a new rule that extends a “test-the-waters” accommodation to all issuers. “Test-the-waters” is a tool currently available to emerging growth companies or “EGCs”.  The new rule is intended to encourage companies to access the public markets. Under the new rule, all issuers will be allowed to gauge market interest in a possible initial public offering or other registered securities offering through discussions with certain institutional investors prior to, or following, the filing of a registration statement.

The rule will become effective 60 days after publication in the Federal Register.

SEC Issues Staff Interpretive Guidance About Interactive Data Tagging Requirements

On August 20, the SEC’s Division of Corporation Finance (CorpFin) updated staff interpretive guidance, Compliance & Disclosure Interpretations (C&DIs): Interactive Data, to help public companies comply with the interactive data rule in Release No. 33-10514, Inline XBRL Filing of Tagged Data, published in June 2018. The release requires public companies to embed interactive data tags directly into their financial statements using a process called the Inline eXtensible Business Reporting Language (XBRL).

Effective dates are as follows:

  • Large accelerated filers are required to use Inline XBRL for fiscal periods ending on or after June 15, 2019*
  • Accelerated filers are required to use Inline XBRL for fiscal periods ending on or after June 15, 2020*
  • Smaller companies with public floats of less than $75 million are required to use Inline XBRL for fiscal periods ending on or after June 15, 2021*
  • Companies will be required to comply beginning with their first Form 10-Q filed for a fiscal period ending on or after the applicable compliance date
SEC Issues Proposal Aimed at Modernizing Disclosures of Business, Legal Proceedings, and Risk Factors Under Regulation S-K

On August 8, the SEC announced that it has voted to propose rule amendments to modernize the description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K. The proposed revisions to Items 101(a) (description of the general development of the business), 101(c) (narrative description of the business), and 105 (risk factors) would emphasize a more principles-based approach to facilitate more tailored disclosures about the aspects of these disclosures that are material to them.  The proposed amendment of Item 103 (legal proceedings) would continue the current prescriptive approach because that requirement depends less on the specific characteristics unique to each registrant. Select highlights of the revisions are outlined below:

The proposed amendment of Item 101(a) would:

  • make it largely principles-based by providing a non-exclusive list of the types of information that a registrant may need to disclose, and by requiring disclosure of a topic only to the extent such information is material to an understanding of the general development of a registrant’s business
  • include as a listed disclosure topic, to the extent material to an understanding of the registrant’s business, transactions and events that affect or may affect the company’s operations, including material changes to a registrant’s previously disclosed business strategy
  • eliminate a prescribed timeframe for this disclosure
  • permit a registrant, in filings made after a registrant’s initial filing, to provide only an update of the general development of the business that focuses on material developments in the reporting period, and with an active hyperlink to the registrant’s most recent filing that, together with the update, would contain the full discussion of the general development of the registrant’s business

The proposed amendment of Item 101(c) would:

  • clarify and expand its principles-based approach, by including disclosure topics drawn from a subset of the topics currently contained in Item 101(c)
  • include, as a disclosure topic, human capital resources, including any human capital measures or objectives that management focuses on in managing the business, to the extent such disclosures would be material to an understanding of the registrant’s business, such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the attraction, development, and retention of personnel
  • refocus the regulatory compliance requirement by including material government regulations, not just environmental provisions, as a topic

The proposed amendment of Item 103 would:

  • expressly state that the required information about material legal proceedings may be provided by including hyperlinks or cross-references to legal proceedings disclosure located elsewhere in the document in an effort to encourage registrants to avoid duplicative disclosure
  • revise the $100,000 threshold for disclosure of environmental proceedings to which the government is a party to $300,000 to adjust for inflation

The proposed amendment of Item 105 would:

  • require summary risk factor disclosure if the risk factor section exceeds 15 pages
  • refine the principles-based approach of that rule by changing the disclosure standard from the “most significant” factors to the “material” factors required to be disclosed
  • require risk factors to be organized under relevant headings, with any risk factors that may generally apply to an investment in securities disclosed at the end of the risk factor section under a separate caption

The proposal will have a 60-day public comment period following its publication in the Federal Register.

Quarterly Accounting Update: Other Developments

Second Staff Document Issued on Credit Loss Rules

The FASB on July 17, 2019, released its second staff Q&A document, Developing an Estimate of Expected Credit Losses on Financial Assets, to address 16 questions related to ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

When a company develops an estimate of its expected credit losses for financial assets (held at amortized cost at the reporting date), the guidance requires that it considers all available and relevant information. Companies need to consider, for example, historical experience, current conditions and reasonable and supportable forecasts. The objective is for the entity to estimate the net amount it expects to collect on the financial assets.

Companies raised questions about acceptable approaches for determining reasonable and supportable forecasts and techniques for reverting to historical loss information when developing the estimate, according to the main text of the Q&A document.

Specifically, the Q&A provides answers to the following questions:

·       Does the application of the word forecast in paragraph 326-20-30-7 infer computer-based modeling analysis is required?

·       If an entity’s actual credit losses differ from its estimate of expected credit losses, is it required to modify its forecasting methodology?

·       Can an entity’s process for determining expected credit losses consider only historical information?

·       How should an entity determine which historical loss information to use when estimating expected credit losses?

·       Is an entity required to consider all sources of available information when estimating expected credit losses?

·       What if external data are not costly, but internal data are more relevant to an entity’s loss calculation? Is the entity required to obtain and/or use the external data?

·       Should an entity use external data to develop estimates of credit losses if internal information is available?

·       May the length of reasonable and supportable forecast periods vary between different portfolios, products, pools, and inputs?

·       Does an entity need to include the full contractual period (adjusted for prepayments) in its estimate of the reasonable and supportable forecast period?

·       Should an entity reevaluate its reasonable and supportable forecast period each reporting period?

·       Is an entity required to correlate reasonable and supportable forecasts to macroeconomic data, such as nationwide or statewide data?

·       When developing a reasonable and supportable forecast to estimate expected credit losses, is probability weighting of multiple economic scenarios required?

·       Is there a standard threshold that can be used to adjust historical loss information?

·       What should an entity do if it cannot forecast estimated credit losses over the entire contractual term (adjusted for prepayments)?

·       Can an entity adjust the historical loss information used in the reversion period for existing economic conditions or expectations of future economic conditions when developing estimates of expected credit losses?

·       Is an entity required to revert to historical loss information on a straight-line basis?

AICPA Issues CECL Practice Aid

On September 9, the AICPA issued non-authoritative guidance in the form of a Practice Aid, Allowance For Credit Losses – Audit Considerations, to assist auditors when communicating with management and audit committees about CECL. While the Practice Aid is primarily written for auditors, it will likely also be directly beneficial to lenders preparing to implement CECL.

The practice aid highlights key areas within the auditing process including the following:

·       obtaining an understanding of the entity

·       assessing the risks

·       identifying the controls relevant to the audit

·       designing an audit response

·       performing audit procedures

·       evaluating the audit and disclosure considerations

The Practice Aid is part of a broader AICPA initiative and will be included in its Credit Losses A&A Guide planned for release next year.

The Practice Aid is offered to the public at no charge and can be accessed at:

https://www.aicpa.org/content/dam/aicpa/interestareas/frc/accountingfinancialreporting/downloadabledocuments/cecl-audit-practice-aid.pdf

Preparers of Governmental Statements Get Guide to Aid Implementation of New Leases Rules

A new GASB implementation guide was issued on August 15, 2019, to help state and local governments adopt new accounting provisions for reporting leases for items such as land, vehicles, buildings, and equipment. The GASB issued Implementation Guide No. 2019-3, Leases, to help governmental entities with the adoption of GASB Statement (GASBS) No. 87, Leases. The guide answers about 77 questions raised by practitioners ahead of their adoption of the leases standard.

The GASB generally issues implementation guides to help accountants navigate major new accounting standards. The guide is a compilation of the questions the board received and answers to those questions.

Quarterly Accounting Update: On the Horizon

The following selected FASB exposure drafts and projects are outstanding as of September 30, 2019.

FASB Proposes Deferral of Effective Dates for CECL, Leases and Hedging

On August 15, the FASB issued Proposed ASU NO. 2019-750, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. Under the proposed changes, the effective dates for CECL, Leases and Hedging will be deferred for smaller reporting companies (SRCs), private and not-for-profit organizations an additional year to adopt the new credit loss rule. The proposal would also grant private companies and nonprofits an additional year to adopt leases and hedge accounting rules. Large public companies will not get a deferral.

If finalized, the proposed changes would result in the following changes:

Measurement of Credit Losses (CECL)

The proposal would defer ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, from 2021 to 2023 for SRCs and from 2022 to 2023 for private companies and nonprofits (calendar-year-end dates).

Calendar-year-end SEC filers (typically larger public companies) that are not SRCs as defined by the SEC would keep the current January 1, 2020, effective date for ASU No. 2016-13. Earlier application is allowed.

Leases

The proposal would defer ASU No. 2016-02, Leases (Topic 842), from 2020 to 2021 (calendar-year-end) for private companies and not-for-profit organizations.

The leases rules are already in effect for public companies and therefore no date changes can be made for those companies.

Hedging

The proposal would defer ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, from 2020 to 2021 (calendar-year-end) for private companies and not-for-profit organizations.

The hedging rules are already in effect for public companies and therefore no date changes can be made for those companies, the proposal states.

The comment period closed on September 16 and the FASB is scheduled to vote on the Proposed ASU on October 16.

FASB Reissues Proposal on Income Tax Disclosure Rules

In March 2019, the FASB reissued a proposal to amend the disclosures companies will have to provide under Topic 740, Income Taxes. Proposed ASU No. 2019-500, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes, requires companies to provide more disclosures so that financial statements provide more relevant information to investors.

The proposal would remove disclosures that no longer are considered cost beneficial or relevant and add more detailed disclosure requirements identified as relevant, according to the main tenets of the package and also reflects changes in the tax law enacted in December 2017.

At the September 4th meeting, the FASB affirmed many of the positions previously deliberated to remove several exceptions from Topic 740.  Additionally, the FASB affirmed decisions related to the following:

·       recognition of franchise tax that is partially based on income

·       evaluation of a step up in the tax basis of goodwill

·       allocation of consolidated current and deferred tax expense to legal entities that that are not subject to tax in their separate financial statements

·       reflection of the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date

Additionally, the FASB affirmed its decision to make a Codification improvement for income taxes related to employee stock ownership plans and reversed its decision to supersede the illustrative example in paragraph 323-740-55-8 and instead decided to correct an error in the illustrative example on investments in qualified affordable housing projects accounted for using the equity method.

The amendments should be effective for fiscal years beginning on or after December 15, 2020, and interim periods within those fiscal years for public business entities and for fiscal years beginning on or after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 for all other entities. Early adoption will be permitted

The FASB is expected to issue the final standard during 2019

FASB Proposal Issued to Address Business Combination Accounting for an Assumed Liability in a Revenue Contract

When accounting for a business combination, in applying the acquisition method, the acquirer recognizes identifiable assets acquired and liabilities assumed in the business combination and measures those assets and liabilities at fair value. For business combinations that occur before the adoption of the new revenue recognition standard, entities often use a legal obligation definition for recognition of a liability under Topic 805 for deferred revenue. However, Topic 606 has introduced the performance obligation definition for revenue contracts with customers which has created diversity of opinion regarding which definition should be used for recognition for business combinations after Topic 606 has been adopted.

On February 14, 2019, the FASB issued proposed ASU, Business Combinations (Topic 805): Revenue from Contracts with Customers—Recognizing an Assumed Liability (a consensus of the FASB Emerging Issues Task Force). The EITF reaffirms that the performance obligation definition in Topic 606, Revenue from Contracts with Customers, would be used to determine whether a liability assumed for a contract liability from a revenue contract with a customer is recognized by the acquirer in a business combination.

FASB Proposes Narrow-Scope Improvements to Credit Losses Standard

In June, the FASB Proposed Narrow-Scope Improvements to the Credit Losses Standard. If adopted as proposed, this ASU would permit organizations to record negative allowances on PCD assets. A negative allowance describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset, but then later determines that the amount written off, or a portion of that amount, will in fact be recovered.

In addition to other narrow technical improvements, the proposed ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities.

Convertible Instruments and Contracts in an Entity’s Own Equity

In July, the FASB issued Proposed ASU No. 2019-730, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), to make targeted improvements intended to reduce cost and complexity in the financial reporting for convertible instruments and contracts in an entity’s own equity. For convertible instruments, the proposed ASU would reduce the number of accounting models for convertible debt instruments and convertible preferred stock. For derivatives, the proposed ASU would amend guidance for derivatives scope exceptions to:

·       allow an entity to qualitatively screen out any contingent events that are considered to have a remote likelihood of occurring and disregard these events in the assessment of the derivatives scope exception

·       remove three conditions required to qualify for the settlement guidance related to settlement in unregistered shares, collateral requirements and shareholder rights.

The proposed ASU would also amend the related disclosure and EPS guidance.

The comment period on the proposed ASU closes on October 14, 2019.

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 January 10, 2017, the FASB issued a proposed ASU on determining whether debt should be classified as current or noncurrent in a classified balance sheet. In place of the current, fact-specific guidance in ASC 470-10, the proposed ASU would introduce a classification principle under which a debt arrangement would be classified as noncurrent if either (1) the “liability is contractually due to be settled more than one year (or operating cycle, if longer) after the balance sheet date” or (2) the “entity has a contractual right to defer settlement of the liability for at least one year (or operating cycle, if longer) after the balance sheet date.” Under an exception to the classification principle, an entity would not classify debt as current solely because of the occurrence of a debt covenant violation that gives the lender the right to demand repayment of the debt, as long as the lender waives its right before the financial statements are issued (or are available to be issued).

Many businesses, professional groups, and some auditors criticized the proposal in their comment letters. But others, including a majority of the FASB’s Private Company Council, stated the FASB’s proposal made sense and would simplify U.S. GAAP’s myriad, fact-specific rules about debt classification. Proponents of the changes also said that by the time the updated guidance became effective, the public would have a better idea about the principles behind the changes. Regulators also potentially could adapt their rules so companies that reported higher short-term debt solely because of the accounting change would not be disqualified from projects.

On September 13, 2017, the FASB approved the update 6-1. The FASB agreed that public companies would have to comply with the new guidance for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Private companies and other organizations would not have to follow the revised guidance until their fiscal years that begin after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. All organizations can apply the amendments early.

Through the March 2019 meeting, the FASB redeliberated its proposed ASU and made the following decisions:

  • Classification Principle—Unused Long-Term Financing Arrangements—the Board reversed its previous decision that if a long-term financing arrangement is in place as of the balance sheet date (for example, an unused line of credit), the amount of current maturities for any other debt arrangements would be reduced by the unused amount of the long-term financing arrangement up to the amount of the current maturities and classified as a noncurrent liability. Therefore, an unused long-term financing arrangement in place at the balance sheet date should be disregarded in determining the classification of debt unless it is explicitly available to refinance an existing debt. The Board directed the staff to conduct additional outreach, focusing on scenarios in which an entity has a redeemable instrument that is subject to a remarketing agreement and is also secured by a long-term letter of credit.
  • Grace Periods—the Board clarified how to apply the debt classification principle when a debt covenant violation exists and the creditor provides a grace period. Specifically, the Board decided that when a borrower violates a provision of a long-term debt agreement and the creditor provides a specified grace period for the borrower to cure the violation, which makes the debt no longer callable at the balance sheet date, the borrower should classify the debt as a noncurrent liability. The Board decided to require an entity to disclose information when a borrower violates a provision of a long-term debt agreement and the creditor provides a specified grace period. That disclosure would be required when (1) the violation has not been cured before the financial statements are issued (or are available to be issued) and (2) the violation would make the long-term obligation callable.
  • Effective Date—the Board decided that the effective date should be as follows:
  • For public business entities, for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years
  • For all other entities, for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

In September, the FASB issued Proposed ASU (REVISED) No. 2019-780, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent), to solicit feedback on the revised proposed ASU.The FASB is expected to continue redeliberations of the revised proposed ASU after the comment period closes on October 28, 2019.

Expanded Inventory Disclosures Proposed

On January 10, 2017, the FASB issued a proposed ASU, Disclosure Framework—Changes to the Disclosure Requirements for Inventory, which calls on businesses to provide more detailed disclosures about their raw materials and finished goods.

The proposed ASU would require businesses to disclose their inventory by component, such as by raw materials, finished goods, supplies, and works-in-process. Businesses also would have to break down how their inventory is measured. Businesses use a variety of measurement techniques for inventory, including last-in, first-out (LIFO), first-in, first-out (FIFO), LIFO retail inventory method, or weighted average.  Significant shrinkage, spoilage, damage or other unusual transactions or circumstances affecting inventory balances also would have to be disclosed. Additionally, businesses would have to describe the types of costs capitalized into inventory, the effect of LIFO liquidations on income, and the replacement cost of LIFO inventory.

The FASB is currently redeliberating the proposed ASU in light of the comments received.

FASB Proposes Accounting Changes to Facilitate LIBOR Phaseout

On September 5, the FASB issued as Proposed ASU No. 2019-770, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The proposal would provide temporary optional guidance to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The proposal is intended to addresses operational challenges companies raised and ultimately will help simplify the transition process.

The exposure draft proposes to simplify the accounting evaluation of a contract modification and allow for that modification to be considered a continuation of the contract for accounting purposes. The proposal would also simplify the assessment of hedge effectiveness and allow hedging relationships affected by reference rate reform to continue. Application of the hedge accounting relief would be optional on a hedge-by-hedge basis. The proposed accounting relief could be applied up until January 1, 2023, a year after the expected discontinuation of LIBOR.

The comment period on the proposed ASU closes on October 7, 2019.

Disclosure Framework

The disclosure framework project consists of two phases: (1) the FASB’s decision process and (2) the entity’s decision process. The overall objective of the 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.

Consolidation Reorganization

On November 2, 2016, the Board added this project to its technical agenda. Further, it tentatively decided to (1) clarify the consolidation guidance in ASC 810, Consolidation, by dividing it into separate Codification subtopics for voting interest entities and variable interest entities (VIEs); (2) develop a new Codification topic that would include those reorganized subtopics and would completely supersede ASC 810; (3) rescind the subsections on consolidation of entities controlled by contract in ASC 810-10-15 and in ASC 810-30 on research and development arrangements; (4) further clarify that power over a VIE is obtained through a variable interest; and (5) provide further clarification of the application of the concept of “expected,” which is used throughout the VIE consolidation guidance.

At its March 8, 2017, meeting, the FASB discussed the feedback received at its December 16, 2016, public roundtable and voted to move forward with a proposed ASU that reorganizes the consolidation guidance.  On September 20, 2017, the FASB issued Proposed ASU, Consolidation (Topic 812): Reorganization, and the comment period has closed. The proposed ASU is now in the redeliberation phase related to comment responses received.

On June 27, 2018, the FASB decided to continue its existing project to reorganize ASC 810 and instructed the staff to develop nonauthoritative educational material to address the more difficult parts of consolidation guidance with the goal of supporting and supplementing the reorganized authoritative consolidation guidance.

EITF Agenda Items

The Emerging Issues Task Force (EITF) did not meet during the third quarter. The next scheduled meeting is November 7, 2019.

PCC Activities

The Private Company Council (PCC) met on Wednesday, September 11, 2019. Below is a brief summary of issues addressed by the PCC at the meeting, categorized by project:

  • Practical Expedient to Measure Grant-Date Fair Value of Equity-Classified Share-Based Awards: The PCC and the Board continued their discussion from the June 2019 PCC meeting about a potential practical expedient that would allow private companies to use the exercise price of their equity-classified traditional share-option awards as the current share price input for purposes of determining the grant-date fair value of such awards. The staff provided the PCC with an overview of outreach performed since 2013 on the topic of share-based compensation as well as a detailed analysis of recent outreach with private company practitioners and preparers. Several Board members expressed concern with: (1) whether the identified issue was pervasive and (2) whether, and how, a practical expedient could reduce the cost and complexity associated with determining the current share price input. The PCC and the Board discussed an alternative practical expedient where the current price for equity-classified share-option awards could be leveraged from a valuation that meets the requirements of Section 409A of the United States Internal Revenue Code. With the support of Board members, the PCC directed the staff to (1) draft language for the potential practical expedient and (2) identify additional issues that need to be considered by the PCC at a future meeting.
  • Implementation Topic—Leases: The PCC and the Board discussed private company implementation activities related to Update No. 2016-02, Leases (Topic 842), including a dialogue regarding the determination of a lease term in related party lease arrangements and the complexity associated with embedded leases.
  • Identifiable Intangible Assets and Subsequent Accounting for Goodwill: The PCC and Board discussed the Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill. The PCC generally supported the project and provided wide-ranging feedback on the characteristics of goodwill amortization and the potential effects of the project on the existing private company goodwill alternative.
  • Simplifying the Balance Sheet Classification of Debt: The staff provided the PCC with an overview of the upcoming revised proposed Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent), resulting from this project. The PCC and the Board discussed the settlement of debt through the issuance of equity and whether the purpose of debt classification should be to signal when or how the debt will be settled. Several PCC members expressed continued support for the decisions reached on unused long-term financing arrangements.
  • Distinguishing Liabilities from Equity (Including Convertible Debt): The PCC and the Board discussed the proposed Update, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The PCC expressed its general support for the simplifications for private companies that would be provided by the amendments resulting from the proposed Update.
  • Reference Rate Reform: Facilitation of the Effects of the Interbank Offered Rate Transition on Financial Reporting: The staff provided PCC members with an overview of the recently issued proposed Update, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. PCC members discussed the progress of transition away from rates expected to be discontinued as a result of reference rate reform. The PCC and the Board emphasized the importance of making private companies aware of the upcoming change to reference rates and discussed ways to ensure the message reaches a wide range of stakeholders.
  • Effective Date Philosophy: The staff provided PCC members with an overview of the proposed Update, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. The PCC expressed its overall support for the proposed philosophy and provided feedback in response to questions about both the two-bucket approach and the appropriate effective date for private company interim financial reporting.

APPENDIX A

Important Implementation Dates

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

Click here for PDF

APPENDIX B

Illustrative Disclosures for Recently Issued Accounting Pronouncements

For the Quarter Ended September 30, 2019

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 2014-09 ― 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 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 2016-01 ― Applicable to entities, including not-for-profit organizations and employee benefit plans, 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 business entities] [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 business entities] [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.

We expect to adopt the guidance using the modified retrospective method and practical expedients for transition. The practical expedients allow us to largely account for our existing leases consistent with current guidance except for the incremental balance sheet recognition for lessees. We have started an initial evaluation of our leasing contracts and activities. We have also started developing our methodology to estimate the right-of use assets and lease liabilities, which is based on the present value of lease payments (the December 31, 2018 future minimum lease payments were $____ million). We do not expect a material change to the timing of expense recognition, but we are early in the implementation process and will continue to evaluate the impact. We are evaluating our existing disclosures and may need to provide additional information as a result of adoption of the ASU.

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 business entities] [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 2016-08 ― 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 2016-10 ― 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 reporting 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] [fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.-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 2016-15 ― 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 2016-18 ― 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 2016-20 ― 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.

ASU 2017-01 ― Applicable to all:

In January 2017, the FASB issued guidance 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. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. 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] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-04 ― Applicable to all:

In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  The effective date and transition requirements for the technical corrections will be effective for the Company for [reporting periods beginning after December 15, 2019.-public business entities that are SEC filers] [reporting periods beginning after December 15, 2020.-public business entities that are not SEC filers] [reporting periods beginning after December 15, 2021.-all other entities] Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-05 ― Applicable to all:

In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification to clarify the scope of the guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. 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 2017-06 ― Applicable to employee benefit plans with a master trust:

In February 2017, the FASB amended the guidance related to employee benefit plan master trust reporting. The new guidance provides for presentation within the plan’s financial statements of its interest in a master trust as a single line item; disclosure of the master trust’s investments by general type as well as by the dollar amount of the plan’s interest in each type; disclosure of the master trust’s other assets and liabilities and the balances related to the plan; and elimination of required disclosures for Section 401(h) accounts that are already provided by the associated defined benefit plan. The amendments are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Plan does not expect these amendments to have a material effect on its financial statements.

ASU 2017-07 ― Applicable to entities that offer defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under ASC 715:

In March 2017, the FASB amended the requirements in the Compensation—Retirement Benefits Topic of the Accounting Standards Codification related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The amendments will be effective for the Company for [interim and annual 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] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-08 ― Applicable to entities that hold investments in callable debt securities held at a premium:

In March 2017, the FASB amended the requirements in the Receivables—Nonrefundable Fees and Other Costs Topic of the Accounting Standards Codification related to the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for [interim and annual periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-10 ― Applicable to entities with service concession arrangements:

In May 2017, the FASB amended the requirements in the Service Concession Arrangements Topic of the Accounting Standards Codification to clarify how an operating entity determines the customer of the operation services for service concession arrangements. 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] –entities that have not adopted ASU 2014-09} {[fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.-public business entity, a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and an employee benefit plan that files or furnishes financial statements with or to the SEC] [fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities]-entities that have adopted ASU 2014-09} The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-11 ― Applicable to entities that issue financial instruments that include down round features:

In July 2017, the FASB amended the requirements in the Earnings per Share, Distinguishing Liabilities from Equity, and Derivatives and Hedging Topics of the Accounting Standards Codification to address the complexity of accounting for certain financial instruments with down round features. The amendments will be effective for the Company for [interim and annual periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-12 ― Applicable to entities that elect to apply hedge accounting:

In August 2017, the FASB amended the requirements of the Derivatives and Hedging Topic of the Accounting Standards Codification to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments will be effective for the Company for [interim and annual periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-15 ― Applicable to U.S. Steamship Entities:

In December 2017, the FASB removed the U.S. Steamship Entities Topic of the Accounting Standards Codification. The amendments remove the guidance for steamship entities with respect to unrecognized deferred taxes related to certain statutory reserve deposits. The amendments are effective for fiscal years and first interim periods beginning after December 15, 2018.  Early adoption is permitted.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-01 ― Applicable to entities with land easements:

In January 2018, the FASB amended the requirements of the Leases Topic of the Accounting Standards Codification. The amendments permit an entity to elect an optional transition practical expedient to not evaluate under the new lease accounting guidance land easements that exist or expired before the entity’s adoption of the new lease accounting guidance and that were not previously accounted for as leases under previous lease accounting guidance. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in ASU 2016-02. Early adoption is permitted.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-02 ― Applicable to entities with items of other comprehensive income for which the related tax effects are presented in other comprehensive income:

In February 2018, the FASB amended the Income Statement—Reporting Comprehensive Income Topic of the Accounting Standards Codification. The amendments allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.  Early adoption is permitted.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-03 ― Applicable to all:

In February 2018, the FASB amended the Financial Instruments Topic of the Accounting Standards Codification. The amendments clarify certain aspects of the guidance issued in ASU 2016-01. The amendments are effective for [fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018 –public business entities] [Public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018, are not required to adopt these amendments until the interim period beginning after June 15, 2018, and public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt these amendments before adopting the amendments in ASU 2016-01] [the same as the effective date in ASU 2016-01 –all other entities]. All entities may early adopt these amendments for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted ASU 2016-01. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-07 ― Applicable to all entities that enter into share-based payment transactions for acquiring goods and services from nonemployees:

In June 2018, the FASB amended the Compensation—Stock Compensation Topic of the Accounting Standards Codification. The amendments expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments are effective for [fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.-public business entities] [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, but no earlier than an entity’s adoption date of Topic 606. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-08 ― Applicable to Not-for-Profit entities and all other entities, including business entities, that receive or make contributions of cash and other assets, including promises to give within the scope of Subtopic 958-605 and contributions made within the scope of Subtopic 720-25, Other Expenses—Contributions Made:

In June 2018, the FASB updated the Not-for-Profit Entities Topic of the Accounting Standards Codification. The amendments clarify and improve current guidance about whether a transfer of assets (or the reduction, settlement, or cancellation of liabilities) is a contribution or an exchange transaction. For contributions received, the amendments are effective for [annual periods beginning after June 15, 2018, including interim periods within those annual periods-public business entities or an NFP that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market and serves as a resource recipient] [annual periods beginning after December 15, 2018, and interim periods within those annual periods beginning after December 15, 2019-all other entities]. For contributions made, the amendments are effective for [annual periods beginning after December 15, 2018, including interim periods within those annual periods-public business entities or an NFP that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market and serves as a resource provider] [annual periods beginning after December 15, 2019, and interim periods within those annual periods beginning after December 15, 2020-all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-10 ― Applicable to lessee and lessor entities:

In July 2018, the FASB amended the Leases Topic of the Accounting Standards Codification to make narrow amendments to clarify how to apply certain aspects of the new leases standard. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-11 ― Applicable to lessee and lessor entities:

In July 2018, the FASB amended the Leases Topic of the Accounting Standards Codification to give entities another option for transition and to provide lessors with a practical expedient. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-12 ― Applicable to insurance entities that issue long-duration contracts:

In August 2018, the FASB amended the Financial Services—Insurance Topic of the Accounting Standards Codification to make targeted improvements to the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2020.-public business entities] [annual periods beginning after December 15, 2021, and interim periods within annual reporting periods beginning after December 15, 2022.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-13 ― Applicable to all entities that are required to make disclosures about recurring or nonrecurring fair value measurements:

In August 2018, the FASB amended the Fair Value Measurement Topic of the Accounting Standards Codification. The amendments remove, modify, and add certain fair value disclosure requirements based on the concepts in the FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-14 ― Applicable to all employers that sponsor defined benefit pension or other postretirement plans:

In August 2018, the FASB amended the Compensation—Retirement Benefits—Defined Benefit Plans Topic of the Accounting Standards Codification. The amendments remove, modify, and add certain disclosure requirements for employers that sponsor defined benefit pension plans or other postretirement plans. The amendments are effective [fiscal years ending after December 15, 2020.-public business entities] [fiscal years ending after December 15, 2021,-all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-15 ― Applicable to all:

In August 2018, the FASB amended the Intangibles—Goodwill and Other Topic of the Accounting Standards Codification to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2019.-public business entities] [fiscal years beginning after December 15, 2020, and interim periods within annual reporting periods beginning after December 15, 2021.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-16 ― Applicable to all:

In October 2018, the FASB amended the Derivatives and Hedging Topic of the Accounting Standards Codification to expand the list of U.S. benchmark interest rates permitted in the application of hedge accounting. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2018.-public business entities] [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 2018-17 ― Applicable to all:

In October 2018, the FASB amended the Consolidation topic of the Accounting Standards Codification for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety. [The amendments will be effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.-public business entities] [The amendments also provide a nonpublic entity with the option to exempt itself from applying the variable interest entity consolidation model to qualifying common control arrangements. The amendments will be effective for the Company for 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. The Company will apply a full retrospective approach in which financial statements for each individual prior period presented and the opening balances of the earliest period presented are adjusted to reflect the period-specific effects of applying the amendments. [The Company does not expect these amendments to have a material effect on its financial statements.] [The Company is currently evaluating the effect that implementation of the new standard will have on its financial statements.]

ASU 2018-18 ― Applicable to all:

In November 2018, the FASB amended the Collaborative Arrangements Topic of the Accounting Standards Codification to clarify the interaction between the guidance for certain collaborative arrangements and the new revenue recognition financial accounting and reporting standard. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2018-19 ― Applicable to entities that hold financial assets and net investment in leases that are not accounted for at fair value through net income:

In November 2018, the FASB issued guidance to amend the Financial Instruments—Credit Losses topic of the Accounting Standards Codification. The guidance aligns the implementation date of the topic for annual financial statements of nonpublic companies with the implementation date for their interim financial statements. The guidance also clarifies that receivables arising from operating leases are not within the scope of the topic, but rather, should be accounted for in accordance with the leases topic. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2019, including interim periods within those fiscal years.-SEC filers] [reporting periods beginning after December 15, 2020, including interim periods within those fiscal years.-public business entities that are not SEC filers] [fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.-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 2018-20 ― Applicable to lessors:

In December 2018, the FASB issued guidance that providing narrow-scope improvements for lessors, that provides relief in the accounting for sales, use and similar taxes, the accounting for other costs paid by a lessee that may benefit a lessor, and variable payments when contracts have lease and non-lease components. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2018, including interim periods within those fiscal years.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020-all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2019-01 ― Applicable to all lessees and lessors:

In March 2019, the FASB issued guidance to address concerns companies had raised about an accounting exception they would lose when assessing the fair value of underlying assets under the leases standard and clarify that lessees and lessors are exempt from a certain interim disclosure requirement associated with adopting the new standard. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2019.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020-all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2019-02 ― Applicable to broadcasters and entities that produce and distribute films and episodic television series:

In March 2019, the FASB issued guidance that helps align the accounting for production costs for films and episodic content produced for television and streaming services. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2019, including interim periods within those fiscal years.-public business entities] [reporting periods beginning after December 15, 2020, including interim periods within those fiscal years.-all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2019-03 ― Applicable to entities that hold collections:

In March 2019, the FASB issued guidance to clarify the definition of collection in the Master Glossary in order to eliminate the diversity in practice between the application of the Master Glossary’s definition compared with the definition that many entities use for accreditation purposes. The amendments will be effective for the Organization for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020 and should be applied on a prospective basis. Early adoption is permitted. The Organization does not expect these amendments to have a material effect on its financial statements.

ASU 2019-04 ― Applicable to entities that hold financial instruments:

In April 2019, the FASB issued guidance that clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments. The amendments related to credit losses 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] [fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.-all other entities]. The amendments related to hedging will be effective for the Company for [interim and annual periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.-all other entities]. The amendments related to recognition and measurement of financial instruments will be effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2019-05 ― Applicable to entities that hold financial instruments:

In May 2019, the FASB issued guidance to provide entities with an option to irrevocably elect the fair value option, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.-entities that have adopted ASU 2016-13] For entities that have not yet adopted ASU 2016-13: [reporting periods beginning after December 15, 2019.-SEC filers] [reporting periods beginning after December 15, 2020.-public business entities that are not SEC filers] [fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.-all other entities]. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2019-06 ― Applicable to all not-for-profit entities:

In May 2019, the FASB issued guidance to extend the private company accounting alternatives related to goodwill and business combinations to not-for-profit entities. Under the goodwill accounting alternative, a not-for-profit entity may elect to amortize goodwill on a straight-line basis over a period of ten years or over a shorter period if the entity demonstrates that another useful life is more appropriate. Goodwill would be subject to impairment testing only upon the occurrence of a triggering event. Under the business combination accounting alternative, a not-for-profit 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 entity also is required to adopt the alternative accounting related to goodwill. The amendments are effective upon issuance. The Organization does not expect these amendments to have a material effect on its financial statements.

ASU 2019-07 ― Applicable to SEC filers:

In July 2019, the FASB updated various Topics of the Accounting Standards Codification to align the guidance in various SEC sections of the Codification with the requirements of certain SEC final rules. The amendments were effective upon issuance and did not have a material effect on the 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.