Quarterly Accounting Update – Q1 2019

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

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SELECTED HIGHLIGHTS

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

FASB UPDATE

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

LEASE ACCOUNTING IMPLEMENTATION

This section includes special 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

FASB Addresses Lessor Accounting Issues

In March, the FASB addressed concerns companies had raised about an accounting exception they would lose when assessing the fair value of underlying assets under the leases standard.

See the FASB Update section for additional details.

Leases—Are You Ready?

The new lease accounting standard places 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 new accounting for related party leases.

Find out more in the Lease Accounting Implementation section.

Final Rules for Simplified Disclosures

In March 2019, the SEC adopted final rules to simplify the disclosure requirements companies with the intent to reduce repetition, reduce costs and burdens to registrants, focus disclosure on material information and improve readability. This simplification will likely reduce the volume of required disclosures for registrants.

More information can be found in the Regulatory Updatesection.

FASB Issues Staff Guidance to Answer Questions about CECL

In January, the FASB staff issued a question-and-answer document that addresses particular issues related to the weighted average remaining maturity (WARM) method for estimating the allowance for credit losses.

Learn more in the Other Developments section.

Join us on Wednesday, April 10th, 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

The following selected Accounting Standards Updates (ASUs) were issued by the Financial Accounting Standards Board (FASB) during the first quarter. A complete list of all ASUs issued or effective in 2019 is included in Appendix A.

FASB Addresses Lessor Accounting Issues

Affects: All entities

On March 5, 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements, to address concerns companies 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 leases standard.

The ASU aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Accounting Standards Codification (ASC) 842, Leases, with that of existing guidance.  As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply and costs incurred to acquire the asset. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in ASC 820, Fair Value Measurement) should be applied.

The ASU also requires lessors within the scope of ASC 942, Financial Services—Depository and Lending, to present all principal payments received under leases within investing activities.

Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard.

Effective Date

The amendments in this ASU amend ASC 842. That guidance has different effective dates for public business entities and entities other than public business entities. The effective date of those amendments is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years for any of the following:

  • A 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
  • An employee benefit plan that files financial statements with the U.S. Securities and Exchange Commission (SEC)

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

FASB Updates Definition of Collections

Affects: All entities that hold collections

On March 21, 2019, the FASB issued ASU 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections, to clarify the definition of collection in the Master Glossary in order to eliminate the diversity in practice that exists today between the application of the Master Glossary’s definition compared with the definition that many entities use for accreditation purposes.

Generally, collections include priceless artwork, groupings of art, historical treasures or similar assets. The ASU impacts not only not-for-profits, such as museums, libraries, etc. but also for-profit entities that maintain these types of collections.

Under the clarified definition, proceeds from the sale of collection items can be used either to acquire new items or directly care for existing items already in possession. Previous guidance required proceeds to be used only for the acquisition of additional collections. This change aligns the definition of “collections” with that currently used by the American Alliance of Museums.

The ASU further requires an entity to disclose (1) if collection sale proceeds can in fact be used to acquire new items and/or for the direct care of existing collections; and (2) if using those proceeds for direct care is allowed, the entity’s definition of “direct care”.

Effective Date

The amendments in this ASU are effective for annual financial statements issued for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early application of the amendments is permitted. The amendments should be applied on a prospective basis.

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.

Key Points

  • Lease assets and lease liabilities will be recognized for all leases over 12 months.
  • Income statement expense recognition will remain substantially similar to current U.S. generally accepted accounting principles (U.S. GAAP)
  • Current U.S. GAAP on lease classification is substantially similar in the new lease standard; however, an additional criterion will trigger finance lease classification for assets of a specialized nature with no alternative use to a lessor
  • Since all leases will create lease assets and lease liabilities, attention will shift to whether or not arrangements are leases
  • Segregating lease and non-lease (e.g. service) components in a lease contract will be a new important process as only lease components will be recognized as lease assets and lease liabilities
  • The new lease standard makes a significant change in accounting for related party leases by shifting from substance-based criteria in current U.S. GAAP to accounting for related party leases based on their legally enforceable terms
  • Sale/leaseback accounting has substantially changed with the new lease standard; more transactions involving real estate sale/leasebacks will qualify for sale/leaseback accounting due to elimination of continuing involvement rules; however, equipment sale/leasebacks may not qualify for sale/leaseback accounting if the equipment sale/leaseback has a disqualifying repurchase option
  • While lessor accounting is substantially unchanged, the accounting for leases with significant variable lease payments could be challenging

All Leases Recorded on Balance Sheet

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 statement of financial position as assets and liabilities. Current U.S. GAAP requires only capital (to be known now as finance) leases to be recognized in the statement of financial position and amounts related to operating leases largely are reflected in the financial statements as rent expense on the income statement and in disclosures to the financial statements.

Short-Term Exception

The new guidance permits a lessee to not recognize 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.  The lease term would include renewals that the lessee is reasonably certain to exercise.

Variable Lease Payments

The new guidance indicates that variable lease payments that depend on an index or a rate (such as the Consumer Price Index (CPI) or a market interest rate), be initially measured using the index or rate at the commencement date.

Renewal Options

When measuring assets and liabilities arising from a lease, the new guidance requires a lessee (and a lessor) to include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option.

Segregating Lease Components

Many contracts contain both lease and non-lease (e.g., service) components. Some examples of potential non-lease service components include maintenance, cleaning, and repair services.  Existing U.S. GAAP requires an entity to separate those components but provides limited guidance on how to make those separations and the distinction is typically of limited financial reporting consequence for current operating leases. The new lease standard also requires an entity to separate the lease components from the non-lease components. The lessee should determine the relative standalone price of the separate lease components and the non-lease components on the basis of their observable standalone prices. If observable standalone prices are not readily available, the lessee should estimate the standalone prices, maximizing the use of observable information. A residual estimation approach may be appropriate if the standalone price for a component is highly variable or uncertain.

The new guidance allows a lessee to make an accounting policy election by class of underlying asset, to not separate non-lease components from lease components and, instead, to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. In other words, keep the non-lease and lease components together. The result of electing this practical expedient will be to record additional lease liabilities.

Property Taxes and Insurance

Under current U.S. GAAP, if costs related to the lessor’s ownership of an asset are included in the lease payments, they are excluded from the definition of minimum lease payments and capitalized lease payments. Under the new guidance, payments that are reimbursements or payment of lessor’s costs (such as property taxes and insurance payments) do not represent a separate good or service.  Therefore, they are not considered a non-lease component for which consideration is allocated in an arrangement that includes a lease. If a lease includes amounts in fixed payments that represent a reimbursement of lessor cost for property taxes and insurance, these payments will now be considered as part of the lease liability. Entities may wish to design leases such that reimbursements for property taxes and insurance are considered variable lease payments and not initially recognized as part of the lease liability.

Initial Direct Costs

Costs that meet the new definition of initial direct costs can be included in the capitalized right-of-use asset.  The new lease standard defines initial direct costs as the incremental costs of a lease that would not have been incurred if the lease had not been obtained and indicates that commissions may be an example. However, the new lease standard also explicitly notes that costs to negotiate or arrange a lease that would have been incurred regardless of whether the lease was obtained, such as fixed employee salaries, are not direct costs.  Some lessees may currently include these costs as assets in current capital lease arrangements.

Financial Statement Presentation

The new lease standard retains a distinction between finance leases (previously known as capital leases) and operating leases. According to the FASB, the classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in existing U.S. GAAP. However, the lease classification criteria in the new guidance does not depend on bright-line thresholds as they do in existing U.S. GAAP, although the guidance indicates that the current bright-line thresholds are “one reasonable approach” to determine lease classification. Also, according to the FASB, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from existing U.S. GAAP.

For finance (capital) leases, a lessee is required to:

  • Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position
  • Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows

For operating leases, a lessee is required to:

  • Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position
  • Recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis unless another systematic and rational basis is more representative of the pattern in which the benefit is expected to be derived from the right-of-use underlying asset.
  • Classify all cash payments within operating activities in the statement of cash flows

Related Party Leases

Under current U.S. GAAP, entities are required to account for leases with related parties on the basis of the economic substance of the arrangement. In a potentially significant change under the new lease standard, the recognition and measurement requirements 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 arrangement. 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. That is, account for leases between related parties based on the legally enforceable terms just like leases between unrelated parties.  In the Basis for Conclusions, the FASB noted that lessees and lessors are required to apply the disclosure requirements for related party transactions in ASC 850, Related Party Disclosures. The FASB also noted that the existing U.S. GAAP requirement to account for leases with related parties on the basis of the economic substance of the arrangement can be difficult when there are no legally enforceable terms and conditions of the arrangement.

Going Forward

The new lease standard places all leases on the balance sheet while largely retaining current income statement treatments and lease classification. New processes, procedures, and controls will be necessary including segregating lease and non-lease components and new accounting for related party leases. Entities can prepare for the impact of the new lease standard by starting to identify their arrangements that meet the new definition of a lease  and beginning to quantify the impact to the balance sheet as well as other key financial statement metrics.  Further entities can then ensure proper ASC 842 adoption disclosures and estimated balance sheet impact is in this year-end’s disclosure notes to the financial statement. This may minimize the potential that users are surprised when all lease arrangements show up on the 2020 balance sheet.

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

Quarterly Accounting Update: Regulatory Update

SEC Adopts Rule to Simplify Disclosure Requirements

In March 2019, the SEC adopted final rules to simplify the disclosure requirements companies with the intent to reduce repetition, reduce costs and burdens to registrants, focus disclosure on material information and improve readability.

One of the most significant changes deals with Item 303 of Regulation S-K, which covers the management’s discussion and analysis (MD&A) of a public company’s financial condition. The final rule allows companies to generally omit the earliest of the three years in MD&A if they have already included the discussion in a prior filing.

The rules also modify confidential treatment of certain disclosures in Item 601, required disclosures related to locations and character of physical properties, risk factor disclosure requirements under Item 503(c), among other things.

The rule will become effective 30 days after publication in the Federal Register, which normally occurs a few weeks after a release is posted on the SEC’s website.

Senate Legislation Would Provide Small Companies with Exemption from Sarbanes-Oxley Attestation Requirements

A bipartisan group of senators has introduced a new bill, the Fostering Innovation Act of 2019, that would amend the Sarbanes Oxley Act of 2002 (SOX) to provide a temporary exemption from the auditor attestation requirements of Section 404(b) for low-revenue issuers, such as biotech firms. The bill is designed to help emerging growth companies (EGCs) that will lose their exemptions from SOX 404(b) five years after their IPOs, but still do not report much revenue. For those companies, proponents contend, the auditor attestation requirement is time-consuming and expensive, diverting capital from other critical uses, such as research and development. The bill would provide a very narrow fix that temporarily extends the SOX 404(b) exemption for an additional five years for a small subset of EGCs with annual average revenue of less than $50 million and less than $700 million in public float.

This issue has also been considered at a meeting of the Securities and Exchange Commission (SEC) Committee on Small and Emerging Companies, And the Commissioners themselves have been divided on the advisability of retaining the SOX 404(b) requirement for smaller companies. To further consider that issue, SEC Chairman Jay Clayton last year directed the staff to come up with potential amendments to reduce the number of companies subject to SOX 404(b), while maintaining appropriate investor protections. Potential beneficiaries of relief, according to Clayton, are companies with little or no revenue.  In those cases, he asserted, the money that would otherwise be used for the SOX 404(b) attestation could instead be used to hire new scientists to advance life-enhancing or life-saving developments.

SEC Proposes to Expand “Test-the-Waters” to All Issuers

In February, the SEC proposed to expand the “test-the-waters” accommodation—currently available to emerging growth companies—to all issuers, including investment company issuers. The proposed rule and related amendments under the Securities Act of 1933 would enable all issuers (and its authorized representatives, including underwriters) to engage in test-the-waters communications with certain institutional investors regarding a contemplated registered securities offering prior to, or following, the filing of a registration statement related to such offering. These communications would be exempt from restrictions imposed by Section 5 of the Securities Act on written and oral offers prior to or after filing a registration statement and would be limited to qualified institutional buyers and institutional accredited investors.

In the SEC’s press release announcing the action, SEC Chairman Jay Clayton said, “Extending the test-the-waters reform to a broader range of issuers is designed to enhance their ability to conduct successful public securities offerings and lower their cost of capital, and ultimately to provide investors with more opportunities to invest in public companies.”  Chairman Clayton added, “I have seen first-hand how the modernization reforms of the JOBS Act have helped companies and investors. The proposed rules would allow companies to more effectively consult with investors and better identify information that is important to them in advance of a public offering.”

Under proposed Securities Act Rule 163B:

  • There would be no filing or legending requirements
  • Test-the-waters communications may not conflict with material information in the related registration statement issuers subject to Regulation FD would need to consider whether any information in a test-the-waters communication would trigger disclosure obligations under Regulation FD or whether an exemption under Regulation FD would apply.

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

Quarterly Accounting Update: Other Developments

FASB Issues Staff Guidance to Answer Questions about CECL

In January, the FASB staff issued a question-and-answer document that addresses particular issues related to the weighted average remaining maturity (WARM) method for estimating the allowance for credit losses as required in ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 requires organizations to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts with the objective of presenting an entity’s estimate of the net amount expected to be collected on the financial assets. The standard does not require a specific credit loss method; however, it allows organizations to use judgment in determining the relevant information and estimation methods that are appropriate in their circumstances.

Some stakeholders, including small financial institutions, asked the staff whether it would be acceptable to use the WARM method to estimate expected credit losses.  The WARM method uses an average annual charge-off rate as a foundation for estimating the credit losses for the remaining balances (that is, losses occurring through the end of the contractual term) of financial assets in a pool at the balance sheet date.

In the question-and-answer document, the FASB staff agrees that the WARM method is one of many methods that could be used to estimate an allowance for credit losses for less complex financial asset pools.  The staff also provides examples of how it could be used.

A copy of the staff guide is available at https://bit.ly/2Hpqicl.

AICPA Publishes CECL Audit and Accounting Guide

In January, the AICPA issued guidance for implementing the FASB’s credit losses standard. The Audit and Accounting Guide is intended to help lending institutions and insurers implement ASU 2016-13.

When the FASB published ASU 2016-13, the AICPA organized the Credit Loss Task Force to identify and address accounting implementation issues. In light of the new accounting requirements, this publication will address accounting implementation issues identified by the task force as well as provide in-depth coverage of audit considerations from risk assessment and planning to execution of the audit. The AICPA will regularly update accounting and auditing content in future editions of this guide as task forces finalize each implementation issue.

Experts across the profession developed and reviewed the guidance, and the AICPA’s Financial Reporting Executive Committee, or one of its subcommittees, reviewed the guide. The AICPA’s Auditing Standards Board issues auditing guidance in the AICPA’s audit and accounting guides, and they are considered authoritative guidance.

Narrow Credit Losses Transition Proposal Issued

In February, the FASB released a narrow proposal aimed at offering relief largely to subprime car lenders when they start following the new credit losses accounting standard. ASU 2016-13 allows businesses to elect to measure newly originated or purchased loans at fair value. Many used automobile dealers and lenders to customers with poor or low credit history plan to take this option, according to industry professionals. But, if they take this option when they apply the new credit losses standard starting in 2020, existing loans will be on their books on a different measurement basis—amortized cost. This could make the information in their financial statements unclear in the first few years after adopting the new accounting standard.

In May 2018, the FASB received requests from automobile lenders and other subprime financing companies to allow them measure at fair value financial instruments previously recognized and measured at amortized cost when they adopt the new standard. In November, the FASB agreed to float this idea for public comment.

Regional Bank Alternative for Credit Loss Standard to be Evaluated

In November, twenty-one regional banks asked the FASB to consider a different approach for calculating loan losses under ASU 2016-13. In their view, the standard would create volatility in their regulatory capital and force them to curtail lending during economic downturns. To offset these effects, the banks called on the FASB to let banks recognize the provision for credit losses in a way they say would mitigate swings in earnings and reduce headaches around regulatory capital management. The FASB’s research staff is currently assessing the recommendation, which was submitted to the Board on November 5. The FASB plans to decide whether to proceed with a limited-scope standard-setting project in early April.

The group of regional banks want to recognize the provision for credit losses in three parts instead of one. For non-impaired financial assets, loss expectations within the first year would be recorded to the provision for losses in the income statement. Loss expectations beyond the first year on performing assets would be recorded in accumulated other comprehensive income. For impaired financial assets, lifetime expected credit losses would be recognized entirely in earnings.

 

Quarterly Accounting Update: On the Horizon

The following selected FASB exposure drafts and projects are outstanding as of March 31, 2019.

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.

The deadline for comments is May 31.

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.

The comment letter deadline is April 30, 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.

On August 28, 2018, 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 October, the FASB continued redeliberations of the proposed ASU and directed the staff to conduct additional research, focusing on a potential alternative that considers the contractual linkage between certain debt arrangements and unused long-term financing arrangements in place at the balance sheet date.

The FASB is expected to issue the final standard during 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.

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 Board 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

At its January 2019 meeting, the FASB’s Emerging Issues Task Force (EITF) reached a final consensus on improvements to accounting for episodic television series. The FASB issued the final standard (ASU 2019-02) in March and it is effective for public business entities for fiscal years beginning on or after December 15, 2019, and interim periods within those fiscal years. For other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

PCC Activities

The Private Company Council (PCC) did not meet during the first quarter. The next PCC meeting will be held on Tuesday, April 2, 2019.

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 March 31, 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.

{Please give careful consideration to appropriateness of highlighted text.} 

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 2015-02 ― Applicable to all:

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

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

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

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

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

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

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

ASU 2015-14 ― 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 entitiesThe Company will apply the guidance using a [full retrospective approach] [modified retrospective approach]. The Company does not expect these amendments to have a material effect on its financial statements.

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

In September2015, the FASB amended the Business Combinations topicof the Accounting Standards Codification to simplify the accounting for adjustments made to provisional amounts recognized in a business combination by eliminating the requirement to retrospectively account for those adjustments. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015-public business entities] [fiscal years beginning after December 15, 2016, and interim periods beginning after December 15, 2017-all other entities], with early adoption permittedfor financial statements that have not been issued. All entities are required to apply the amendments prospectively to adjustments to provisional amounts that occur after the effective date.  The Company does not expect these amendments to have a material effect on its financial statements.

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

In November2015, the FASB amended the Income Taxes topicof the Accounting Standards Codification to simplify the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments will be effective for [financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods-public business entities] [financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018-all other entities], with early adoption permittedas of the beginning of an interim or annual reporting period.The Company will apply the guidance [prospectively][retrospectively].  The Company does not expect these amendments to have a material effect on its financial statements.

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

In January2016, 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 plansThe Company will apply the guidanceby 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, 2017 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 March2016, 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 entitiesEarly adoption is permitted. The Company will apply the guidance[using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective][retrospectively] to each period presented.  The Company does not expect these amendments to have a material effect on its financial statements.

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

In March2016, the FASB amended the Derivatives and Hedging topic of the Accounting Standards Codification to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The amendments will be effective for [financial statements issued for fiscal years beginning after December 15, 2016, includ­ing interim periods within those fiscal years.-public companies] [financial statements issued for fis­cal years beginning after Decem­ber 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.-all other entitiesEarly adoption is permitted. The Company will apply the guidance[using a modified retrospective transition][prospectively]to each period presented.  The Company does not expect these amendments to have a material effect on its financial statements.

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

In March2016, the FASB amended the Derivatives and Hedging topic of the Accounting Standards Codification to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendments will be effective for [financial statements issued for fiscal years beginning after December 15, 2016, includ­ing interim periods within those fiscal years.-public business entities] [financial statements issued for fis­cal years beginning after Decem­ber 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.-all other entitiesEarly adoption is permitted. The Company will apply the guidanceusing a modified retrospective transition to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective.  The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-08 ― 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 entitiesThe Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-09 ― Applicable to all:

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

ASU 2016-10 ― Applicable to all:

In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property.The amendments will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entitiesThe 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, non-cash consideration, presentation of sales tax, and transition.The amendments will be effective for the Company for [reporting periods beginning after December 15, 2017.-public business entities] [annual periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019.-all other entitiesThe 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 2016-14 ― Applicable to all not-for-profit entities:

In August 2016, the FASB issued guidance to make targeted improvements to the not-for-profit financial reportingmodel, including changes in how a not-for-profit organization classifies its net assets, as well as the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows. The amendments will be effective for the Organization for fiscal years beginning after December 15, 2017 and interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted. The Organization is currently evaluating the effect that implementation of the new guidance will have on its 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, 2017including 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, 2017including interim periods within those fiscal years.-public business entities] [fis­cal years beginning after Decem­ber 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2016-17 ― Applicable to all:

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

ASU 2016-18 ― Applicable to all:

In November 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows.The amendments will be effective for the Company for [fiscal years beginning after December 15, 2017including 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 entitiesThe 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 entitiesEarly adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-02 ― Applicable to all not-for-profit entities:

In January 2017, the FASB amended the Not-for-Profit Entities Topic of the Accounting Standards Codification to clarify consolidation guidance for not-for-profit entities. The amendments will be effective for the Organization for fiscal years beginning after December 15, 2016 and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted. The Organization is currently evaluating the effect that implementation of the new standard will have 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 entitiesEarly 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 post-retirement 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 entitiesEarly 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 entitiesEarly adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

ASU 2017-09 ― Applicable to entities with stock compensation plans

In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. 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 2014-09The 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 entitiesEarly 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 entitiesEarly 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 withitems 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 2018-04 ― Applicable to SEC filers:

In March 2018, the FASB updated the Debt Securities and the Regulated Operations Topics of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance which was issued in order to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The amendments were effective upon issuanceand did not have a material effect on the financial statements.

ASU 2018-05 ― Applicable to SEC filers:

In March 2018, the FASB updated the Income Taxes Topic of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance related to the income tax accounting implications of the Tax Cuts and Jobs Act. The amendments were effective upon issuanceand did not have a material effect on the financial statements.

ASU 2018-06 ― Applicable to depository and lending institutions:

In May 2018, the FASB amended the Financial Services—Depository and Lending Topic of the Accounting Standards Codification to remove outdated guidance related to Circular 202. The amendments were effective upon issuanceand did not have a material effect on the 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 2018-09 ― Applicable to all:

In July 2018, the FASB issued amendments to clarify the Accounting Standards Codification (ASC), correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and were effective upon issuance (July 16, 2018). 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 entitiesThe 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 entitiesThe 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 entitiesThe 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 entitiesEarly 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 entitiesEarly 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 entitiesEarly 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 entitiesEarly 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 entitiesEarly 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 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 forfiscal 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.

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.