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ASU 2015-14 defers effective date of revenue guidance

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Contents
FASB
     Board issues final ASU deferring effective date of new revenue standard
     Final ASU clarifies scope exception for certain electricity contracts
AICPA issues proposal to amend auditor’s report
GASB statement requires disclosure of information on tax abatements
Comment letter issued




FASB
All decisions reached at Board meetings are tentative and may be changed at future meetings. Decisions are included in an Exposure Draft only after a formal written ballot. Decisions reflected in Exposure Drafts are often changed in redeliberations by the Board based on information received in comment letters, at public roundtable discussions, and from other sources. Board decisions become final after a formal written ballot to issue a final Accounting Standards Update.

Board issues final ASU deferring effective date of new revenue standard

The FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date
, to provide entities with an additional year to implement ASU 2014-09, Revenue from Contracts with Customers. As a result, the new revenue guidance becomes effective as follows:

  • For public business entities: Annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period (that is, beginning in the first interim period within the year of adoption)
  • For all other entities (nonpublic): Annual reporting periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019 (that is, all other entities will not be required to apply the guidance in interim periods within the year of adoption)

The ASU allows for early adoption for all entities, but not before the original effective date prescribed in ASU 2014-09. Public business entities can adopt the new standard as early as annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.

All other entities choosing to early adopt have an additional option to apply the new revenue guidance as early as annual reporting periods beginning after December 15, 2016 and interim periods within annual periods beginning one year after the year of adoption.

Final ASU clarifies scope exception for certain electricity contracts  

The Board recently issued a final ASU, Derivatives and Hedging (Topic 815): Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets – a consensus of the FASB Emerging Issues Task Force.

The ASU clarifies that the use of locational marginal pricing by an independent system operator (ISO) to determine the transmission charge or credit does not constitute net settlement of a contract for the purchase or sale of electricity, even if the ISO takes legal title to the electricity during transmission. As a result, the use of locational marginal pricing by an ISO does not cause a contract to fail to meet the physical delivery criterion of the normal purchases and normal sales (NPNS) scope exception. If an entity meets the physical delivery criterion along with all other criteria to apply the NPNS scope exception, it may elect to designate the contract as a normal purchase or normal sale.

The amendments in the ASU are effective upon issuance (August 10, 2015) and should be applied prospectively. An entity can elect to designate as normal purchase or normal sales any qualifying contract on or after August 10, 2015.



AICPA issues proposal to amend auditor’s report

The AICPA’s Auditing Standards Board (ASB) recently issued an exposure draft of Proposed Statement on Auditing Standards (SAS), Amendment to Statement on Auditing Standards No. 122 Section 700: Forming an Opinion and Reporting on Financial Statements, to establish requirements and provide guidance for reporting on audits conducted in accordance with both U.S. GAAS and PCAOB standards.

When an audit is not within the jurisdiction of the PCAOB but is conducted in accordance with PCAOB standards, the proposed amendments would

  • Clarify that the AICPA Code of Conduct requires the auditor to conduct the audit in accordance with U.S. GAAS
  • Require an auditor to use the report layout and wording specified by PCAOB auditing standards, amended to indicate that the audit was also conducted in accordance with U.S. GAAS, when the auditor plans to refer to PCAOB standards in addition to U.S. GAAS in the report

The proposal includes application material, including examples of entities that are not within the jurisdiction of the PCAOB.

The proposed SAS would be effective for audits of financial statements for periods ending on or after December 15, 2015, with early adoption permitted.

Comments on the proposed SAS are due by September 30, 2015.



GASB statement requires disclosure of information on tax abatements

The Governmental Accounting Standards Board (GASB) recently issued Statement 77, Tax Abatement Disclosures, which requires state and local governments to disclose information about tax abatement agreements. Governments often agree to abate or reduce the taxes of individuals and entities to promote economic development, job growth, redevelopment of blighted or underdeveloped areas, and other actions that are beneficial to the government or its citizens.

Statement 77 requires governments to disclose information about their own tax abatements separately from information about tax abatements that are entered into by other governments and reduce the reporting government’s tax revenues. The new disclosures about a government’s own tax abatement agreements include the purpose of the tax abatement program, the tax being abated, the dollar amount of taxes abated, the provisions for recapturing abated taxes, the types of commitments made by tax abatement recipients, and other commitments made by a government in tax abatement agreements.

The new disclosures about tax abatements that are entered into by other governments and reduce the reporting government’s tax revenues include the name of the government entering into the abatement agreement, the tax being abated, and the dollar amount of the reporting government’s taxes abated.

Statement 77 is effective for periods beginning after December 15, 2015, with early application encouraged.

For more information on Statement 77, see the August 14 edition of GASB in Focus, “GASB Statement No. 77, Tax Abatement Disclosures.”



Comment letter issued

On August 13, the firm issued a comment letter in response to the FASB’s Proposed ASU, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.



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