On the Horizon: FASB shortens amortization period for debt premiums

Contents FASB       ASU shortens amortization period for debt premiums
      Tentative decisions from March 29 meeting posted
JOBS Act       Final rule adopts technical amendments and inflation adjustments

     CorpFin adds C&DIs related to Regulation A

     Audit and accounting guides issued
     Not-for-profit entities audit risk alert released

issues white paper on emerging growth companies

FASB ASU shortens amortization period for debt premiums The Board issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which shortens the amortization period of the premium for certain callable debt securities, from the contractual maturity date to the earliest call date. The amendments do not require an accounting change for securities held at a discount; an entity will continue to amortize to the contractual maturity date the discount related to callable debt securities.

The amendments apply to the amortization of premiums on callable debt securities with explicit, noncontingent call features that are callable at fixed prices on preset dates.

For public business entities, ASU 2017-08 is effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For entities other than public business entities, the amendments are effective in fiscal years beginning after December 15, 2019 and in interim periods in fiscal years beginning after December 15, 2020.

Early adoption is permitted for all entities, including in an interim period.

The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the amendments are adopted.

Tentative decisions from March 29 meeting posted All decisions reached at Board meetings are tentative and may be changed at future meetings.

The FASB met on March 29 and ratified an Emerging Issues Task Force (EITF) consensus reached on EITF Issue 16-C, “Determining the Customer of the Operation Services in a Service Concession Arrangement.”

See the March 23 On the Horizon for a summary of this issue.

The Board also received an update from the International Accounting Standards Board (IASB) on tentative decisions made on the IASB’s projects on the conceptual framework and financial instruments with characteristics of equity.

JOBS Act The Jumpstart Our Business Startups Act (JOBS Act) is intended to foster job creation and economic growth by assisting smaller companies in accessing the capital markets. Primary beneficiaries of the JOBS Act are issuers known as “emerging growth companies.”

Final rule adopts technical amendments and inflation adjustments On March 31, the SEC adopted the Final Rule, Inflation Adjustments and Other Technical Amendments Under Titles I and III of the JOBS Act. The technical amendments conform several existing rules and forms with certain provisions of Title I of the JOBS Act, which amended the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 (Exchange Act) when the JOBS Act was originally signed into law.

Further, the Final Rule amends certain Securities Act and Exchange Act forms to provide an emerging growth company (EGC) with a uniform method—that is, new check boxes on the cover pages of the amended forms—to notify the Commission and the public about its EGC status and its election of whether or not to use the extended transition period for complying with any new or revised financial accounting standards.

The Final Rule also effectuates inflation adjustments required every five years by Titles I and III of the JOBS Act, including adjusting both the EGC gross revenue threshold to $1,070,000,000 and the dollar amounts used in connection with the Regulation Crowdfunding exemptions.

The Final Rule becomes effective upon publication in the Federal Register.

SEC CorpFin adds C&DIs related to Regulation A The Compliance and Disclosure Interpretations described below reflect the views of the SEC staff. They are not rules, regulations, or statements of the Commission and have not been approved by the Commission. The interpretations are intended as general guidance and should not be relied on as definitive.

The staff of the SEC’s Division of Corporation Finance recently added Questions 182.15–185.20 to its Securities Act Rules Compliance & Disclosure Interpretations (C&DIs) to address certain reporting obligations under Regulation A. Among other things, the new C&DIs address the age of financial statement requirements for an issuer in a Tier 2 offering statement.

On the same day, the staff also withdrew Questions 128.05–128.07 from Section 128, Form 1A, of its Securities Act Forms C&DIs.

AICPA Audit and accounting guides issued The AICPA issued updated versions of the following Audit and Accounting Guides (significant changes are highlighted below):
  • Reporting on an Examination of Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting (SOC 1) – Updated to address changes adopted with the issuance of the clarified attestation standards (AT-C Section 320) and common practice issues.
  • Employee Benefit Plans – Updated to include expanded guidance on related parties and parties in interest, plan transfers, and changes in service providers.
  • Not-for-Profit Entities – Updated to provide guidance on reporting donated services between affiliated not-for-profit entities, split-interest agreements, contributions and grants, functional expenses, and joint costs, among other items; the guide also includes highlights of FASB ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, to assist in determining whether to early adopt the requirements.

Not-for-profit entities audit risk alert released The AICPA issued Audit Risk Alert, Not-for-Profit Entities Industry Developments – 2017. The alert provides an overview of recent industry, technical, regulatory, and professional developments as well as future and emerging issues for auditors to consider.

PCAOB issues white paper on emerging growth companies The Public Company Accounting Oversight Board (PCAOB) issued a report, “White Paper on Characteristics of Emerging Growth Companies.” The white paper includes general information about emerging growth companies as defined in the 2012 JOBS Act. Information for the white paper was derived from the most recent available SEC filings and data from third-party vendors through November 15, 2016.

© 2017 Grant Thornton LLP, U.S. member firm of Grant Thornton International Ltd. All rights reserved. This Grant Thornton LLP On the Horizon provides information and comments on current accounting and SEC reporting issues and developments. It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting or other advice or guidance with respect to the matters addressed in this publication. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this publication. For additional information on topics covered in this publication, contact a Grant Thornton client-service partner.