On The Horizon: FASB ASU to supersede financial services industry guidance

Contents FASB       ASU to supersede financial services industry guidance
      Highlights from May 2 meeting posted
      Board requests comments on proposed taxonomy implementation guide

SEC proposes amendments to Regulation S-X, Rule 2-01 AICPA       FinREC releases revenue recognition implementation working drafts

IASB issues update on April meetings Comment letter issued

FASB ASU to supersede financial services industry guidance The FASB issued ASU 2018-06, Codification Improvements to Topic 942, Financial Services – Depository and Lending, to supersede guidance related to the Comptroller of the Currency’s Banking Circular 202, Accounting for Net Deferred Tax Charges, which has been rescinded and is no longer relevant.

ASU 2018-06 is effective upon issuance.

Highlights from May 2 meeting posted All decisions reached at Board meetings are tentative and may be changed at future meetings.

The FASB met on May 2 to discuss a draft of a final ASU related to recognizing revenue from grants and contracts, as well as a draft of a proposed chapter to Concepts Statement 8, Conceptual Framework for Financial Reporting – Chapter 8, Notes to Financial Statements.

The Board discussed comments received from both external reviewers and Board members on a draft of the final ASU, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting for Contributions Received and Contributions Made, and tentatively decided that the guidance would be effective for fiscal years beginning after June 15, 2018, and for all interim periods within those fiscal years, for public business entities and certain not-for-profit entities. For all other entities, the effective date would be the same as that under ASC 606, Revenue from Contracts with Customers. Early adoption would be permitted for all entities.

The Board directed the staff to draft a final ASU for vote by written ballot.

In addition, the Board supported the draft of the proposed chapter to Concepts Statement 8, but made no tentative decisions on the proposed guidance.

Board requests comments on proposed taxonomy implementation guide The FASB released the proposed U.S. GAAP Financial Reporting Taxonomy Implementation Guide, Revenue from Contracts with Customers (including remodeling of revenue and cost of revenue presentation in the Statement of Income), for public review. The proposed guide features examples that are designed to help users understand how the modeling for the following items is structured within the taxonomy: disclosures of revenue from contracts with customers, as well as revenue and the cost of revenue in the statement of income.

The examples assume that an entity is required to report revenue from contracts with customers under U.S. GAAP and/or SEC authoritative literature.

Comments on the proposed guide are due May 30.

SEC proposes amendments to Regulation S-X, Rule 2-01 The SEC has issued a Proposed Rule, Auditor Independence with Respect to Certain Loans or Debtor-Creditor Relationships, which is designed to amend certain provisions of the auditor independence requirements under Regulation S-X, Rule 2-01. The SEC believes the amendments will refocus the analysis that must be conducted to determine whether an auditor has a lending relationship with certain shareholders of an audit client at any time during either the audit or the professional engagement period.

The proposed amendments include

  • Focusing the analysis solely on “beneficial ownership” instead of the current requirement to consider both “record ownership” and “beneficial ownership”
  • Replacing the existing 10 percent bright-line shareholder ownership test with a “significant influence” test
  • Including a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the audit client’s equity securities
  • Modifying the definition of “audit client” for a fund under audit to exclude funds that would otherwise be considered affiliates of the audit client

The proposal also includes a general request for comment on other potential amendments to the SEC’s auditor independence rules.

Comments on the proposal are due on or before July 9.

AICPA FinREC releases revenue recognition implementation working drafts The AICPA Financial Reporting Executive Committee (FinREC) released working drafts of revenue recognition implementation issues for comment. This latest set of working drafts discusses considerations about, and provides illustrative examples for, entities implementing the new revenue standard in the gaming and telecommunications industries.

These implementation issues will be added to the AICPA audit and accounting guide on revenue recognition after the review of public comments and finalization of the issues.

The comment period for these working drafts ends July 2.

IASB issues update on April meetings All decisions reached at IASB meetings are tentative and may be changed or modified at future meetings. Board decisions become final only after completion of a formal ballot to issue a new Standard or Interpretation or to publish an Exposure Draft.

The IASB has issued the April 2018 Update summarizing the tentative decisions reached during its April public meetings. The Board discussed the following topics during those meetings:

  • Primary financial statements
  • Business combinations under common control
  • Goodwill and impairment
  • Dynamic risk management
  • Disclosure initiative – definition of material
  • Implementation issues in IFRS Standards

Comment letter issued On April 30, Grant Thornton issued a comment letter in response to the FASB’s proposed ASU, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract; Disclosures for Implementation Costs Incurred for Internal-Use Software and Cloud Computing Arrangements (a consensus of the FASB Emerging Issues Task Force).

© 2018 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.