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On The Horizon: EITF discusses assumed liability in a revenue contract

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Contents FASB posts highlights from Sept. 26 meeting SEC

CorpFin adds C&DI related to expanded interim stockholders’ equity disclosure

EITF meeting held on Sept. 27 GASB issues Preliminary Views documents IASB issues update on September meetings

FASB posts highlights from Sept. 26 meetingAll decisions reached at Board meetings are tentative and may be changed at future meetings.

The Board met on Sept. 26 to discuss feedback received on the proposed ASU, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections, but made no tentative decisions. See the July 12 On the Horizon for a summary of the Board’s proposal to amend the definition of collections.

In addition, the staff was authorized to conduct research on potential hedge accounting issues that are broader than the amendments made in ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.



SEC CorpFin adds C&DI related to expanded interim stockholders’ equity disclosure The Compliance and Disclosure Interpretations described below reflect the views of the SEC staff. They are not rules, regulations, or statements of the SEC 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 (CorpFin) recently added Question 105.09 to its Exchange Act Forms Compliance and Disclosure Interpretations (C&DIs) to provide transition guidance on the expanded disclosure for interim-period changes in stockholders’ equity and noncontrolling interests required by the recently issued Final Rule, Disclosure Update and Simplification. The Final Rule will become effective 30 days after it is published in the Federal Register and is expected to become effective near the due date of many filers’ quarterly reports.

The C&DI clarifies that the staff would not object if a filer’s first presentation of the expanded interim disclosure regarding changes in stockholders’ equity is included in Form 10-Q for the quarter that begins after the effective date of the Final Rule. Accordingly, a Dec. 31 fiscal year-end filer could omit this disclosure from its Sept. 30, 2018, Form 10-Q.

See NDS 2018-12 for a summary of the Final Rule, including information on the expanded interim disclosure requirement.



EITF meeting held on Sept. 27Because a consensus-for-exposure is subject to ratification by the FASB and some of the details of conclusions reached at an EITF meeting are determined during the process of developing the minutes of the meeting, the following descriptions are preliminary.

The FASB’s Emerging Issues Task Force (EITF) met on Sept. 27 to discuss issues related to recognizing a contract liability for a revenue contract of an acquiree in a business combination, and improving accounting for episodic television series. The Task Force’s discussions of these issues are summarized below.

See the June 14 On the Horizon for a summary of these issues.

Issue 18-A, ‘Recognition under Topic 805 for an Assumed Liability in a Revenue Contract’At its June 7 meeting, the Task Force reached a consensus-for-exposure that would require an entity to use the definition of “performance obligation” in ASC 606, Revenue from Contracts with Customers, to determine whether an assumed contract liability from a revenue contract with a customer represents an assumed liability that is recognized in a business combination at the acquisition date. The consensus-for-exposure states that the timing of the payment of consideration or the payment terms under the assumed contract would not affect the amount of revenue recognized by the acquirer related to this contract after the acquisition date.

This consensus-for-exposure further states that an acquirer should:

  1. Not default to using the carrying amount in the acquiree’s balance sheet when measuring the assumed liability in a revenue contract
  2. Consider the assets and liabilities in the acquired set when determining the fair value of an assumed contract liability
  3. Apply the proposed amendments prospectively to all business combinations occurring after the proposed amendments are effective

The Task Force also voted to include certain implementation guidance related to this issue in the Codification.  

At its June 27 meeting, the FASB ratified this consensus-for-exposure and directed the FASB staff to draft a proposed ASU for vote by written ballot. The EITF subsequently reviewed a draft of this proposed ASU and recommended that Task Force members further discuss certain potential unintended consequences of the consensus-for-exposure prior to issuing a proposed ASU.

The Task Force affirmed their previous decisions regarding the recognition aspects of the consensus-for exposure at this meeting, but requested that the FASB staff perform further research and outreach on other measurement aspects of the consensus-for-exposure, including the effect of payment terms on subsequent revenue recognition and how entities should consider costs to fulfill a performance obligation when determining the fair value of an assumed contract liability. The Task Force also affirmed that entities will apply a prospective transition method when adopting the final guidance.

Issue 18-B, ‘Improvements to Accounting for Episodic Television Series’At its June 7 meeting, the EITF tentatively decided that entities producing episodic television series would be permitted to capitalize production costs under the same guidance that is applied by entities producing films, but it did not reach a consensus-for-exposure on this issue. It also directed the FASB staff to perform additional research on some of the other issues presented.

On Sept. 27, the Task Force reached a consensus-for-exposure indicating that entities producing episodic television series would be permitted to capitalize production costs under the same guidance that is applied by entities producing films. In addition, the Task Force reached a consensus-for-exposure on the impairment test of capitalized film costs, the amortization of film costs, and the presentation and disclosure guidance. It also decided that entities will apply a prospective transition method when adopting the final guidance.



GASB issues Preliminary Views documentsThe Governmental Accounting Standards Board (GASB) has issued the following Preliminary Views documents for public comment:

  • Financial Reporting Model Improvements – Considers certain components of the GASB’s existing financial reporting model to improve government financial reports.
  • Recognition of Elements in Financial Statements – Includes new concepts intended to guide the Board in developing standards on the recognition of elements of financial statements, such as assets and liabilities.

A Preliminary Views document is designed to seek comments on the Board’s current views at an early stage of a project, but is not an Exposure Draft of a Statement of Governmental Accounting Standards.

Comments on these Preliminary Views documents are due Feb. 15, 2019.



IASB issues update on September meetingsAll 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 September 2018 Update summarizing the tentative decisions reached during its September public meetings. The Board discussed the following topics:

  • Dynamic risk management
  • Costs considered in assessing whether a contract is onerous
  • Extractive activities
  • Update on research program
  • Primary financial statements
  • Classification of liabilities
  • Targeted standards-level review of disclosures



© 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