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June 2016 

Greetings,

We are pleased to release MaloneBailey's June 2016 newsletter highlighting recent SEC and FASB updates. Please note that the updates provided in this newsletter are not a comprehensive list. We have selected the updates that we believe may be of relevance to you. Our goal is to provide you with resources to keep you informed of the ever-changing rules and regulations pertaining to regulatory and accounting matters. 

We encourage you to visit the SEC and FASB websites for more information as well as a complete list of updated rules and regulations.  We invite you to contact us should you have any questions about the information provided in this issue. You can find a list of MaloneBailey partners and their contact information at the end of this newsletter. 

For easy navigation, please refer to the 'In This Issue' section, which contains a hyperlinked table of contents of rule and regulation updates that may affect you.

The MaloneBailey Team
 
In This Issue
SEC Updates
 
FASB Updates
Recent SEC Updates

Article1Changes to Exchange Act Registration Requirements to Implement Title V and Title VI of the JOBS Act 

Summary - The SEC approved amendments to revise its rules related to the thresholds for registration, termination of registration, and suspension of reporting under Section 12(g) of the Securities Exchange Act of 1934 (Exchange Act). These amendments implement provisions of the Jumpstart Our Business Startups Act (JOBS Act) and the Fixing America's Surface Transportation Act (FAST Act). Specifically, the SEC approved final rules to implement the JOBS Act and FAST Act by:
  • Amending Exchange Act Rules 12g-1 through 12g-4 and 12h-3 which govern the procedures relating to registration and termination of registration under Section 12(g), and suspension of reporting obligations under Section 15(d), to reflect the new thresholds established by the JOBS Act and the FAST Act.
  • Applying the definition of "accredited investor" in Rule 501(a) of the Securities Act of 1933 (Securities Act) to determinations as to which record holders are accredited investors for purposes of Exchange Act Section 12(g)(1). An issuer will make the accredited investor determination as of the last day of its fiscal year.
  • Amending the definition of "held of record" to provide that, when determining whether an issuer is required to register a class of equity securities with the SEC under Exchange Act Section 12(g)(1), an issuer may exclude securities held by persons who received them under an employee compensation plan in transactions exempt from, or not subject to, the registration requirements of Section 5 of the Securities Act and in certain circumstances, held by persons who received them in exchange for securities received under an employee compensation plan.
In addition, the SEC also is establishing a non-exclusive safe harbor for determining holders of record which provides that:
  • An issuer may deem a person to have received the securities under an employee compensation plan if the plan and the person who received the securities under the plan met conditions of Securities Act Rule 701(c).
  • An issuer may, solely for the purposes of Section 12(g), deem the securities to have been issued in a transaction exempt from, or not subject to, the registration requirements of Section 5 of the Securities Act if the issuer had a reasonable belief at the time of the issuance that the securities were issued in such a transaction.
According to the SEC, as a result of JOBS Act and FAST Act changes, an issuer that is not a bank, bank holding company or savings and loan holding company is required to register a class of equity securities under the Exchange Act if it has more than $10 million of total assets and the securities are "held of record" by either 2,000 persons, or 500 persons who are not accredited investors. An issuer that is a bank, bank holding company or savings and loan holding company is required to register a class of equity securities if it has more than $10 million of total assets and the securities are "held of record" by 2,000 or more persons.

On April 5, 2012, the JOBS Act was signed into law by President Barack Obama. The Act required the SEC to write rules and issue studies on capital formation, disclosure, and registration requirements. On December 4, 2015, President Obama signed into law the FAST Act. The law includes several amendments to the federal securities laws, including provisions related to improving access to capital for emerging growth companies, disclosure modernization and simplification, and small company simple registration requirements.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission. 




Summary - The SEC has voted to publish a concept release discussing and seeking public comment on modernizing certain business and financial disclosure requirements in Regulation S-K. The Commission is interested in receiving input on whether the disclosure requirements continue to elicit the information that investors need for investment and voting decisions and how registrants can most effectively present the information. The Commission is also seeking comment on the costs and benefits of the disclosure requirements for companies and investors.
The request for comment is part of the Disclosure Effectiveness Initiative, which is a broad-based staff review of the requirements, and the presentation and delivery of disclosures that companies make to investors.

In addition to discussing and seeking input on the disclosure requirements for business and financial information in Regulation S-K, the concept release explores how the Commission could improve the readability and navigability of company disclosures. The Commission invites comment on various formats used to present information, such as tables and structured data, as well as different tools used to deliver disclosure, including cross-referencing, incorporation by reference, hyperlinks and company websites.

The public comment period will remain open for 90 days following publication of the concept release in the Federal Register.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Possible Revisions to Audit Committee Disclosures

Summary - The SEC has issued for public comment a concept release on current audit committee disclosure requirements that focuses on the committee's oversight of independent auditors. According to the SEC, it is interested in receiving information about the audit committee and auditor relationship and whether improvements can be made to enhance the information provided to investors about the audit committee's responsibilities and activities.

The concept release notes that some "have expressed a view that the Commission's disclosure rules for this area may not result in disclosures about audit committees and their activities that are sufficient to help investors understand and evaluate audit committee performance, which may in turn inform those investors' investment or voting decisions." The majority of audit committee disclosure requirements can be found in Item 407 of Regulation S-K and were adopted in 1999. The SEC indicates since that time "there have been significant changes in the role and responsibilities of audit committees arising out of, among other things, the Sarbanes-Oxley Act of 2002, enhanced listing requirements for audit committees, enhanced requirements for auditor communications with the audit committee arising out of the rules of the PCAOB, and changes in practice, both domestically and internationally."

Comments on the concept release are due 60 days from publication in the Federal Register.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Simplification of Disclosure Requirements for Emerging Growth Companies and Forward Incorporation by Reference on Form S-1 for Smaller Reporting Companies

Summary The SEC has issued an Interim Final Rule, Simplification of Disclosure Requirements for Emerging Growth Companies and Forward Incorporation by Reference on Form S-1 for Smaller Reporting Companies.

The SEC is adopting interim final amendments to its rules and forms to implement Sections 71003 and 84001 of the Fixing America's Surface Transportation ("FAST") Act, which require that the SEC revise Forms S-1 and F-1 to permit emerging growth companies to omit financial information for certain historical periods and revise Form S-1 to permit forward incorporation by reference for smaller reporting companies.

Section 71003 of the FAST Act amends Section 102 of the Jumpstart Our Business Startups ("JOBS") Act to allow an emerging growth company that is filing a registration statement (or submitting a draft registration statement for confidential review) under Section 6 of the Securities Act on Form S-1 or Form F-1 to omit financial information for historical periods otherwise required by Regulation S-X. The company must reasonably believe the omitted information will not be required to be included in the filing at the time of the contemplated offering and the issuer must amend the registration statement prior to distributing a preliminary prospectus to include all financial information required by Regulation S-X at the time of the amendment.

Section 84001 of the FAST Act requires the SEC to revise Form S-1 to permit a smaller reporting company to incorporate by reference into its registration statement any documents filed by the issuer subsequent to the effective date of the registration statement. The SEC added a new paragraph to Item 12 of Form S-1 to implement Section 84001.
This interim rule is effective upon publication in the Federal Register. Comments on the interim final rules can be submitted on or before 30 days after publication in the Federal Register.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Crowdfunding

Summary The SEC has adopted final rules, Regulation Crowdfunding, to permit companies to offer and sell securities through crowdfunding. Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects. Title III of the JOBS Act created a federal exemption under the securities laws so that this type of funding method can be used to offer and sell securities.

The final rules permit individuals to invest in securities-based crowdfunding transactions subject to certain investment limits. The rules also limit the amount of money an issuer can raise using the crowdfunding exemption, impose disclosure requirements on issuers for certain information about their business and securities offering, and create a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions.

The new crowdfunding rules and forms will be effective 180 days after they are published in the Federal Register. The forms enabling funding portals to register with the SEC will be effective January 29, 2016.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Pay Ratio Disclosure

Summary The SEC adopted a rule requiring public companies to disclose the ratio of the annual total compensation of the chief executive officer to the median of the annual total compensation of the company's employees as required by section 953(b) of the Dodd-Frank Act. The SEC indicated that it received over 287,000 comment letters on its pay ratio rules and has incorporated some of the concerns into the final rule.
SEC Chair Mary Jo White indicated that the rules provide additional company-specific information about important executive compensation practices, which shareholders now have a specific say on. The final rule does include provisions aimed at reducing the cost of compliance, including:
  • Flexibility in the methodology used to calculate the median employee, which can be based on the registrant's total employee population or a statistical sample;
  • The median employee must only be determined once every three years, unless significant changes would reasonably be expected to significantly change the median employee calculation;
  • The median employee can be determined on any date within the last three months of the registrant's fiscal year;
  • Non-US employees can be excluded from the calculation if it would violate foreign data privacy laws to obtain certain information; and
  • Companies can exclude up to 5% of its overseas workers from its pay ratio calculation.
The final rule does require companies to calculate the median employee using all employees, including full-time, part-time, and seasonal employees.
The pay ratio disclosure rule does not apply to certain registrants, including emerging growth companies, smaller reporting companies, and foreign private issuers.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Amendments to Regulation A

Summary - The SEC adopted rules and forms related to the offer and sale of securities pursuant to Section 3(b) of the Securities Act of 1933 to implement Section 401 of the Jumpstart Our Business Startups Act (JOBS Act). Section 401 of the JOBS Act includes provisions known as Regulation A+ that permit public offerings of up to $50 million in a 12 month period without having to comply with the SEC's general registration requirements. The new rules adopted create a two-tiered system:
  • Tier 1 includes the current Regulation A that allows companies to sell stock without having to comply with the SEC's general registration requirements; however, it increases the limit to $20 million from the current $5 million worth of stock offered in a 12 month period. Offerings under Tier 1 must be filed and fees paid in every state in which they're selling pursuant to state "blue sky laws." The $20 million limit on Tier 1 set by the SEC is different from the previous proposal to keep the limit at $5 million.
  • Tier 2 creates new rules that increase the limit on the capital that can be raised to $50 million in a 12 month period without having to comply with the SEC's general registration requirements. For Tier 2 offerings, issuers will have to provide audited financials with their offering circular, and will have to file annual and semi-annual financial reports with certain scaled disclosure. In addition, Tier 2 offerings will be required to provide certain current event reporting. The Tier 2 rules preempt state blue sky laws.
The rules adopted by the SEC provide additional provisions applicable to all offerings under both tiers of Regulation A, including required electronic filing of offering circulars, the ability to file draft offering circulars with the SEC for review before going public, and the ability to use certain "test the waters" communications.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


SEC Staff Views, Opportunity for Companies to Test File in Preparation for Crowdfunding Offerings

Summary The SEC staff has issued an announcement, Opportunity for Companies to Test File in Preparation for Crowdfunding Offerings. According to the announcement, companies may immediately begin test filings of the form to be used when conducting Regulation Crowdfunding offerings. Under new SEC rules that take effect on May 16, 2016, companies will be permitted to offer and sell securities through crowdfunding. Companies seeking to conduct a crowdfunding offering using the new rules must file the required disclosures about the offering on a new Form C on EDGAR, the SEC's electronic document filing system. Companies can access the Form C on the SEC's EDGAR filing website provided they have a Central Index Key (CIK) and a CIK Confirmation Code.

Filers are now able to submit test filings on the new form. The test filings will be accepted until February 29, 2016, and are intended to help prospective issuers become more familiar with the mechanics of the filing process in advance of a crowdfunding offering. During this testing period, filers should identify their Form C filings as "test" filings. "Live" filings are not permitted, and the system will reject such filings, until the rules are effective. Test filings will not be evaluated for compliance with the rules and will not be reviewed by SEC staff or available for public viewing. As is the case with any document submitted on EDGAR, testers should not submit confidential or personally identifiable information in the test filings.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


SEC Staff Views, Report on the Review of the Definition of "Accredited Investor"

Summary The SEC has issued a staff report on the "accredited investor" definition. The Dodd-Frank Wall Street Reform and Consumer Protection Act directs the Commission to review the accredited investor definition as it relates to natural persons every four years to determine whether the definition should be modified or adjusted. Staff from the Divisions of Corporation Finance and Economic and Risk Analysis prepared the report in connection with the first review of the definition.

The report examines the history of the accredited investor definition and considers comments on the definition received from a variety of sources, including public commenters, the Investor Advisory Committee and the Advisory Committee on Small and Emerging Companies. The report considers alternative approaches to defining "accredited investor," provides staff recommendations for potential updates and modifications to the existing definition and analyzes the impact potential approaches may have on the pool of accredited investors.

The SEC is seeking comments from members of the public on the accredited investor definition, generally, and specifically on the staff recommendations contained in the report.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


SEC Staff Views, Recently Enacted Transportation Law Includes a Number of Changes to the Federal Securities Laws

Summary The staff in the Division of Corporation Finance (Corp Fin) of the SEC has issued the following guidance on the recently enacted Fixing America's Surface Transportation (FAST) Act:
  • Compliance and Disclosure Interpretation (C&DI), Fixing America's Surface Transportation (FAST) Act; and
  • SEC Staff Announcement: Recently Enacted Transportation Law Includes a Number of Changes to the Federal Securities Laws.
On December 4, 2015, President Obama signed the FAST Act into law. The new law includes several amendments to the federal securities laws. Some of these provisions must be implemented by SEC rulemaking or study, while others are self-executing. Consistent with its practice following enactment of the JOBS Act, the Division intends to consider providing additional guidance as questions are presented. In addition, Corp Fin has issued an announcement that provides a summary of the FAST Act that includes the specific provisions with the legislation that impacts the securities laws. Provisions impacting the securities laws deal with the following issues:
  • Improving Access to Capital for Emerging Growth Companies;
  • Grace Period for Change of Status of Emerging Growth Companies;
  • Simplified Disclosure Requirements for Emerging Growth Companies;
  • Disclosure Modernization and Simplification;
  • Study on Modernization and Simplification of Regulation S-K; and
  • Summary Page for Form 10-K.
For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Division of Corporation Finance: Amendments to Regulation A - A Small Entity Compliance Guide

Summary - The staff of the SEC has issued a Small Entity Compliance Guide, Amendments to Regulation A. This guide summarizes and explains rule amendments to Regulation A issued by the SEC in March 2015. The amendments implement Section 401 of the Jumpstart Our Business Startups Act by expanding Regulation A into two tiers: (a) Tier 1, for securities offerings of up to $20 million in a 12-month period; and (b) Tier 2, for securities offerings of up to $50 million in a 12-month period. The intent of these amendments to Regulation A is to enable all smaller firms to raise capital more easily while still providing certain protections to investors. These rule amendments became effective June 19, 2015.  Topics discussed in this guide include:
  • Summary of Regulation A;
  • Scope of Exemption;
  • Offering Statement;
  • Solicitation of Interest Materials;
  • Ongoing Reporting;
  • Bad Actor Disqualification;
  • Relationship with State Securities Law; and
  • Transition Issues.
For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Recent FASB Updates

 FASB Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients 
 
Summary The FASB has issued Accounting Standards Update No. 2016-12,  Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.  The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients. These amendments are effective at the same date that Topic 606 is effective. Topic 606 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Topic 606 is effective for nonpublic entities one year later. Following is a summary of the clarifying guidance and practical expedients in the amendments.
 
Assessing the Collectibility Criterion in Paragraph 606-10-25-1(e) and Accounting for Contracts That Do Not Meet the Criteria for Step 1 (Applying Paragraph 606-10-25-7).  The amendments clarify the objective of the collectibility criterion in Step 1. The objective of this assessment is to determine whether the contract is valid and represents a substantive transaction on the basis of whether a customer has the ability and intention to pay the promised consideration in exchange for the goods or services that will be transferred to the customer. The amendments also add a new criterion to paragraph 606-10-25-7 to clarify when revenue would be recognized for a contract that fails to meet the criteria in Step 1. That criterion allows an entity to recognize revenue in the amount of consideration received when the entity has transferred control of the goods or services, the entity has stopped transferring goods or services (if applicable) and has no obligation under the contract to transfer additional goods or services, and the consideration received from the customer is nonrefundable.
 
Presentation of Sales Taxes and Other Similar Taxes Collected from Customers.  The amendments permit an entity, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price.
 
Noncash Consideration.  The amendments specify that the measurement date for noncash consideration is contract inception. The amendments also clarify that the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration.
 
Contract Modifications at Transition.  The amendments provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.
 
Completed Contracts at Transition.  The amendments clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application. Accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments permit an entity to apply the modified retrospective transition method either to all contracts or only to contracts that are not completed contracts.
 
Technical Correction.  The amendments clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


 FASB Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) 

Summary -  The FASB has issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 Revenue from Contracts with Customers requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (i.e., the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is an agent).
The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by clarifying the following:
  • An entity determines whether it is a principal or an agent for each specified good or service promised to a customer.
  • An entity determines the nature of each specified or service (e.g., whether it is a good, service, or a right to a good or service).
  • When another entity is involved in providing goods or services to a customer, an entity that is a principal obtains control of: (a) a good or another asset from the other party that it then transfers to the customer; (b) a right to a service that will be performed by another party, which gives the entity the ability to direct that party to provide the service to the customer on the entity's behalf; or (c) a good or service from the other party that it combines with other goods or services to provide the specified good or service to the customer.
  • The purpose of the indicators in paragraph 606-10-55-39 is to support or assist in the assessment of control. The amendments in paragraph 606-10-55-39A clarify that the indicators may be more or less relevant to the control assessment and that one or more indicators may be more or less persuasive to the control assessment, depending on the facts and circumstances.
The amendments amend certain existing illustrative examples and add additional illustrative examples to assist in the application of the guidance.
The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09, Revenue from Contracts with Customers (Topic 606).Public entities should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Private entities must apply the amendments one year later.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Update No. 2016-02 -Leases (Topic 842) 

Summary -  The FASB has issued its new lease accounting guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842).
Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
  • A lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and
  • A right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term.
Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 (i.e., January 1, 2020, for a calendar year entity), and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all public business entities and all nonpublic business entities upon issuance.

Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Updates No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities 
 
Summary The FASB has issued Accounting Standards Update (ASU) No. 2016-01,  Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  The new guidance is intended to improve the recognition and measurement of financial instruments. The ASU affects public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities.  The new guidance makes targeted improvements to existing U.S. GAAP by:
  • Requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income;
  • Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;
  • Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements;
  • Eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities;
  • Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and
  • Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as "own credit") when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For private companies, not-for-profit organizations, and employee benefit plans, the new guidance becomes effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019.

The new guidance permits early adoption of the own credit provision. In addition, the new guidance permits early adoption of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Updates No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes 

Summary The FASB has issued ASU No. 2015-17,  Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,  which changes how deferred taxes are classified on organizations' balance sheets.

The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent.

The amendments apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, not-for-profit organizations, and employee benefit plans, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Update No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments 

Summary - Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. To simplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments eliminate the requirement to retrospectively account for those adjustments.

U.S. GAAP currently requires that during the measurement period, the acquirer retrospectively adjust the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Those adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. The acquirer also must revise comparative information for prior periods presented in financial statements as needed, including revising depreciation, amortization, or other income effects as a result of changes made to provisional amounts.

The amendments require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.

The amendments require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.

For public business entities, the amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued.

The only disclosures required at transition should be the nature of and reason for the change in accounting principle. An entity should disclose that information in the first annual period of adoption and in the interim periods within the first annual period if there is a measurement-period adjustment during the first annual period in which the changes are effective.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Update No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements 

Summary The FASB has issued Accounting Standards Update (ASU) No. 2015-15,  Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting.  This ASU adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015, Emerging Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements.

Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Update No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs 

Summary -  The FASB has issued Accounting Standards Update (ASU) No. 2015-03,  Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.  The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU.

For public business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016.

Early adoption of the amendments is permitted for financial statements that have not been previously issued.

The amendments should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (i.e., debt issuance cost asset and the debt liability).
 
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© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Update No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern
 
The amendments in ASU 2014-15 are intended to define management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote disclosures.
 
Under GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities.
 
Currently, GAAP lacks guidance about management's responsibility to evaluate whether there is substantial doubt about the organization's ability to continue as a going concern or to provide related footnote disclosures.
 
This ASU provides guidance to an organization's management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes.
 
Effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.
 
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© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


FASB Accounting Standards Update No. 2014-12 - Compensation - Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
 
The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation - Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award.

Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved.
 
Effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. The effective date is the same for both public business entities and all other entities. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.
 
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© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.