Year in Review — 2017

Summary: The FASB issued ASU 2017-011 on January 13, 2017, to clarify the defi nition of a business in ASC 805.2 The FASB issued the ASU in response to stakeholder feedback that the defi nition of a business in ASC 805 is being applied too broadly. In addition, stakeholders said that analyzing transactions under the current definition is difficult and costly. The ASU’s amendments are intended to make application of the guidance more consistent and cost-efficient.

Next Steps: The ASU is effective for PBEs in annual periods beginning after December 15, 2017, including interim periods therein. For all other entities, the ASU is effective in annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The ASU must be applied prospectively on or after the effective date, and no disclosures for a change in accounting principle are required at transition. Early adoption is permitted for transactions (i.e., acquisitions or dispositions) that occurred before the issuance date or effective date of the standard if the transactions were not reported in financial statements that have been issued or made available for issuance.

Other Resources: Deloitte’s January 13, 2017, Heads Up and A Roadmap to Accounting for Asset Acquisitions.

Summary: The FASB issued ASU 2017-093 on May 10, 2017, to amend the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification.

Next Steps: For all entities, the ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The ASU’s amendments should be applied prospectively to awards modified on or after the effective date. Transition disclosures are not required, because modifications typically are not recurring events for most entities.

Other Resources: Deloitte’s May 11, 2017, Heads Up and A Roadmap to Accounting for Share-Based Payment Awards (upon adoption of ASUs 2016-09 and 2017-09).

Summary: ASU 2017-07,4 which was issued on March 10, 2017, amends the requirements in ASC 715 related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defi ned benefit pension and other postretirement plans. Specifically, ASU 2017-07 requires entities to (1) disaggregate the current-service-cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if such a subtotal is presented. The ASU also requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines.

Next Steps: The ASU’s amendments are effective for PBEs for annual periods, including interim periods therein, beginning after December 15, 2017. For other entities, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods in the subsequent annual period. Early adoption is permitted as of the beginning of any annual period for which an entity’s financial statements (interim or annual) have not been issued or made available for issuance (i.e., an entity should early adopt the amendments within the first interim period if it issues interim financial statements).

Other Resources: Deloitte’s November 8, 2017, Financial Reporting Alert and March 14, 2017, Heads Up.

Summary: The FASB issued ASU 2016-015 on January 5, 2016, to amend the guidance in U.S. GAAP on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments.

Next Steps: For PBEs, the new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. For all other entities, including not-for-profit entities (NFPs) and employee benefit plans within the scope of ASC 960 through ASC 965 on plan accounting, the guidance is effective for fiscal years beginning one year after the effective date for PBEs (i.e., December 15, 2018) and interim reporting periods within fiscal years beginning two years after the PBE effective date (i.e., December 15, 2019).

Early adoption is permitted for all entities whose financial statements have not yet been issued or have not been made available for issuance with respect to the following changes made to ASC 825:

• For financial liabilities measured under the fair value option, fair value changes resulting from a change in instrument-specific credit risk would be presented separately in other comprehensive income.
• The fair value disclosure requirements for financial instruments not recognized at fair value would be eliminated for non-PBEs.

Early adoption of other provisions is not permitted for PBEs. Non-PBEs are permitted to early adopt the new standard when it becomes effective for PBEs (i.e., fiscal years beginning after December 15, 2017, including interim periods therein).

Other Resources: Deloitte’s January 12, 2016, Heads Up.

Summary: The FASB issued ASU 2016-046 on March 16, 2016, in response to a consensus reached at the EITF’s November 2015 meeting. The ASU amends the guidance on extinguishing financial liabilities for certain prepaid stored-value products. If an entity selling prepaid stored-value products expects to be entitled to a breakage amount (i.e., an amount that will not be redeemed), the entity will recognize the effects of the expected breakage “in proportion to the pattern of rights expected to be exercised” by the product holder to the extent that it is probable that a significant reversal of the breakage amount will not subsequently occur. That is, an entity would not recognize breakage immediately but rather proportionally as the prepaid stored-value product is being redeemed. Otherwise, the expected breakage would be recognized when the likelihood becomes remote that the holder will exercise its remaining rights.

Next Steps: For PBEs, the ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, it is effective for annual periods beginning after December 15, 2018, and interim periods beginning after December 15, 2019. Early adoption is permitted, including adoption before the effective date of ASC 606. A reporting entity can apply the guidance by using either (1) a modified retrospective transition approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the annual period of adoption or (2) a full retrospective transition approach.

Other Resources: Deloitte’s March 16, 2016, Heads Up.

Summary: The FASB issued ASU 2016-167 on October 24, 2016, to remove the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The ASU, which is part of the Board’s simplification initiative, is intended to reduce the complexity of U.S. GAAP and diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property.

Next Steps: For PBEs, the ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. For all other entities, the ASU is effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities as of the beginning of a fiscal year for which neither the annual or interim (if applicable) financial statements have been issued. If an entity chooses to early adopt the amendments in the ASU, it must do so in the first interim period of its annual financial statements (if the entity issues interim financial statements). That is, an entity cannot adopt the amendments in the ASU in a later interim period and apply them as if they were in effect as of the beginning of the year.

Entities should apply the ASU’s amendments on a modified retrospective basis, recognizing the effects in retained earnings as of the beginning of the year of adoption.

Other Resources: Deloitte’s October 25, 2016, Heads Up and A Roadmap to Accounting for Income Taxes.

Summary: The FASB issued ASU 2017-058 on February 22, 2017, to clarify the scope of the Board’s guidance on nonfinancial asset derecognition (ASC 610-20) as well as the accounting for partial sales of nonfinancial assets. The ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard (ASC 606, as amended). The FASB issued the ASU in response to stakeholder feedback indicating that (1) the meaning of the term “in-substance nonfinancial asset” is unclear because the Board’s new revenue standard does not define it and (2) the scope of the guidance on nonfinancial assets is confusing and complex and does not specify how a partial sales transaction should be accounted for or which model entities should apply.

Next Steps: The effective date of the new guidance is aligned with the requirements in the new revenue standard, which is effective for public companies for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017, and for nonpublic companies for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. If the entity decides to early adopt the ASU’s guidance, it must also early adopt ASC 606 (and vice versa).

Other Resources: Deloitte’s February 28, 2017, Heads Up and A Roadmap to Applying the New Revenue Recognition Standard.

Summary: The FASB and IASB issued their final standard on revenue recognition on May 28, 2014. The standard, issued as ASU 2014-099 by the FASB and as IFRS 1510 by the IASB, outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.

The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” In applying the revenue model to contracts within its scope, an entity will:

• Identify the contract(s) with a customer (step 1).
• Identify the performance obligations in the contract (step 2).
• Determine the transaction price (step 3).
• Allocate the transaction price to the performance obligations in the contract (step 4).
• Recognize revenue when (or as) the entity satisfies a performance obligation (step 5).

The FASB has also released the following additional ASUs to amend certain provisions of ASU 2014-09 or make conforming amendments to related SEC guidance:

• ASU 2017-1411 (issued November 22, 2017) — Amends various paragraphs in ASC 220 (on reporting comprehensive income in the income statement), ASC 605 (on revenue recognition), and ASC 606 (on revenue from contracts with customers) that contain SEC guidance. The amendments include superseding ASC 605-10-S25-1 (SAB Topic 1312) as a result of Staff Accounting Bulletin No. 116 (SAB 116) and adding ASC 606-10-S25-1 as a result of SEC Release 33-10403.13
• ASU 2016-2014 (issued December 21, 2016) — Makes certain technical corrections (i.e., minor changes and enhancements) to the new revenue standard on various topics.
• ASU 2016-1215 (issued May 9, 2016) — Amends certain aspects of ASU 2014-09 to address certain implementation issues identified by the transition resource group (TRG) for revenue recognition. These issues include (1) collectibility, (2) presentation of sales tax and other similar taxes collected from customers, (3) noncash consideration, (4) contract modifications and completed contracts at transition, and (5) transition technical correction.
• ASU 2016-1116 (issued May 3, 2016) — Rescinds certain revenue-related SEC guidance from the FASB Accounting Standards Codification upon the adoption of ASU 2014-09, including (1) revenue and expense recognition for freight services in process (ASC 605-20-S99-2), (2) accounting for shipping and handling fees and costs (ASC 605-45- S99-1), (3) accounting for consideration given by a vendor to a customer (ASC 605-50- S99-1), and (4) accounting for gas-balancing arrangements (ASC 932-10-S99-5).
• ASU 2016-1017 (issued April 14, 2016) — Amends certain aspects of the new revenue standard’s guidance on identifying performance obligations and the implementation guidance on licensing. The amendments in this ASU reflect feedback received by the TRG.
• ASU 2016-0818 (issued March 17, 2016) — Amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09. The FASB issued ASU 2016-08 in response to concerns identified by stakeholders, including those related to (1) determining the appropriate unit of account under the revenue standard’s principal-versus-agent guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard’s control principle.

Next Steps: ASU 2015-1419 (issued August 12, 2015) deferred the original effective date of ASU 2014-09 by one year for all entities and permitted early adoption on a limited basis. Specifically:

• For PBEs, ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within those annual periods.
• For nonpublic entities, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Nonpublic entities can also elect to early adopt the standard as of the following:

  • Annual reporting periods beginning after December 15, 2016, including interim periods.
  • Annual reporting periods beginning after December 15, 2016, and interim periods within annual reporting periods beginning one year after the annual reporting period in which the new standard is initially applied.

Entities have the option of using either a full retrospective or a modified approach to adopt the guidance in the ASU:

• Full retrospective application — Retrospective application would take into account the requirements in ASC 250 (with certain practical expedients).
• Modified retrospective application — Under the modified approach, an entity recognizes “the cumulative effect of initially applying [the ASU] as an adjustment to the opening balance of retained earnings . . . of the annual reporting period that includes the date of initial application” (revenue in periods presented in the financial statements before that date is reported under guidance in effect before the change). Under the modified approach, the guidance in the ASU is only applied to existing contracts (those for which the entity has remaining performance obligations) as of, and new contracts after, the date of initial application. The ASU is not applied to contracts that were completed before the effective date (i.e., an entity has no remaining performance obligations to fulfill). Entities that elect the modified approach must disclose an explanation of the impact of adopting the ASU, including the financial statement line items and respective amounts directly affected by the standard’s application.

Other Resources: Deloitte resources on the FASB’s standard include A Roadmap to Applying the New Revenue Recognition Standard and the November 21, 2017; September 5, 2017; May 9, 2017; May 11, 2016 (ASU 2016-12); April 15, 2016 (ASU 2016-10); March 22, 2016 (ASU 2016-08); and May 28, 2014 (ASU 2014-09), Heads Up newsletters. For more information about IFRS 15, see Deloitte’s May 28, 2014; September 11, 2015; and April 20, 2016, IFRS in Focus newsletters.

Summary: The FASB issued ASU 2017-1020 on May 16, 2017, in response to an EITF consensus reached at the Task Force’s March 2017 meeting. The ASU addresses “diversity in practice in how an operating entity determines the customer of the operation services for transactions within the scope of [ASC] 853” by “clarifying that the grantor is the customer of the operation services in all cases for those arrangements.” The amendments also allow for a “more consistent application of other aspects of the revenue guidance, which are affected by this customer determination.”

Next Steps: For entities that have not yet adopted ASC 606, the effective date is aligned with that for ASC 606. For PBEs that have adopted ASC 606, the ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For most other entities, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted.

Other Resources: Deloitte’s March 2017 EITF Snapshot.

Summary: The FASB issued ASU 2016-1821 on November 17, 2016, in response to an EITF consensus reached at the Task Force’s September 2016 meeting. The ASU amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows.

Next Steps: For PBEs, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods therein. For all other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods thereafter. Early adoption is permitted for all entities, which must apply the guidance retrospectively to all periods presented.

Other Resources: Deloitte’s November 17, 2016, Heads Up and A Roadmap to the Preparation of the Statement of Cash Flows.

Summary: The FASB issued ASU 2016-1522 on August 26, 2016, in response to an EITF consensus reached at the Task Force’s June 2016 meeting. The ASU amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows.

Next Steps: For PBEs, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for all entities. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively if retrospective application would be impracticable.

Other Resources: Deloitte’s August 30, 2016, Heads Up and A Roadmap to the Preparation of the Statement of Cash Flows.

Summary: The IASB issued a final version of IFRS 923 on July 24, 2014, marking the completion of its project to improve the accounting for financial instruments and replace IAS 39.24 The new standard substantially revises IFRS guidance on classification and measurement, including impairment, as well as hedge accounting. In addition, unlike IAS 39, under which impairment is based on incurred losses, the new impairment model in IFRS 9 (2014) is based on expected losses. The impairment model applies to amortized-cost financial assets and financial assets in IFRS 9’s new FVTOCI25 category as well as to loan commitments, financial guarantees, lease receivables, and contract assets.

Next Steps: IFRS 9 will become effective on January 1, 2018. Early adoption is permitted. However, note that on September 12, 2016, the IASB published amendments26 to its insurance contracts standard, IFRS 4,27 to address concerns about the differing effective dates of IFRS 9 and its new insurance contracts standard, IFRS 17,28 which will supersede IFRS 4. The amendment provides entities that meet a criterion for engaging in predominantly insurance activities with the option to continue current IFRS accounting and to defer the application of IFRS 9 until the earlier of the application of the new insurance standard or periods beginning on or after January 1, 2021. Separately, the amendment gives all entities with contracts within the scope of IFRS 4 an option to apply IFRS 9, with adjustments to profit or loss for designated qualifying financial assets.

Other Resources: Deloitte’s August 8, 2014, Heads Up and September 21, 2016, and July 29, 2014, IFRS in Focus newsletters.

Summary: The IASB published IFRIC 2229 on December 8, 2016. IFRIC 22 was developed by the IFRS Interpretations Committee to clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The interpretation is being issued to reduce diversity in practice related to the exchange rate used when an entity reports transactions that are denominated in a foreign currency in accordance with IAS 2130 in circumstances in which consideration is received or paid before the related asset, expense, or income is recognized.

Next Steps: IFRIC 22 is effective for annual reporting periods beginning after January 1, 2018; early adoption is permitted.

Other Resources: Deloitte’s December 19, 2016, IFRS in Focus.

Summary: The IASB released amendments31 to IFRS 232 on June 20, 2016. The amendments clarify the accounting requirements related to classification and measurement of share-based payment transactions. Specifically, the amendments concern the:

• Effects of vesting and nonvesting conditions on the measurement of a cash-settled share-based payment.
• Classification of share-based payment transactions with net settlement features for withholding tax obligations.
• Accounting for modifications of share-based payment transactions from cash-settled to equity-settled.

Next Steps: The amendments are effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted.

Other Resources: Deloitte’s June 28, 2016, IFRS in Focus.

Summary: The IASB issued amendments33 on December 8, 2016, to the guidance in IAS 4034 on transfers of property to or from investment property. Specifically, the amendments revise paragraph 57 of IAS 40 to state that “[a]n entity shall transfer a property to, or from, investment property when, and only when, there is a change in use.” The amendments further clarify that a “change in use occurs when the property meets, or ceases to meet, the definition of investment property” and that a “change in management’s intentions for the use of a property does not provide evidence of a change in use.”

Next Steps: The amendments are effective for periods beginning on or after January 1, 2018. Early adoption is permitted.

Other Resources: Deloitte’s December 19, 2016, IFRS in Focus.

Summary: On January 12, 2017, the FASB issued ASU 2017-02,35 which amends the consolidation guidance for NFPs in ASC 958-810. The amendments:

• Incorporate into ASC 958-810 the superseded consolidation guidance in ASC 810-20.
• Address when an “NFP limited partner should consolidate a for-profit limited partnership.”

Next Steps: The ASU is effective for NFPs for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.

Other Resources: Deloitte’s January 30, 2017, Heads Up.

Summary: On February 27, 2017, the FASB issued ASU 2017-0636 on employee benefit plan master trust reporting in response to an EITF consensus. The ASU’s provisions include the following:

• Presentation within the plan’s financial statements of its interest in a master trust as a single line item.
• Disclosure of the master trust’s investments by general type as well as by the dollar amount of the plan’s interest in each type.
• Disclosure of the master trust’s other assets and liabilities and the balances related to the plan.
• Elimination of required disclosures for Section 401(h) accounts that are already provided by the associated defined benefit plan.

Next Steps: The ASU’s amendments are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.

Other Resources: Deloitte’s November 2016 EITF Snapshot.

Summary: On July 13, 2017, the FASB issued ASU 2017-11,37 which makes limited changes to the Board’s guidance on classifying certain financial instruments as either liabilities or equity. The ASU’s objective is to improve (1) the accounting for instruments with “down-round” provisions and (2) the readability of the guidance in ASC 480 on distinguishing liabilities from equity by replacing the indefinite deferral of certain pending content with scope exceptions.

Next Steps: For PBEs, the ASU is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods. For all other entities, the ASU is effective for annual reporting periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020. Early adoption is permitted in any interim or annual period for which financial statements have not yet been issued or have not been made available for issuance.

Other Resources: Deloitte’s July 21, 2017, Heads Up; A Roadmap to Accounting for Contracts on an Entity’s Own Equity; and A Roadmap to Distinguishing Liabilities From Equity. Also see the press release on the FASB’s Web site.

Summary: On March 30, 2017, the FASB issued ASU 2017-08,38 which is intended to enhance “the accounting for the amortization of premiums for purchased callable debt securities.” Specifically, the ASU shortens the amortization period for certain investments in callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. The ASU was issued in response to concerns from stakeholders that “current GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised.”

Next Steps: The ASU’s amendments are effective for PBEs for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. For other entities, the amendments are effective for annual periods beginning after December 15, 2019, and interim periods thereafter. Early adoption is permitted.

Other Resources: Deloitte’s April 4, 2017, Heads Up.

Summary: On January 26, 2017, the FASB issued ASU 2017-04,39 which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, “an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount [and] should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.”

In addition, the ASU:

• Clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units in connection with an entity’s testing of reporting units for goodwill impairment.
• Clarifies that “an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.”
• Makes minor changes to the overview and background sections of certain ASC subtopics and topics as part of the Board’s initiative to unify and improve those sections throughout the Codification.

Next Steps: The ASU is effective prospectively for fiscal years beginning after the following dates:

• For PBEs that are SEC filers, December 15, 2019.
• For PBEs that are not SEC filers, December 15, 2020.
• For all other entities, including NFPs, December 15, 2021.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

Other Resources: Deloitte’s February 1, 2017, Heads Up.

Summary: On August 28, 2017, the FASB issued ASU 2017-12,40 which amends the hedge accounting recognition and presentation requirements in ASC 815. The Board’s objectives in issuing the ASU are to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. Changes made by the ASU include the following:

• Elimination of the concept of recognizing periodic hedge ineffectiveness for cash flow and net investment hedges.
• Recognition and presentation of changes in the fair value of the hedging instrument.
• Recognition and presentation of components excluded from an entity’s hedge effectiveness assessment.
• Addition of the ability to exclude cross-currency basis spreads for currency swaps from an entity’s hedge effectiveness assessment.
• Addition of the ability to elect to perform subsequent effectiveness assessments qualitatively.
• Elimination of the benchmark interest rate concept for variable-rate instruments in cash flow hedges. An entity can now designate the contractually specified interest rate as the hedged risk.
• Addition of the Securities Industry and Financial Markets Association Municipal Swap Rate as a benchmark interest rate.
• Addition of the ability to designate a “fallback” long-haul method for the shortcut method.
• Addition of the ability to apply the shortcut method to partial-term fair value hedges of interest rate risk.
• Enhancement of the ability to use the critical-terms-match method for cash flow hedge of groups of forecasted transactions when the timing of the hedged transactions does not perfectly match the hedging instrument’s maturity date.
• Addition of new disclosure requirements and amendments to existing ones.

Next Steps: For PBEs, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods therein; however, early adoption by all entities is permitted upon its issuance.

Other Resources: Deloitte’s August 30, 2017, Heads Up. Also see the press release, FASB in Focus, and cost-benefit analysis on the FASB’s Web site.

Summary: At the July 20, 2017, EITF meeting, the SEC staff provided significant relief to registrants that are required to include financial statements or financial information of other reporting entities in their SEC filings. Specifically, the SEC staff announced that it would not object to elections by certain PBEs to use the non-PBE effective dates for the sole purpose of adopting the FASB’s new standards on revenue (ASC 606) and leases (ASC 842). The staff announcement makes clear that the ability to use non-PBE effective dates for adopting the new revenue and leases standards is limited to the subset of PBEs “that otherwise would not meet the definition of a [PBE] except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filings with the SEC.” In 18 response to the announcement made at the EITF meeting, the FASB released ASU 2017-1341 in September 2017.

In addition, on January 23, 2017, the FASB issued ASU 2017-03,42 which amends certain SEC guidance in the FASB Accounting Standards Codification in response to SEC staff announcements made at the September 22, 2016, and November 17, 2016, EITF meetings. The announcements addressed the following topics:

• The “additional qualitative disclosures” that a registrant is expected to provide when it “cannot reasonably estimate the impact” that ASUs 2014-09, 2016-02,43 and 2016-1344 will have in applying the guidance in SAB Topic 11.M45 (announcement made at the September 22, 2016, EITF meeting).
• Guidance in ASC 323 related to the amendments made by ASU 2014-0146 regarding use of the proportional amortization method in accounting for investments in qualified affordable housing projects (announcement made at the November 17, 2016, EITF meeting).

Other Resources: Deloitte’s July 20, 2017, Heads Up; September 22, 2016, Financial Reporting Alert; and July 2017, November 2016, and September 2016 EITF Snapshot newsletters.

Summary: In December 2017, the FASB issued ASU 2017-15,47 which supersedes the guidance for steamship entities in ASC 995 with respect to “unrecognized deferred taxes related to certain statutory reserve deposits.” Specifically, the ASU requires entities with “unrecognized deferred income taxes related to statutory deposits made on or before December 15, 1992, . . . to recognize the unrecognized income taxes in accordance with [ASC] 740.”

Next Steps: The amendments in the ASU are effective for fiscal years and first interim periods beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period.

Summary: On December 12, 2017, the IASB issued a series of amendments48 as part of its annual improvements project (i.e., its project to make minor, nonurgent amendments to IFRSs). The following four standards are being amended:

• IFRS 349 — Clarification that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business.
• IFRS 1150 — These amendments explain that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.
• IAS 1251 — Revisions to clarify that all income tax consequences of dividends (i.e., distribution of profits) should be recognized in profit or loss, regardless of how the tax arises.
• IAS 2352 — These amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.

Next Steps: The amendments are all effective for annual periods beginning on or after January 1, 2019.

Other Resources: For more information, see the press release on the IASB’s Web site.

Summary: On October 12, 2017, the IASB released amendments to the following standards:

• IFRS 9 — These amendments53 address concerns about how particular prepayable financial assets are classified under IFRS 9. Specifically, under the amendments, companies are allowed “to measure particular prepayable financial assets with so-called negative compensation at amortised cost or at fair value through other comprehensive income if a specified condition is met — instead of at fair value through profit or loss.”
• IAS 2854 — These amendments55 “clarify that companies account for long-term interests in an associate or joint venture — to which the equity method is not applied — using IFRS 9.”

Next Steps: Both sets of amendments become effective on January 1, 2019. Early application is permitted.

Other Resources: Deloitte’s October 19, 2017, IFRS in Focus newsletters on the amendments to IFRS 9 and IAS 28. Also see the press release on the IASB’s Web site.

Summary: On June 7, 2017, the IASB published IFRIC Interpretation 23,56 which clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty regarding income tax treatments. Topics addressed in the new interpretation include:

• “[W]hether an entity considers uncertain tax treatments separately.”
• “[T]he assumptions an entity makes about the examination of tax treatments by taxation authorities.”
• “[H]ow an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.”
• “[H]ow an entity considers changes in facts and circumstances.”

Next Steps: IFRIC 23 is effective for annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted.

Other Resources: For more information, see Deloitte’s June 7, 2017, IFRS in Focus as well as the press release on the IASB’s Web site.

Summary: On May 18, 2017, the IASB released IFRS 17, which supersedes IFRS 4 and establishes principles for the recognition, measurement, presentation, and disclosure of insurance contracts. The main objective of IFRS 17 is to reduce the diversity in practice that arose under IFRS 4, which allowed companies “to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches.” The new standard increases comparability “by requiring all insurance contracts to be accounted for in a consistent manner.”

Next Steps: IFRS 17 is effective for annual reporting periods beginning on or after January 1, 2021. Earlier application is permitted if both IFRS 15 (on revenue recognition) and IFRS 9 (on financial instruments) have also been applied. The standard should be applied retrospectively unless it is impracticable to do so; entities then have the option to use a modified retrospective approach or the fair value approach.

Other Resources: Deloitte’s May 18, 2017, IFRS in Focus. Also see the following resources on the IASB’s Web site:

• Press release.
• Project summary.
  Feedback statement.
• Fact sheet.
• Effects analysis.

Summary: On October 3, 2017, the FASB issued a proposed ASU57 that would “clarify, correct errors in, or make minor improvements to” various Codification topics. In the proposal, the FASB particularly focuses on guidance that entities may have “incorrectly or inconsistently applied,” including guidance on the following topics:

• Comprehensive income (ASC 220-10).
• Debt modifications and extinguishments (ASC 470-50).
• Distinguishing liabilities from equity (ASC 480-10).
• Income tax considerations related to stock compensation and business combinations (ASC 718-740 and ASC 805-740, respectively).
• Derivatives and hedging (ASC 815-10).
• Fair value measurement (ASC 820-10).
• Financial services — brokers and dealers (ASC 940-405).
• Plan accounting — defined contribution pension plans (ASC 962-325).

Comments on the proposed ASU were due by December 4, 2017.

Summary: On September 27, 2017, the FASB issued a proposed ASU58 that would “clarify certain aspects of the guidance” on financial instruments in ASU 2016-01. Specifically, the proposal would amend guidance on the following topics:

• Equity securities without a readily determinable fair value.
• Forward contracts and purchased options.
• Presentation requirements for certain fair value option liabilities.
• Fair value option liabilities denominated in a foreign currency.
• Transition guidance for equity securities without a readily determinable fair value.

Comments on the proposed ASU were due by November 13, 2017.

Other Resources: Deloitte’s September 28, 2017, journal entry.

Summary: On September 25, 2017, the FASB issued a proposed ASU59 that would amend the transition requirements for land easements in the Board’s new leasing standard, ASU 2016-02. The objectives of the land easement amendments, which are being proposed in response to feedback received by the FASB regarding implementation of the new leasing standard, are to:

• Clarify that land easements entered into (or existing land easements modified) on or after the effective date of the new leasing standard must be assessed under ASC 842.
• Provide a transition practical expedient for existing or expired land easements that were not previously assessed in accordance with ASC 840. The practical expedient would allow entities to elect not to assess whether those land easements are, or contain, leases in accordance with ASC 842 when transitioning to the new leasing standard.

In addition, on September 27, 2017, the FASB issued another lease-related proposed ASU that would make 16 technical corrections and improvements to the new leasing standard.

Comments on the proposal related to land easements were due by October 25, 2017; comments on the technical-corrections proposal were due by November 13, 2017.

Further, on November 29, 2017, the Board discussed stakeholder feedback on its proposed ASU related to the land easement practical expedient associated with transition to ASC 842 and voted to move forward with drafting a final ASU.

Other Resources: Deloitte’s December 5, 2017, and October 3, 2017, Heads Up newsletters.

Summary: On October 24, 2017, the AICPA issued a series of technical Q&As addressing the definition of a PBE in the FASB Accounting Standards Codification. The Q&As cover the following topics:

• Use of the terms “security,” “over-the-counter market,” “conduit bond obligor,” “prepare,” “publicly available,” “financial statements,” and “periodic basis” in the definition of a PBE.
• Types of securities included in the definition of a PBE.
• FINRA TRACE and MSRB EMMA data.
• Use of the phrase “contractual restriction on transfer.”
• Application of the definition of a PBE when entities are in tiered organizational structures.
• Financial statements or information filed with the SEC and related effective-date considerations.
• ASU effective dates.
• How financial institutions subject to certain depository regulations should evaluate the definition of a PBE.
• Mutual depository institutions.
• Brokered certificates of deposit.
• Private resales.
• Insurance companies.
• Brokers, dealers, and futures commission merchants.

Other Resources: For more information, see the press release on the AICPA’s Web site.

Summary: On March 29, 2017, UK Prime Minister Theresa May provided written notification to the European Council of the UK’s intention to withdraw from the EU. Along with the many other aspects of European law that would presumably cease to apply to the UK upon its withdrawal from the EU, unless other agreements are reached, various tax exemptions and reliefs related to intra-Europe undertakings would presumably also no longer apply to dealings between UK entities and entities domiciled in EU-member states.

Other Resources: Deloitte’s March 31, 2017, and June 24, 2016 (updated March 31, 2017), Financial Reporting Alert newsletters.

Summary: In the fourth quarter of 2017, the Center for Audit Quality (CAQ) posted to its Web site the highlights of the September 26, 2017, and July 11, 2017, CAQ SEC Regulations Committee joint meetings with the SEC staff. Topics discussed at the meetings included:

• Waivers under SEC Regulation S-X, Rule 3-13.60
• Process for requesting omission of selected financial data.
• Data registration statement processing.
• PBE announcement at EITF meeting.
• Pro forma financial information for a business combination under common control or discontinued operation.
• Effects of accounting changes by a successor entity on the predecessor-period financial statements.
• ASC 606.
• Non-GAAP financial measures.
• Regulation A submissions.
• Evaluating the significance of a business disposal in connection with a proxy statement soliciting authorization for the disposal.
• Pro forma financial information presented in a Form 8-K for a significant acquisition made after a previously reported significant acquisition.

Other Resources: Deloitte’s December 13, 2017, and November 20, 2017, journal entries.

Summary: At its October 4, 2017, meeting, the FASB discussed the estimated life of a credit card receivable in the context of estimating expected credit losses. Specifically, the Board discussed how an entity should consider estimated expected future payments on a credit card receivable.

Other Resources: Deloitte’s October 5, 2017, journal entry.

Summary: Historically, the IMF has had concerns about the reliability of the consumer price index (CPI) inflation data produced by the government of Argentina. Because of these concerns, some stakeholders have looked to qualitative factors to help them determine whether Argentina’s economy is highly inflationary. Others have looked to the wholesale price index (WPI) produced by the Argentina government as a proxy for inflation data to be used in the three-year cumulative inflation calculation. The WPI has consistently provided national coverage (unlike most of the published CPI data) and has been viewed by some local practitioners as providing the most relevant and reliable inflation measures for the country as a whole, even though it is not a CPI. Further, recent information has shown that inflation has started to decelerate under the new government, and the expectation is that inflation could continue to decelerate given the new government’s anti-inflationary policies. Accordingly, entities will face practical challenges and will need to use significant judgment in assessing whether Argentina’s economy is considered highly inflationary.

Other Resources: Deloitte’s March 7, 2017, Financial Reporting Alert. Also see the highlights from the May 2017 IPTF joint meeting.

Summary: The congressional tax reform legislation continues to evolve. On November 16, 2017, the House of Representatives passed a tax reform bill. On December 2, 2017, the Senate passed its version of the bill, setting the stage for a formal House-Senate conference intended to reconcile differences between the bills and achieve a uniform bill (the “final bill”) that can be forwarded to President Trump for his signature. ASC 740-10-25-47, which addresses changes in income tax laws or rates, requires adjustments of deferred tax liabilities and deferred tax assets for the effects of a change in tax laws or rates in the quarterly and annual periods that include the enactment date. If the president were to sign the legislation on or before December 31, 2017, an entity with a calendar fiscal year-end would be required to recognize the effects of the legislation in its 2017 annual financial statements, resulting in a significantly compressed time frame for public entities to apply the provisions of the new legislation (filings due 60 to 90 days after year-end). If the enactment date falls in a quarterly period other than the fourth quarter (which might be the case for many entities with other than a calendar fiscal year), the time frame for public entities to apply ASC 740 would be even more compressed (filings due 40 to 45 days after quarter-end).

Other Resources: Tax reform insights on Deloitte.com.

Summary: At its November 29, 2017, Board meeting, the FASB tentatively decided to amend certain aspects of its new leasing standard, ASU 2016-02, in an attempt to reduce the costs of implementing the standard. Specifically, the FASB tentatively decided to amend the guidance in ASC 842 as follows:

• Entities may elect not to restate their comparative periods in the period of adoption when transitioning to the new standard.
• Lessors may elect not to separate lease and nonlease components when certain conditions are met.

Other Resources: Deloitte’s December 5, 2017, Heads Up.

Summary: On August 18, 2017, the SEC issued Staff Accounting Bulletin No. 116 (SAB 116) as well as two interpretive releases to update its interpretive guidance on revenue recognition and bring it into conformity with the FASB’s new revenue standard (ASC 606). On November 22, 2017, the FASB issued ASU 2017-14 to bring this SEC guidance into the Codification.

SAB 116 modifies SAB Topics 8,61 11.A,62 and 13 as follows:

• SAB Topic 8, which is specific to retail companies, and SAB Topic 13, which provides the SEC staff’s views regarding general revenue recognition guidance as codified in ASC 605, will no longer be applicable upon a registrant’s adoption of ASC 606.
• SAB Topic 11.A is amended to clarify that “revenues from operating-differential subsidies presented under a revenue caption should be presented separately from revenue from contracts with customers accounted for under [ASC] 606.”

The interpretive releases are as follows:

• Commission Guidance Regarding Revenue Recognition for Bill-and-Hold Arrangements — Indicates that upon adopting ASC 606, “registrants should no longer rely on the guidance in Securities Exchange Act Release No. 23507 and Accounting and Auditing Enforcement Release No. 108, In the Matter of Stewart Parness, which set forth the criteria to be met in order to recognize revenue when delivery has not occurred.”
• Updates to Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement Into the Pediatric Vaccine Stockpile or the Strategic National Stockpile — States that upon adopting ASC 606, manufacturers should recognize revenue for vaccines that are placed into the “Vaccines for Children Program” and the “Strategic National Stockpile” because control of the enumerated vaccines will have been transferred to the customer when the vaccines are placed into the federal government stockpile program.

Other Resources: Deloitte’s August 22, 2017, journal entry. Also see the press release on the SEC’s Web site.

Summary: On November 29, 2017, the SEC issued Staff Accounting Bulletin No. 117 (SAB 117), which amends certain SAB topics to make them consistent with current auditing and accounting guidance, especially the FASB’s ASC 321. Specifically, SAB 117 amends SAB Topic 563 to indicate that SAB Topic 5.M64 is no longer applicable upon adoption of ASC 321. ASC 321 creates new guidance that “eliminates the ability to present changes in the fair value of investments in equity securities within other comprehensive income, which eliminates the need for [SAB] Topic 5.M.”

Summary: On April 26, 2017, the AICPA issued a framework related to cybersecurity risk management. The purpose of the framework is to “enable all organizations — in industries worldwide — to take a proactive and agile approach to cybersecurity risk management and to communicate on those activities with stakeholders.”

Other Resources: For more information, see the press release and system and organization controls for cybersecurity page on the AICPA’s Web site. In addition, see Deloitte’s cybersecurity risk management examination discussion on Deloitte.com.

Summary: In February 2017, the Auditing Standards Board of the AICPA published SAS 132,65 which supersedes the guidance in SAS 12666 on “the auditor’s responsibilities in the audit of financial statements relating to the entity’s ability to continue as a going concern and the implications for the auditor’s report.” Aspects of the guidance that the new SAS revises include:

• The auditor’s objectives and related conclusions.
• Financial support by third parties or the entity’s owner-manager.
• Interim financial information.
• Financial statements prepared in accordance with a special-purpose framework.

Next Steps: The new guidance will be effective for audits of financial statements for periods ending on or after December 15, 2017.

Other Resources: For more information, see the press release on the AICPA’s Web site.

Summary: On December 6, 2017, the CAQ issued a publication that is intended to help audit committees implement the PCAOB’s updated auditor reporting model. The publication “explains changes to the auditor’s report and lists key questions on topics including auditor tenure, Critical Audit Matters (CAMs) and other new requirements.”

Other Resources: For more information, see the press release on the CAQ’s Web site.

Summary: On June 28, 2017, the CAQ issued an alert67 to encourage its members to “focus on evaluating the adequacy of management’s disclosure of impending changes in accounting principles.” The alert was released to provide auditors with information about the disclosure requirements in SAB 74 (codified in SAB Topic 11.M) in light of the upcoming effective dates of the FASB’s standards on leases, credit losses, and revenue. SAB 74 “requires that when a recently issued accounting standard has not yet been adopted, a registrant discuss the potential effects of the future adoption in its interim and annual SEC filings.”

Summary: On April 18, 2017, the CAQ released an updated version of its publication68 on assessing external auditors. The purpose of the publication is “to assist audit committees in carrying out their responsibilities of appointing, overseeing, and determining compensation for the external auditor.” The update takes into account “upcoming changes in accounting rules and standards and other potential risk areas.”

Next Steps: For more information, see the press release and video on the CAQ’s Web site.

Summary: On June 1, 2017, the PCAOB released an auditor reporting standard69 that significantly modifies the auditor’s reporting model. While the standard retains the current “pass/fail” approach, it also significantly increases the information included in auditors’ reports. The key changes to the auditor’s report under the standard are:

• A new required section describing CAMs arising from the audit of the current period’s financial statements. In this new section, the auditor will identify the CAMs, describe the principal considerations that led to the particular CAMs, describe how the auditor addressed the CAMs in the audit, and refer to the related financial statement accounts and disclosures.
• The standardization of the order and form of the auditor’s report, with the opinion section appearing first and section titles included to guide the reader.
• The addition of a new statement indicating that the auditor is required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB.
• Enhanced descriptions of the auditor’s roles and responsibilities in the audit. • Inclusion of the year the auditor began serving consecutively as the company’s auditor.

Further, on December 4, 2017, the PCAOB released staff guidance70 that “describes changes to the auditor’s report that become effective for audits for fiscal years ending on or after December 15, 2017.” Topics covered in the staff guidance include:

• The form of the auditor’s report.
• Addressees.
• Auditor independence.
• Auditor tenure.
• Auditor reporting regarding internal control over financial reporting.
• Explanatory and emphasis paragraphs.
• Information about certain audit participants.

In addition, the staff guidance provides a high-level overview of the requirements related to CAMs.

Next Steps: The effective date will be phased in as follows:

• Communication of CAMs will be effective:

  • For fiscal years ending on or after June 30, 2019, for auditor reports issued in connection with audits of large accelerated filers (as defined by the SEC).
  • For fiscal years ending on or after December 15, 2020, for auditor reports issued for all other audits to which the requirements apply.

  • Remaining changes to the auditor’s report, including auditor tenure, will apply to auditor reports issued for fiscal years ending on or after December 15, 2017.

The SEC approved the new auditor reporting standard on October 23, 2017; thus, entities can elect to begin complying with the standard.

Other Resources: Deloitte’s June 20, 2017, Heads Up. Also see the June 1, 2017, and December 4, 2017, press releases on the PCAOB’s Web site.

Summary: On October 5, 2017, the PCAOB issued a staff audit practice alert71 that discusses PCAOB requirements and other topics “relevant to auditors’ consideration of companies’ implementation of the new revenue standard.” These topics include:

• Auditing management’s transition disclosures in the notes to the financial statements.
• Auditing transition adjustments.
• Internal control over financial reporting.
• Fraud risks.
• Evaluating whether revenue is recognized in accordance with the applicable financial reporting framework.
• Evaluating whether the financial statements include the required disclosures regarding revenue.

Other Resources: For more information, see the press release on the PCAOB’s Web site.

Summary: On February 16, 2017, the PCAOB issued updated staff guidance72 to help auditors provide disclosures on the new Form AP, as required by the Board’s December 2015 final rule.73 (The SEC approved the rule on May 9, 2016.) On Form AP, auditors must disclose (1) the “name of the engagement partner”; (2) the “name, location, and extent of participation of each other accounting firm participating in the audit [if their] work constituted at least 5% of total audit hours”; and (3) the “number and aggregate extent of participation of all other accounting firms participating in the audit whose individual participation was less than 5% of total audit hours.” The updated guidance clarifies the treatment of professional staff in secondment arrangements.

Next Steps: The requirement to disclose the engagement partner is effective for audit reports issued on or after January 31, 2017. The disclosure requirements related to other accounting firms are effective for audit reports issued on or after June 30, 2017.

Summary: On September 21, 2017, the SEC issued interpretive guidance on pay ratio disclosure. The interpretive guidance is designed to “assist companies in their efforts to comply with the pay ratio disclosure requirement mandated by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.” In addition, the SEC staff has issued guidance on the pay ratio rule that includes “hypothetical examples of use of sampling and other reasonable methodologies.”

The interpretive guidance became effective on September 27, 2017.

Other Resources: Deloitte’s October 17, 2017, Heads Up. Also see the press release on the SEC’s Web site.

Summary: On October 11, 2017, the SEC issued a proposed rule74 in response to recommendations in the SEC staff’s Report on Modernization and Simplification of Regulation S-K, which was issued on November 23, 2016. The proposed rule would make specific revisions to a limited group of items in SEC Regulation S-K and is intended to streamline and improve disclosures. Regulation S-K requirements, which are the central repository for nonfinancial statement disclosures in SEC registration statements and periodic filings, were established more than 30 years ago, and the modernization of these requirements has been called for as a result of evolving business models, new technology, and changing investor needs.

Next Steps: Comments on the proposed rule are due by January 2, 2018.

Other Resources: Deloitte’s October 16, 2017, Heads Up.

Summary: On November 1, 2017, the SEC’s Division of Corporation Finance (the “Division”) issued Staff Legal Bulletin (SLB) 14I, which provides its views on the exclusion of shareholder proposals under Rule 14a-8 of the Securities Exchange Act of 1934.

Specifically, the SLB clarifies the scope and application of Rules 14a-8(i)(5) and 14-8(i)(7). In addition, the SLB provides information on proposals submitted on behalf of shareholders and the use of images in shareholder proposals.

Summary: On December 1, 2017, the Division published an update to its Financial Reporting Manual (FRM). The updates include:

• Revisions to paragraphs 3250.1(m) and 3250.1(n) with respect to “the pro forma impact of adopting new accounting standards.”
• Changes to paragraph 10230.1 to “address adoption of new accounting standards after [emerging growth company (EGC)] status is lost.”
• Revisions to Sections 11100 and 11200 to clarify — for certain PBEs — the effective dates of ASU 2014-09 and ASU 2016-02.

The SEC also published an FRM update in August 2017. This update includes:

• A new section that “describes communications with [the Division’s Office of the Chief Accountant (CF-OCA)] and provides contact information.”
• Revisions to Section 2065 and the index to “clarify that questions about applying the guidance on abbreviated financial statements to a predecessor entity should be directed to CF-OCA.”
• Revisions to paragraphs 10220.1 and 10220.5 to “clarify the guidance on the omission of financial information from draft and filed registration statements.” The updates in paragraph 10220.1 omit previous guidance, refer users via hyperlink to newly issued Securities Act of 1933 Compliance & Disclosure Interpretation (C&DI) 101.4 and note that that C&DI 101.05 addresses similar matters for non-EGC issuers. The updates in paragraph 10220.5c delete previous guidance and refer users via hyperlink to Fixing America’s Surface Transportation (FAST) Act C&DI, Question 2.

Summary: In the fourth quarter of 2017, the Division staff updated its C&DIs on the following topics:

• Safeguards for sensitive company information — The staff released Question 271.25, which addresses whether companies can “implement safeguards with respect to electronic access to Rule 701(e) [disclosure] information.”
• Non-GAAP financial measures — The staff added Question 101.01, which addresses whether “financial measures included in forecasts provided to a financial advisor and used in connection with a business combination transaction” constitute non-GAAP measures. In addition, the previous Question 101.01 has been amended and renumbered to Question 101.02, and the previous Question 101.02 has been renumbered to Question 101.03.

Other Resources: Deloitte’s A Roadmap to Non-GAAP Financial Measures.

Summary: On August 17, 2017, the SEC updated its June 29, 2017, announcement that it is extending to all companies benefits that are similar to those it has extended to EGCs regarding the confidential review process for draft registration statements under the Jumpstart Our Business Startups (JOBS) Act. The updates are intended to clarify the factors a company considers in determining whether it is eligible to use the expanded nonpublic review process. 34 The announcement notes that the “nonpublic review process is available for Securities Act registration statements prior to the issuer’s initial public offering date and for Securities Act registration statements within one year of the IPO. In identifying the initial public offering date, we will refer to Section 101(c) of the JOBS Act. The nonpublic review process is available for the initial registration of a class of securities under Exchange Act Section 12(b) on Form 10, 20-F or 40-F.”

Other Resources: For more information about the SEC’s updated announcement, see the press release on the SEC’s Web site as well as Deloitte’s July 11, 2017, Heads Up.

Summary: On April 3, 2017, the U.S. District Court for the District of Columbia released its final judgment in the litigation related to the SEC’s final rule75 on conflict minerals and remanded the case to the SEC. After the April 3, 2017, ruling by the district court, the SEC announced that it is suspending enforcement of some requirements in the conflict minerals rule. Specifically, the public statement released by the Division notes:

Other Resources: For more information, see Acting Chairman Michael Piwowar’s public statement on the ruling on the SEC’s Web site. Also see the U.S. Government Accountability Office’s (GAO’s) letter to congressional committees about its review of disclosures provided in connection with the conflict minerals rule.