First Quarter — 2018

Summary: On February 28, 2018, the FASB issued ASU 2018-03,5 which makes technical corrections to certain aspects of ASU 2016-016(on recognition of financial assets and financial liabilities), including the following:

• Equity securities without a readily determinable fair value — discontinuation.
• Equity securities without a readily determinable fair value — adjustments.
• 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.

Next Steps: For public business entities, the amendments in ASU 2018-03 are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018, are not required to adopt the amendments until the interim period beginning after June 15, 2018. Public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt these amendments before adopting the amendments in ASU 2016-01. For all other entities, the effective date will be the same as the effective date in ASU 2016-01. Early adoption of ASU 2018-03 is permitted for all entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, if they have adopted ASU 2016-01.

Other Resources: Deloitte’s March 2, 2018, journal entry.

Summary: On December 22, 2017, President Trump signed into law the tax legislation commonly known as the Tax Cuts and Jobs Act (the “Act”). Under ASC 740, the effects of new legislation are recognized upon enactment, which (for federal legislation) is the date the president signs a bill into law. Accordingly, recognition of the tax effects of the Act is required in the interim and annual periods that include December 22, 2017.

The SEC and FASB have issued various guidance in response to the Act, including the following:

• SEC — On December 22, 2017, the SEC issued SAB 118 (codified by the SEC as SAB Topic 5.EE7 and incorporated into the FASB Codification through ASU 2018-058) and C&DI9 Question 110.02. According to the press release on the SEC’s Web site, SAB 118 provides the SEC staff’s views on the “application of U.S. GAAP when preparing an initial accounting of the income tax effects of the Act,” while C&DI Question 110.02 provides views on the “applicability of Item 2.06 of Form 8-K with respect to reporting the impact of a change in tax rate or tax laws pursuant to the Act.”
• FASB — On February 14, 2018, the FASB issued ASU 2018-02,10 which amends ASC 220 to “allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the [Act]” and requires entities to provide certain disclosures regarding stranded tax effects. The ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. See the press release on the FASB’s Web site for more information about ASU 2018-02.
  The FASB staff has also released a number of Q&As on Act-related issues:
  • Whether Private Companies and Not-for-Profit Entities Can Apply SAB 118.
  • Whether to Discount the Tax Liability on the Deemed Repatriation.
  • Whether to Discount Alternative Minimum Tax Credits That Become Refundable.
  • Accounting for the Base Erosion Anti-Abuse Tax.
  • Accounting for Global Intangible Low-Taxed Income.
  For more information about the Q&As, see the January 11, 2018, and January 22, 2018, press releases on the FASB’s Web site.

Other Resources: Deloitte’s January 3, 2018, Financial Reporting Alert (updated on March 20, 2018), which contains responses to FAQs on how an entity should account for the tax effects of the Act in accordance with ASC 740. The publication addresses accounting questions related to SAB 118, ASU 2018-02 and the FASB staff Q&As, the change in corporate tax rate, modifications of carryforwards and certain deductions, the deemed repatriation transition tax, global intangible low-taxed income, foreign-derived intangible income, the base erosion anti-abuse tax, the corporate alternative minimum tax, non-ASC 740 topics affected by tax reform, separate-company financial statements, disclosure considerations, IFRS considerations, and interim reporting considerations.

Summary: On January 25, 2018, the FASB issued ASU 2018-01,11 which amends the Board’s new leasing standard, ASU 2016-02 (codified in ASC 842), to provide a transition practical expedient for existing or expired land easements (i.e., rights to access, cross, or otherwise use someone else’s land for a specified purpose) that were not previously accounted for 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. However, the ASU clarifies 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.

Next Steps: The ASU’s effective date and transition requirements are the same as those for ASU 2016-02. See Appendix A for more information.

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

Summary: On February 7, 2018, the IASB released amendments12 containing revisions to the guidance in IAS 19 on pension plan amendments, curtailments, or settlements. The amendments include the following:

• If a plan amendment, curtailment, or settlement occurs, the current service cost and the net interest for the remainder of the reporting period after the remeasurement must be determined by using the assumptions employed for the remeasurement.
• Clarification of the effect of a plan amendment, curtailment, or settlement on the requirements related to the asset ceiling.

Next Steps: The amendments apply to plan amendments, curtailments, or settlements occurring on or after the beginning of the first annual reporting period that begins on or after January 1, 2019. Early application is permitted but must be disclosed.

Other Resources: Deloitte’s March 1, 2018, IFRS in Focus. Also see the press release on the IASB’s Web site.

Summary: On March 1, 2018, the FASB issued for public comment a proposed ASU13 that would amend ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract. The proposed ASU, which was issued in response to an EITF consensus, would also add certain disclosure requirements related to implementation costs incurred for internal-use software and CCAs.

Under the proposed ASU, an entity would apply ASC 350-40 to determine which implementation costs should be capitalized. For example, while an entity would expense costs incurred in the preliminary-project and post-implementation-operation stages, it would capitalize certain costs incurred during the application-development stage, and it might be able to capitalize certain costs related to enhancements that it made. The proposed ASU would not change the accounting for the service component of a CCA.

Next Steps: Comments on the proposed ASU are due by April 30, 2018.

Other Resources: Deloitte’s March 2, 2018, Heads Up. Also see the press release on the FASB’s Web site.

Summary: On February 20, 2018, the FASB issued a proposed ASU14 that would amend ASC 815 to “add the OIS rate based on SOFR as a fifth U.S. benchmark interest rate to help companies and other organizations avoid the potential cost and complexity associated with using different cash flows and discount rates to measure the hedged item and the hedging instrument.” Currently, the four eligible benchmark interest rates under ASC 815 are:

• Interest rates on direct Treasury obligations of the U.S. government.
• The London Interbank Offered Rate swap rate.
• The Overnight Index Swap Rate based on the Fed Funds Effective Rate.
• The Securities Industry and Financial Markets Association municipal swap rate.

Next Steps: Comments on the proposed ASU are due by March 30, 2018.

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

Summary: On December 22, 2017, the FASB published a maintenance update as part of its project on Codification improvements. The update moves the guidance from ASC 305 (on cash and cash equivalents) to ASC 210 (on the balance sheet), effectively combining the two topics into one; however, no incremental changes to the actual guidance have been made.

Summary: On March 8, 2018, the CAQ and its International Practices Task Force issued a discussion document15 that provides “a framework for compiling inflation data to assist registrants in monitoring inflation statistics in connection with their determination of the inflationary status of countries in which they have operations.” The purpose of the document is to help management apply ASC 830 “in conjunction with its internal controls over financial reporting to reach a conclusion on whether a country’s economy should be considered highly-inflationary.”

Summary: On December 21, 2017, the FASB released the 2018 U.S. GAAP financial reporting and SEC reporting taxonomies. The new version of the U.S. GAAP taxonomy “contains updates for accounting standards and other improvements.” The updated SEC taxonomy “contains elements necessary to meet SEC requirements for financial schedules required by the SEC, condensed consolidating financial information for guarantors, and disclosures about oil- and gas-producing activities.”

The SEC approved both taxonomies on March 19, 2018.

Other Resources: For more information, see the December 21, 2017, and March 19, 2018, press releases on the FASB’s Web site.

Summary: On March 16, 2018, the CAQ issued a publication16 that summarizes common themes from its series of roundtable discussions on non-GAAP measures held last year. The publication “provides a set of key considerations for audit committees, including leading practices to assess whether a company’s non-GAAP metrics present a balanced representation of the company’s performance.”

Other Resources: For more information, see the press release on the CAQ’s Web site. Also see Deloitte’s A Roadmap to Non-GAAP Financial Measures.

Summary: On March 14, 2018, the SEC issued a proposed rule17 that would “improve the reporting and disclosure of liquidity information by registered open-end investment companies.” Specifically, the proposal would:

• Require funds to “disclose information about the operation and effectiveness of their liquidity risk management program in their annual reports to shareholders.”
• Remove the requirement in Form N-PORT related to the disclosure of “aggregate liquidity classification information about [a fund’s] portfolios.”
• Amend Form N-PORT to “allow funds classifying the liquidity of their investments pursuant to their liquidity risk management programs required by rule 22e-4 under the Investment Company Act of 1940 to report on Form N-PORT multiple liquidity classification categories for a single position under certain specified circumstances.”
• Require “funds and other registrants [to] report their holdings of cash and cash equivalents” in Form N-PORT.

Next Steps: Comments on the proposed rule are due by May 18, 2018.

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