Second Quarter — 2018

Summary: On June 21, 2018, the FASB issued ASU 2018-08,4 which amends the Board’s guidance on contributions received and made. Specifically, the ASU clarifies and enhances “current guidance about whether a transfer of assets (or the reduction, settlement, or cancellation of liabilities) is a contribution or an exchange transaction.” In addition, the amendments clarify “how an entity determines whether a resource provider is participating in an exchange transaction” and improves the framework for “determining whether a contribution is conditional or unconditional, and for distinguishing a donor-imposed condition from a donor-imposed restriction.”

Next Steps: For the ASU’s effective date and transition provisions, see Appendix A.

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

Summary: On May 7, 2018, the FASB issued ASU 2018-06,5 which supersedes guidance in ASC 942-740 associated with the Office of the Comptroller of the Currency’s (OCC’s) Banking Circular 202 (on accounting for net deferred tax charges), since the OCC has rescinded that guidance. The amendments in this ASU are being made as part of the FASB’s Codification improvements project (i.e., minor corrections and enhancements) and are therefore not expected to significantly affect current practice.

The amendments became effective upon issuance.

Summary: On June 20, 2018, the FASB issued ASU 2018-07,6 which supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. As a result, most of the guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements.

Next Steps: For the ASU’s effective date and transition provisions, see Appendix A.

Other Resources: Deloitte’s June 21, 2018, Heads Up. Also see the press release and FASB in Focus newsletter on the FASB’s Web site.

Summary: On April 26, 2018, the FASB issued for public comment a proposed ASU7 that would amend ASC 808 (on collaborative arrangements) to address uncertainties related to the interaction of that guidance with the FASB’s new revenue standard (ASC 606).

Enhancements made by the proposed ASU would include the following:

• The addition of unit-of-account guidance to ASC 808 to “align with the guidance in [ASC] 606 (that is, a distinct good or service) limited to when an entity is assessing the scope of [ASC] 606.”
• Clarification that “certain transactions between collaborative participants should be accounted for as revenue under [ASC] 606 when the collaborative participant is a customer in the context of the unit of account.”
• Clarification that, “in a transaction that is not directly related to sales to third parties, presenting the transaction as revenue would be precluded if the collaborative participant counterparty is not a customer.”

Comments on the proposed ASU were due by June 11, 2018.

Other Resources: Deloitte’s April 30, 2018, Heads Up.

Summary: On June 26, 2018, the FASB issued a proposed ASU8 that would amend the definition of the term “collections” in U.S. GAAP to modify one of the three conditions under which an entity is not required to “recognize contributions of works of art, historical treasures, and similar assets if the donated items are added to collections.” Specifically, under the proposal, an entity would be permitted to use “the proceeds from sales of collection items . . . to support the direct care of existing collections in addition to the current requirement that proceeds from sales of collection items be used to acquire other items for collections.”

Next Steps: Comments on the proposed ASU are due by August 10, 2018.

Summary: On March 27, 2018, the IASB issued an exposure draft9 that would amend the guidance on accounting policies in IAS 8. Specifically, the proposed changes would:

• Make it easier for an entity to change an accounting policy in response to an agenda decision issued by the IFRS Interpretations Committee.
• Allow an entity to depart from full retrospective application of the new policy if it can demonstrate that the cost of determining the effects of the retrospective application would exceed the expected benefits to users.

Next Steps: Comments on the exposure draft are due by July 27, 2018.

Other Resources: Deloitte’s March 29, 2018, IFRS in Focus. Also see the press release on the IASB’s Web site.

Summary: In May 2018, the AICPA’s revenue recognition task forces released for public comment two working drafts on accounting issues associated with the implementation of the new revenue standard for gaming and telecommunication entities. The working drafts address the following topics:

• Gaming entities’ accounting for management contract revenues, including costs reimbursed by managed properties (gaming).
• Contract modifications (telecommunications).

Next Steps: Comments on the working drafts are due by July 2, 2018.

Other Resources: For more information, see the revenue recognition page on the AICPA’s Web site.

Summary: On June 8, 2018, the Center for Audit Quality’s (CAQ’s) International Practices Task Force issued a discussion document10 on monitoring inflation in certain countries.

The document identifies countries “where projected cumulative inflation rates would have been categorized into categories considering the guidance in ASC 830 and in circumstances where there was not consistent reliable data.”

Summary: On June 11, 2018, the FASB’s credit losses transition resource group (TRG) met to discuss the current expected credit loss (CECL) model, an impairment model that ASU 2016-1311 added to U.S. GAAP and that is based on expected losses rather than incurred losses. Specifically, the TRG discussed the following topics:

• Topic 1 — Consideration of capitalized interest by using a method other than a discounted cash flow method under the CECL model.
• Topic 2 — Definition of “amortized cost basis” and the reversal of accrued interest on nonperforming financial assets.
• Topic 3 — Transfer of loans from held for sale to held for investment and transfer of credit-impaired debt securities from available for sale to held to maturity.
• Topic 4 — Accounting for recoveries under the CECL model.
• Topic 5 — Refinancing and loan prepayments.

Other Resources: Deloitte’s June 18, 2018, TRG Snapshot.

Summary: On March 29, 2018, the IASB published its revised “Conceptual Framework for Financial Reporting.” The purpose of the framework is to “(a) assist the [IASB] to develop IFRS Standards (Standards) that are based on consistent concepts; (b) assist preparers to develop consistent accounting policies when no Standard applies to a particular transaction or other event, or when a Standard allows a choice of accounting policy; and (c) assist all parties to understand and interpret the Standards.”

The revised framework includes a new chapter on measurement, guidance on reporting financial performance, improved definitions and guidance, and clarifications on important topics (e.g., the roles of stewardship, prudence, and measurement uncertainty in financial reporting).

The IASB has also issued amendments that update references to the framework in certain standards. The amendments are effective for annual periods beginning on or after January 1, 2020.

Other Resources: Deloitte’s May 14, 2018, IFRS in Focus. Also see the press release, feedback statement, and fact sheet on the IASB’s Web site.

Summary: On April 12, 2018, the CAQ released a publication12 on cybersecurity. The publication “provides questions board members charged with cybersecurity risk oversight can use as they engage in discussions about cybersecurity risks and disclosures with management and CPA firms.”

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

Summary: On April 4, 2018, the CAQ released a publication13 for audit committees that is designed to help them implement the FASB’s new leasing standard, ASU 2016-02.14 Specifically, the purpose of the publication is to “help audit committees exercise their oversight responsibilities as companies implement a new leases accounting standard that begins to take effect in January 2019.”

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

Summary: At the June 5–6, 2018, PCAOB Standing Advisory Group (SAG) meeting, the PCAOB provided an update on recent developments, including introducing the new chairman and Board members and discussing its current and future standard-setting activities. In addition, the PCAOB and SAG discussed:

• The Board’s strategy outlook.
• Implementation of the new auditor reporting standard.
• The PCAOB’s research project related to the use of data and technology in the conduct of audits.
• Cybersecurity and potential implications for financial reporting and auditing.
• Corporate culture and related audit implications.
• Current and emerging audit issues.

Next Steps: The next PCAOB SAG meeting is scheduled for November 28–29, 2018.

Other Resources: Deloitte’s June 18, 2018, Audit & Assurance Update.

Summary: On June 28, 2018, the SEC issued a final rule15 that amends the definition of a “smaller reporting company” (SRC) to expand the number of companies that qualify for this classification and are therefore able to take advantage of the scaled disclosure requirements that apply to such companies. Under the final rule, smaller reporting companies “include registrants with a public float of less than $250 million, as well as registrants with annual revenues of less than $100 million for the previous year and either no public float or a public float of less than $700 million.” In view of this new definition of smaller reporting company, the final rule also revises other definitions, such as those for “accelerated filer” and “large accelerated filer,” in an effort to “preserve the existing thresholds in those definitions.”

Next Steps: The final rule will become effective 60 days after the date of its publication in the Federal Register.

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

Summary: On June 28, 2018, the SEC issued a final rule16 that requires registrants to use the inline XBRL (iXBRL) format for operating companies and funds when submitting financial statement information and fund risk/return summary information. In addition, the rule removes the requirement for operating companies and funds to post XBRL data on their Web sites.

Next Steps: The final rule will become effective 30 days after the date of its publication in the Federal Register.

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

Summary: On June 28, 2018, the SEC issued a final rule17 that amends the “public liquidityrelated disclosure requirements for certain open-end funds.” Specifically, such funds would be required to “discuss in their annual or semi-annual shareholder report the operation and effectiveness of their liquidity risk management programs.”

Next Steps: The final rule will become effective 60 days after the date of its publication in the Federal Register.

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

Summary: On June 25, 2018, the SEC issued a final rule18 to amend its regulations related to the Freedom of Information Act (FOIA).

The final rule amends existing regulations under the FOIA to reflect changes required by the FOIA Improvement Act of 2016. In addition, the final rule revises certain procedural and fee provisions and eliminates certain provisions that are repeated in the FOIA statute and do not need to be in the SEC’s regulations.

Summary: On June 12, 2018, the SEC’s Division of Corporation Finance announced that letters sent to issuers that have “serious deficiencies” in their registration statement or offering document will be made available on EDGAR.

Filings with significant deficiencies are those that are “not minimally compliant with statutory or regulatory requirements.” Letters issued on June 15, 2018, or later will be published first; these letters will appear on EDGAR within 10 calendar days of issuance.

Summary: On June 5, 2018, the SEC approved a new rule and issued two requests for comment in an effort to improve information about mutual funds, exchange-traded funds, and investment funds. Specifically, the SEC released:

• Rule 30e-3 under the Investment Company Act, which allows funds to use an optional “notice and access” delivery method to satisfy their obligations to transmit shareholder reports.
• Two requests for comment on:
  • Enhancing fund disclosures to improve investors’ experience.
  • Processing fees that intermediaries charge for forwarding fund materials.

Next Steps: Rule 30e-3 will become effective on January 1, 2021. Feedback on the requests for comment is due by October 31, 2018.

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

Summary: On May 16, 2018, the CAQ released highlights of the CAQ SEC Regulations Committee’s March 13, 2018, joint meeting with the SEC staff. Topics discussed at the meeting included:

• Financial reporting implications of tax reform legislation.
• Waivers of financial statements required by Regulation S-X, Rule 3-09.19
• New accounting standards.
• Use of most recent year-end financial statements in the assessment of significance in an IPO under Regulation S-X, Rule 1-02(w).20
• Audit requirements for pretransaction periods after a reverse merger involving two operating companies.

Other Resources: Deloitte’s May 22, 2018, journal entry.

Summary: On April 18, 2018, the SEC issued a “package” of proposals that would “enhance the quality and transparency of investors’ relationships with investment advisers and brokerdealers while preserving access to a variety of types of advice relationships and investment products.” Specifically, the Commission released the following proposals:

• Proposed Rule Release No. 34-83062, Regulation Best Interest — Would establish “a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer.”
• Proposed Rule Release No. 34-83063, Form CRS Relationship Summary; Amendments to Form ADV; Required Disclosures in Retail Communications and Restrictions on the Use of Certain Names or Titles — Would “require registered investment advisers and registered broker-dealers (together, ‘firms’) to provide a brief relationship summary to retail investors to inform them about the relationships and services the firm offers, the standard of conduct and the fees and costs associated with those services, specified conflicts of interest, and whether the firm and its financial professionals currently have reportable legal or disciplinary events.”
• Proposed Rule Release No. IA-4889, Proposed Commission Interpretation Regarding Standard of Conduct for Investment Advisers; Request for Comment on Enhancing Investment Adviser Regulation — Requests feedback on “the standard of conduct for investment advisers under the Investment Advisers Act of 1940” as well as the “licensing and continuing education requirements for personnel of SEC-registered investment advisers; delivery of account statements to clients with investment advisory accounts; and financial responsibility requirements for SEC-registered investment advisers, including fidelity bonds.”

Next Steps: Comments on the proposals are due by August 7, 2018.

Other Resources: For more information, see the press release and SEC Chairman Jay Clayton’s overview of the rulemaking package on the SEC’s Web site.

Summary: On April 4, 2018, the staff in the SEC’s Division of Corporation Finance added two questions to its compliance and disclosure interpretations (C&DIs) related to non-GAAP financial measures associated with business combinations.

Specifically, the staff added Questions 101.02 and 101.03, which concern whether forecasts in a business combination are non-GAAP measures. The previous Questions 101.02 and 101.03 have been renumbered to 101.04 and 101.05, respectively.