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2018

18-5, Application of ASU 2016-15 to the Sale of Trade Receivables to Multi-Seller Commercial Paper Conduit Structures (April 9, 2018; Updated August 3, 2018)

Financial Reporting Alert 18-5
Updated August 3, 2018 (Originally issued April 9, 2018)
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Application of ASU 2016-15 to the Sale of Trade Receivables to Multi-Seller Commercial Paper Conduit Structures

The following update to this Financial Reporting Alert reflects recent guidance provided by the SEC’s Office of the Chief Accountant:
In recent discussions with the SEC’s Office of the Chief Accountant, we were informed that the SEC staff believes that it is only appropriate to apply View A (discussed below). For entities that have previously filed financial statements with the SEC and have applied View B, we understand that (1) the SEC staff will not object to a change to View A in the next periodic filing as a change in presentation and (2) such change does not require a preferability letter. In a manner consistent with the transition requirements of ASU 2016-15 (discussed below), the change should be reflected retrospectively to all prior financial reporting periods for which View B was applied.
With respect to the reporting period ended June 30, 2018, some entities will be unable to make the change in presentation either because the Form 10-K or 10-Q has already been filed or because the entity does not have the information necessary to make the change. In that case, we understand that the SEC staff will not object if the entity files financial statements under View B with appropriate disclosure, which might include the following (subject to materiality considerations):
  • The nature of the issue and related transactions.
  • A statement that the entity intends to change the method of presentation in its next periodic filing and that the change will be reflected on a retrospective basis to all periods presented.
  • The anticipated effect (increase/decrease) on operating cash flows and investing cash flows.
  • The anticipated magnitude of the change if reasonably estimable (e.g., whether the change is expected to be material) or a statement that no such estimate can be made.
Entities with questions, including those that believe that application of View A is impracticable in the next periodic filing or with respect to retrospective application to prior periods, should consult with their independent advisers.

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