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FASB Accounting Standards Update No. 2018-11 (Issue Date: July 2018)
Link to Standard: Update No. 2018-11
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-11, Leases (Topic 842) Targeted Improvements, in July 2018.
This update permits entities to use an optional transition method to Accounting Standards Codification (ASC) 842. The optional transition method allows an entity to continue to use guidance from ASC 840 in the comparative periods presented in adoption year of ASC 842. The optional election allows entities to implement the new lease standards of ASC 842 using an easier modified method to comparative financial statements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the adoption year. This approach is thought to provide relief to adopters by simplifying the comparative reporting requirements presented in ASC 842, which would require entities to adjust all lease standard changes in the earliest period presented on their respective financial statements instead of a cumulative adjustment in the period of adoption.Read More
FASB Accounting Standards Update No. 2018-13 (Issue Date: August 2018)
Link to Standard: Update No. 2018-13
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, in August 2018.
This update is part of the FASB’s overall disclosure framework project, which is primarily focused on improving the effectiveness of required Generally Accepted Accounting Principles (GAAP) disclosures for users of the financial statements. The update modifies required fair value disclosures related primarily to level 3 investments. In their endeavor to improve disclosure quality, Topic 820 has been revised by removing, modifying and adding certain requirements. This ASU applies to all entities that are required to provide disclosures about recurring or nonrecurring fair value measurements. Non-public companies are exempt from certain existing and revised requirements of the standard.
ASU 2018-13 eliminates disclosures that the FASB believed were too heavily reliant on subjective information that may have been misinterpreted, and strengthens existing disclosures to provide financial statement users with a firmer understanding surrounding the estimates and assumptions used in valuations.Read More
FASB Accounting Standards Update No. 2018-01 (Issue Date: January 2018)
Link to Standard: Update No. 2018-01
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-01, Land Easement Practical Expedient for Transition to Topic 842, in January 2018.
To assist entities with the transition to the new standard, the FASB issued a practical expedient for existing or expired easements not previously accounted for as leases under ASC 840. This update provides entities with the option to not evaluate existing or expired land easements under ASC 842 that were not previously accounted for as leases under current lease guidance in ASC 840. If an entity chooses to elect the optional practical expedient for transition, it will begin evaluating new or modified land easements under ASC 842 at the time of adoption. Conversely, if an entity does not elect this practical expedient, it will need to evaluate all existing or expiring land easements to determine whether they meet the definition of a lease.Read More
FASB Accounting Standards Update No. 2017-08 (Issue Date: March 2017)
Link to Standard: Update No. 2017-08
The amendments in this Accounting Standards Update (ASU) shorten the amortization period for certain callable debt securities held at a premium. The guidance now requires the premium to be amortized to the earliest call date. Under prior guidance, entities generally amortized the premium as an adjustment of yield over the contractual life of the instrument. The new guidance does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.Read More
FASB Accounting Standards Update No. 2018-02 (Issue Date: February 2018)
Link to Standard: Update No. 2018-02
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, in February 2018.
This update permits entities to reclassify the stranded tax effects caused by the Tax Cuts and Jobs Act from accumulated other comprehensive income (AOCI) to retained earnings. The FASB describes these stranded tax effects as items within AOCI that do not properly reflect the appropriate tax rate, which are caused by the adjustment of deferred taxes due to the reduction of the corporate income tax rate being included in income from continuing operations.
Under the new guidance, if a company elects to reclassify the tax effects from AOCI to retained earnings, the reclassification amount will include the following:
- The effect of the change in the U.S federal corporate income tax rate on the gross deferred tax
amounts and related valuation allowances at the date of enactment of the Tax Cuts and Jobs Act
related to items remaining in AOCI.
- Other income tax effects of the Tax Cuts and Jobs Act on items remaining in AOCI that an entity elects
Excluded from this reclassification amount is the effect of the change in the U.S. federal corporate income tax rate on gross valuation allowances that were originally recorded in income from continuing operations.Read More
FASB Accounting Standards Update No. 2017-07 (Issue Date: March 2017)
Link to Standard: Update No. 2017-07
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-07, Improving the Presentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost, in March 2017.
This update changes the guidance for employers that sponsor employee defined benefit pensions as well as other postretirement benefit plans. Under the new guidance, employers will be required to present the service cost component of net periodic benefit costs separate from the other components. Service cost is the only component of net benefit cost that originates exclusively from an employee’s service to the company during the current period. Therefore, this component will be presented in the same line as other employee compensation costs that arise from services rendered. Other components will be presented separately and outside of any operating income subtotal. Additionally, while the service cost component is still eligible for capitalization, these other components will no longer be eligible for that treatment.
The change is mainly driven by the FASB’s belief that presenting pension costs in this manner will provide stakeholders with a better quality of information. This will make it easier for financial statement users to determine the costs arising from services rendered in the period from costs relating to the other components of net benefit costs. Additionally, it will make it easier for users to compare the service costs across companies that have pension plans as well as compare the other components that are driven more by interest, return on assets and amortizations.
It is worth noting that if presented, gross profit, gross margin, and operating income may change significantly for some companies as a result of adoption.Read More