Annual Accounting and Auditing Workshop. Kurt Oestriecher

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The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset).

      When will this ASU be effective?

      For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. For all other entities, the amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

      Early application is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance.

      Knowledge check

      1 As a result of FASB ASU No. 2017-07, the service cost component of net period pension cost (NPPC) should be presented as which component in the statement of comprehensive income?Net periodic pension cost (NPPC).Other comprehensive income.The line item that contains the related compensation cost.The service cost component is now eliminated under FASB ASU No. 2017-07.

FASB ASU No. 2018-02, Income Statement— Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Comprehensive Income

      Why was this ASU issued?

      Congress passed the Tax Cuts and Jobs Act bill on December 22, 2017, which resulted in a significant lowering of the corporate tax rate from a graduated structure to a flat tax of 21 percent. Because most companies had used an expected tax rate of 34 percent in determining deferred tax assets and liabilities, the significant change in the corporate tax rate may have a significant impact on these estimates for the year ended December 31, 2018.

      For items that flow through comprehensive income, the impact of deferred taxes is netted against the related gain or loss. However, GAAP dictates that the change in deferred tax assets and liabilities arising from changes in enacted rates be recognized in current earnings, not comprehensive income. Stakeholders informed FASB that this may cause misleading reporting because the original tax impact was recognized in other comprehensive income, not current earnings (commonly referred to as stranded tax effects).

      Who is affected by this ASU?

      Any entity that has both of the following presented in the financial statements:

      1 Deferred tax assets or liabilities (typically a “C” corporation).

      2 Elements of Other Comprehensive Income presented in the Statement of Comprehensive Income that had a book or tax timing difference that had been recognized in a related deferred tax asset or liability.

      What are the main provisions of this ASU?

      This update allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This is not a mandatory reclassification, but an election.

An entity that elects to use this provision must disclose the following:

       A statement that an election was made to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

       A description of other income tax effects related to the application of Tax Cuts and Jobs Act that are reclassified from accumulated other comprehensive income to retained earnings, if any.

      An entity that does not make an election under this ASU shall disclose in the period of adoption, a statement than an election was not made to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

      Note that this is a one-time provision and does not change the accounting for future potential changes in tax rates.

      When will this ASU be effective?

      This amendment is effective for all entities for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years.

      The amendments should be applied either in the periods of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate tax rate in the Tax Cuts and Jobs Act is recognized.

FASB ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement

      Why was this ASU issued?

      The board issued the Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements on August 28, 2018. This Conceptual Framework Statement was the result of a project started by FASB on March 4, 2014, that was intended to develop a framework for providing more useful and informative disclosures to users of financial statements. This ASU will be used by FASB in developing disclosure requirements in future updates, as well as evaluating existing disclosure requirements. This particular ASU was the result of FASB running a “test” implementation of this concepts statement on the existing disclosure requirements for fair value.

      Who is affected by this ASU?

      Any entity that measures either assets or liabilities on a recurring or non-recurring basis at fair value is affected by this update. Because this update does not affect what assets or liabilities should be measured at fair value, all entities currently disclosing fair value measurements will be affected by this update, along with any entity that is required to measure assets or liabilities at fair value for the first time.

      What are the main provisions of this ASU?

      The following disclosure requirements will no longer be required upon adoption of this ASU:

       The amount and reasons for transfers between level 1 and 2 of the fair value hierarchy

       The policy for timing of transfers between levels

       The valuation processes for level 3 fair value measurements

       For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring level 3 fair value measurements held at the end of the reporting period

      The following disclosure requirements were modified upon adoption of this ASU:

       In lieu of a rollforward for level 3 fair value measurements, a nonpublic entity will be required to disclose the following:Transfers in and out of level 3 of the fair value hierarchyPurchases and issues of level 3 assets and liabilities

       For investments in an investee that calculates net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse. This is required only if the investee has СКАЧАТЬ