Annual Accounting and Auditing Workshop. Kurt Oestriecher

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Chapter 2 FASB Accounting Standards Updates — Narrow Issues

      Learning objective

      This chapter presents ASUs that are very specific in nature, many of which originated with the Emerging Issues Task Force (EITF). These ASUs typically deal with very specific transactions or industry-specific issues.

      The ASUs covered in this chapter are those that have effective dates in 2018 or later. Therefore, several ASUs issued in prior years are included in this chapter. Effective dates for public business entities are frequently different than those for other entities.

FASB ASU No. 2017-06, Plan Accounting: Defined Benefit Plans (Topic 960), Defined Contribution Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of the Emerging Issues Task Force)

      Why was this ASU issued?

      This update was issued to improve the usefulness of the information reported to users of employee benefit plan financial statements and to provide clarity to preparers and auditors. It relates primarily to the reporting by an employee benefit plan for its interest in a master trust. A master trust is a trust for which a regulated institution serves as a trustee or custodian and in which assets of more than one plan sponsored by a single employer or a by a group of employers under common control are held.

      Many stakeholders found the master trust disclosure requirements in GAAP to be limited and incomplete, particularly relating to disclosures of the plan’s interest in the master trust. Most preparers relied on the AICPA Audit and Accounting Guide Employee Benefit Plans for guidance. The amendments in this update require more detailed disclosures of the plan’s interest in the master trust.

      In addition, stakeholders noted that disclosures for both the defined benefit pension plan financial statement and the health and welfare benefit plan financial statements were redundant. This update removed that redundancy.

      Who is affected by this ASU?

      The amendments in this update apply to reporting entities within the scope of FASB ASC 960, 962, or 965, Plan Accounting.

      What are the main provisions of this ASU?

      All plans must present investments in master trusts in a single line item in the statement of net assets available for benefits.

The requirement to disclose the percentage interest in master trusts with divided interests is eliminated and all plans must now disclose the dollar amount of their interest in each of the general types of investments. This supplements the existing requirement to disclose the master trust’s balances in each general type of investment.

      All plans must disclose the following:

      This update also removes the requirement for disclosures related to the 401(h) account for health and welfare benefit plans. Instead, the plans will disclose the name of the defined benefit plans in which those investment disclosures are provided.

      When will this ASU be effective?

      The amendments in this update are effective for fiscal years beginning after December 15, 2018.

      Early application is permitted.

      The amendments should be applied retrospectively to each period for which financial statements are presented.

FASB ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities

      Why was this ASU issued?

      This update was issued to amend the amortization period for certain purchased callable debt securities held at a premium. Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. Therefore, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. In addition, there was diversity in practice in the amortization period of premiums of callable debt securities and how the potential for a call was factored into current impairment assessments.

      Who is affected by this ASU?

      The amendments in this update affect all entities that hold investment in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date (that is, at a premium).

      What are the main provisions of this ASU?

      The amendments in this update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the premium is to be amortized to the earliest call date. Discounts continue to be amortized to maturity.

      When will this ASU be effective?

      For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018.

      For all other entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

      Early application is permitted.

The amendments should be applied using a modified retrospective basis through a cumulative-effect adjustment directly into retained earnings as of the beginning of the period of adoption.

      Knowledge check

FASB ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities From Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception

      Why was this ASU issued?

      This update has two parts and was undertaken to address narrow issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of both liabilities and equities.

      Part I of this update addresses the complexity of accounting for certain financial instruments with down round СКАЧАТЬ